PAKISTAN’S relationship with competing global powers, and effective participation in international peace efforts, have offered the country avenues to exercise influence beyond its economic weight. It has managed to grab international attention due to its role as a mediator in facilitating dialogue between the United States and Iran.
However, diplomatic recognition does not automatically translate into economic prosperity for a country. Pakistan needs to convert its growing diplomatic relevance into sustainable and durable economic partnerships, which include foreign direct investment, regional connectivity and technology transfer.
Pakistan has increasingly sought to use international platforms to seek its economic interests. Its engagements with multilateral forums such as the United Nations, OIC and SCO provide opportunities to promote trade, attract investment and build partnerships. The economic diplomacy initiatives of the Ministry of Foreign Affairs and its dedicated coordination with the Special Investment Facilitation Council (SIFC) highlight an acknowledgement that economic policy and foreign policy can no longer operate in isolation.
Last month, the SIFC presented an investment pipeline to a Senate committee comprising 38 projects with an anticipated investment potential of approximately $40 billion. This is an encouraging indicator of opportunities being pursued. However, this investment pipeline should not be considered the same as realised investment. Investors assess the legal, regulatory and administrative environment in which their investments will operate instead of merely relying on the strength of diplomatic assurances.
The problem does not simply lie in bureaucratic inefficiency; rather it goes deep into the unresolved question of Pakistan’s federal structure. The 18th Amendment strengthened provincial autonomy by transferring responsibilities from the centre to the provinces. Some of the sectors in which SIFC attracts investments including tourism, agriculture, and minerals require provincial participation as they are outside the mandate of the Federal Legislative List. Therefore, an investment proposal initiate d at the federal level may still require provincial approvals and administrative permissions.
The SIFCwas formulated in 2023 through an amendment in the Board of Investment Ordinance, 2001. However, it is unable to resolve the institutional divide between the centre and provinces on matters related to investment. Section 10E of the Ordinance empowers SIFC to issue recommendations, advice or directions to federal regulatory bodies, public sector entities, authoritiesand government departments. This section does not expressly extend this directive authority to provincial governments.
Such hurdles create an uncomfortable situation for international investors. An investor attracted throughassurance ofa streamlined approval process and diplomatic engagements may encounter delays once the project reaches the provincial level.
The solution does not lie in undermining provincial autonomy or doing expansive interpretation of SIFC’s mandate.
Such a solution may give rise to constitutional disputes and alienate provincial governments. The goal should be to make the existing constitutional federalism work for economic development.
There are institutional mechanisms that can bridge the divide. The Interprovincial Coordination Committee provides a mechanism for coordination between the federation and provinces. Its mandate includes promoting a uniform approach to matters of common national concern. Investment-related bottlenecks can be formally placed before it. The Ministry of InterProvincial Coordination must transition from its mostly reactive position to an active facili-tator of investment-related coordination if this system is to be successful.
Another option is provided by the Provincial Investment Committees established under Section 15 of the BOI Ordinance. These committees are meant to support the BOI, promote investment within provinces, and ensure ongoing cooperation with it. They may function as SIFC’s provincial counterparts if properly constituted and operationalised.
The Council of Common Interests should continue to be accessible for issues coming under its constitutional purview. It is important, however, to distinguish between ordinary administrative cooperation needed to handle individual investment projects and high-level constitutional and policy disagreements.
Ultimately, Pakistan’s diplomatic outreach must be matched by institutional credibility at home. Pakistan cannot ask international investors to place confidence in its economic future while leaving unresolved the question of how its own government will work together to secure that future. The wnter is a lawyer based in Islamabad.