Editorial : Law to woo investors - Sunday 1st May 2011

Source : http://www.dawn.com/2011/05/01/law-to-woo-investors.html

THE president signed the Arbitration (International Investment Disputes) Bill, 2011 into law the other day. It is aimed at giving a sense of security to foreign investors and bringing transparency in the settlement of investment disputes. It also changes domestic laws protecting foreign investments in accordance with the provisions of the international convention on the settlement of investment disputes between states and foreign nationals. Islamabad has already ratified the convention that sets up an international centre for the settlement of investment disputes under the aegis of the World Bank and constitutes a conciliation commission and an arbitral tribunal. While the new law should help raise the comfort level of foreign investors interested in bringing their money to this country in future, it is not right to expect the move to open the floodgates of investment from abroad. The safety of investment is not the only issue that influences investment decisions in a given country. If that were the case Pakistan would not have attracted a record foreign direct investment of more than $5.5bn in 2007 when foreign investment did not have the protection it will after this new law. Other factors — political and economic stability, peace and profitability — play a major role in convincing foreigners to bring their money into a country.

Given that Pakistan was never a favourite destination for foreign investors the government is required to do some extra homework to improve investor confidence. Economic stabilisation must be the first step in this direction. Experts agree that the economy could plunge into serious crisis some two years from now, or perhaps even earlier, if a range of fiscal, economic and governance reforms is not implemented to stabilise the country`s finances and put them back on the road to growth. Indeed, the sustained availability of energy will also have to be ensured and security improved. Delay in the implementation of re- forms and improvement in security and energy supply will not attract foreign investment. It will, in fact, lead to the flight of capital. If this happens, the new law would hardly have been of any help.