Transparency Concerns Shadow Pakistan's Investment Reforms

Pakistan's Ministry of Finance admits the Special Investment Facilitation Council (SIFC) lacks institutional transparency, risking investor confidence. An IMF report highlights governance risks and critiques overlapping mandates with the Board of Investment, calling for structural reforms. Pakistan aims to publish the SIFC report by March 2027 to enhance transparency.

Pakistan's Ministry of Finance has revealed a transparency deficit within the Special Investment Facilitation Council (SIFC), posing a threat to investor confidence and policy consistency, according to a report in The Express Tribune. This admission forms part of the government's comprehensive 240-page Prime Minister's Economic Governance Reforms Agenda.

The report was crafted to satisfy the International Monetary Fund's stringent Governance and Corruption Diagnostic Assessment criteria, essential for the ongoing USD 7 billion loan programme. The document highlights ambiguous decision-making processes in the SIFC, particularly in granting strategic investment concessions and regulatory relaxations, which perpetuate governance risks.

Launched in 2023 to streamline investment after concerns from Gulf countries about Pakistan's cumbersome bureaucracy, the SIFC overcame several procedural barriers. However, significant structural challenges like unpredictable taxation, rising energy costs, and constrained fiscal space continue to undermine investment potential.

Despite its goal of luring foreign capital across multiple sectors, the SIFC has yet to secure substantial FDI. Last month, Lt Gen Sarfraz Ahmed, the SIFC's National Coordinator, publicly outlined various obstacles to foreign investment. The Finance Ministry's report concedes Pakistan lacks a unified, public repository of information on tax concessions, fiscal effects, and regulatory exemptions.

The absence of consistent disclosures leaves investors uncertain about the rationale behind strategic investment choices, notes The Express Tribune. To meet IMF conditions, the government plans to release an initial draft of the SIFC's annual report by December, aiming for finalisation by March 2027.

The IMF has raised alarms over Articles 10F and 10G of the Board of Investment Act, which confer extensive powers and immunity to SIFC officials, possibly compromising accountability. It also criticizes the dual functions of the Board of Investment and the SIFC, suggesting overlapping roles breed confusion and weaken governance. The IMF urges Pakistan to tackle foundational structural issues rather than create multiple entities with conflicting missions, as reported by The Express Tribune. (ANI)

(With inputs from agencies.)