Pakistan Business Forum (PBF) has asked the government to announce special incentives for SMEs in view of saving economy, as the small industry represents more than 90 percent of around 3.2 million business enterprises in Pakistan, contributing 40 percent to the GDP, employing more than 80 percent of non-agricultural workforce, and generating 25 percent of export earnings.

PBF President Karachi, Malik Khuda Baksh said that the economic crisis has forced the global investors to put their new investment plans on hold, foreign direct investment was 11 percent lower than the investment registered last year. He said there is no visible improvement in employment, while the small and medium industries, which are the main providers of jobs, are struggling because of lack of funds and demand. The job losses at the original equipment manufacturers are not significant but at auto venders, where bulk of auto-related jobs exist, are operating with minimum possible staff.

He noted that inflows of Foreign Direct Investment in the country have declined by almost 12 percent during the first two months of this fiscal year (FY24-25). The State Bank of Pakistan reported that the country fetched FDI amounting to $1.13 billion during July-Aug of FY24-25 compared to $1.23 billion in the same period of last fiscal year (FY23-24), depicting a decline of almost 12 percent. During the period under review, FDI inflows were $1.86 billion against $790 million. On a month-on-month basis, the net foreign direct investment settled at $231 million in July 2024, compared to $180 million during July 2023. The FDI inflows in this period are highest since June 2021.

He also suggested the ministry devise strategies for promotion of Pakistani products, calling upon trade officers to take advantage of opportunities offered by the China-Pakistan Economic Corridor.

Malik Khuda Baksh said that previously, foreign investors mostly poured money into the sectors which did not pose a risk to their profit margins due to rupee depreciation such as the power sector. It is hoped that Pakistan’s economy will now gain growth momentum, which should encourage foreign investors to invest in new projects, he added.

PBF Karachi Vice President, Arshad Farooq said that a slowdown in the economy had badly impacted business confidence. It is must for the authorities concerned to first create an enabling environment for the local businessmen desiring to make new investments. He stated that Pakistan has remained a potential market for foreign investors, who still have plans to make fresh investments in the country, but they have continued to wait for the return of economic stability. He highlighted uncertainty in the rupee-dollar parity as one of the major concerns of foreign investors.

Arshad Farooq advocated the need for raising the country’s tax base so that the tax-to-GDP ratio improves from its current poor level. He urged the trade officers to explore opportunities to diversify exports of goods and services in their respective areas, asking them to meet the challenges faced by Pakistan in European markets.