Pakistan’s struggle to attract foreign investment in the mineral sector is a complex issue with several factors at play. One major concern is the country’s inconsistent economic growth rate and balance of payment crisis, which makes it challenging for investors to feel confident about putting their money into Pakistan . Additionally, the country’s placement on the Financial Action Task Force (FATF) gray list has further deteriorated its foreign investment climate, resulting in a significant economic loss of around $38 billion .
Domestic terrorism is another significant issue that has curtailed foreign investor confidence in Pakistan . Although security conditions have improved in recent years, the country’s terror financing and anti-money laundering laws are still not compliant with international standards.
Pakistan’s regulatory framework is also a major obstacle. The country’s tax policies are inconsistent and change frequently, depending on which sector is prioritized by each government . This unpredictability makes it difficult for investors to plan for the long term. Furthermore, Pakistan requests advance tax payments from countries and asks them to pay 34 different taxes, which is significantly higher than the South Asian average of 26.8 .
Unlike other countries, Pakistan does not offer formal investment incentives, such as tax deferrals and subsidized loans, to attract foreign investors ¹. This lack of incentives, combined with stringent regulations and lengthy dispute resolution procedures, erodes investor trust.
Pakistan’s reliance on Chinese investment is also a concern. While China has been a significant investor in Pakistan, particularly through the China-Pakistan Economic Corridor (CPEC), this dependence limits the country’s ability to diversify its foreign investment partnerships .
To address these challenges, Pakistan needs to implement policy reforms that promote transparency, consistency, and predictability. This includes revising its tax policies, improving its regulatory framework, and offering incentives to attract foreign investors. By doing so, Pakistan can create a more favorable business environment and unlock its potential for foreign investment in the mineral sector.
