How anti-Americanism hurts the economy

Pakistan RupeesOn Saturday, Business Recorder noted that Securities and Exchange Commission of Pakistan (SECP) has registered 21 companies having foreign investment during May.

These companies have investment by foreign nationals from the U.K.,China, Canada, Denmark, South Korea, Romania, Russia, Turkey, Jordan, Norway, the Netherlands, Singapore and Afghanistan.

Notice anything missing from the list? How about the largest economy in the world – the United States of America?

That’s not to say Americans are not investing in Pakistan. BBC recently spoke to Muzaffar Khakwani, who grows mangoes in the southern part of Punjab, about how American investment is helping his business.

“The US assistance in this area has gone primarily into education of mango farmers like me,” Mr Khakwani says. “How to grow better mangoes in terms of quality and yield, how to market our mangoes better, and also into trying to create the conditions to increase exports of our mangoes.”

He says the Americans have contributed to the building of a processing facility on his farm.

“I guess the idea is that because southern Punjab has had problems with militancy, if they invest here it will become prosperous and the money will trickle down to the poor so they won’t become militants,” says Mr Khakwani.

This is not private investment, though – it is US aid. Actually, the US government continues to invest heavily in Pakistan despite anti-American sentiments. Obviously part of this must be because the US wants to show that it is also an ‘all-weather friend’ and will continue to invest in Pakistan even when times are tense between the two countries. But this shows exactly the type of economic self-sufficiency that can grow in Pakistan if it is watered with a little investment. So, why are we seeing so much government aid and so little private investment?

One issue that is keeping private investment away is the security situation. This was stated clearly by Ambassador of Belgium to Pakistan Hans Christian.

He stressed the need that Pakistani High Commission in Brussels should take measures for the promotion of Pakistani products. He pointed out that although the Pakistan is a business-conducive country unfortunately due to the terrorist activities the foreign investors in general and Belgian Investors in particular are reluctant to invest in Pakistan. He further pointed out that not even a single Belgian company is in operation in Pakistan.

Unlike Belgium, American companies are investing in Pakistan, but not as much as they could be. An article from USA Today notes that US companies were holding on to $837 billion in cash. That’s larger than the GDP of Saudi Arabia.

But why would American companies use any more of their capital to invest in a country where news reports regularly show images of crowds burning their flag and blaming them for every single one of the world’s ills?

President Zardari has repeatedly called for ‘trade not aid’ to solve Pakistan’s economic crisis. This is one part of a correct approach to breaking the cycle of dependency on foreign aid. Another part is convincing foreign investors to place their capital in Pakistan’s own companies. Finance Minister Dr Hafeez Shaikh invited the American private sector to invest in Pakistan’s energy sector earlier this year. If this invitation is to prevail, we need to show the Americans that they will be dealt with fairly. This does not mean playing a subservient role or selling the nation for aid or investment. But it does mean being able to act without being pressurised by media or political personalities who sing a tune of anti-Americanism to raise their own profiles. Anti-Americanism doesn’t hurt America. It is only hurting ourselves.

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