Investment protection: government to develop model text of BITs

Business Recorder | February 08, 2013

Investment protection: government to develop model text of BITs

WASIM IQBAL

Federal government will develop a model text of Bilateral Investment Treaties (BITs) with the assistance of the Ministry of Law and Justice Division to ensure protection to investment on reciprocity basis. The new model will replace the existing one to the extent possible, while all new BITs will be negotiated on new templates, stated new Investment Policy 2013, approved by Prime Minister Wednesday.

The copy of Investment Policy 2013 available with Business Recorder, pointed out that the existing BITs have been negotiated over a period of 50 years by various ministries and there are great inconsistencies between them, which create legal uncertainty for both investors and the government. Hence, need for designing new templates for BITs in future.

Pakistan has signed BITs with 47 countries, of which 26 are in force. Another 27 are under negotiations. Foreign investors look favourably upon the existence of a BIT between their home and host country as a means to have stronger protection to their investments.

The new policy envisages that Foreign Direct Investment (FDI) promotion efforts will focus on China and Far East, USA, South East Asia mainly Malaysia and Hong Kong, EU mostly UK and Netherlands and Middle East, mainly UAE and KSA where there is considerable potential. Bilateral business councils with countries in these regions will be reactivated and new councils will be initiated with China, UAE, KSA and NL.

The FDI trends in 2008-09 to 2011-12 show considerable decrease in FDI inflows from the above mentioned sources. Some new investment source countries have emerged and this trend draws attention in policy formulation and implementation. The FDI promotion efforts may be extended to additional home countries with strong sectors that match sector-specific strengths of Pakistan (eg Turkish construction industry or Australian mining industry).

The FDI in Pakistan mainly comes from four regions which in 2007-08 accounted for 71 percent of total FDI flows to Pakistan: USA (25.4 percent), South East Asia mainly Malaysia and Hong Kong (20.5 percent), EU mostly UK and NL (12.8 percent) and Middle East, mainly UAE and KSA (12.3 percent).

These sources of FDI in Pakistan are also the regions with the largest expatriate Pakistani communities. A special action plan will be prepared aimed at activating Pakistani diaspora in the four focal regions in promoting foreign investment policy strategy.

Regarding security and safety of foreign investors, besides other measures, the Board of Investment in co-ordination with provincial investment promotion agencies (IPAs) provides co-ordination for "airport-to-airport" security for foreign investors. To avail this service, registered foreign investors or bona fide potential investors shall make the request to the BOI with adequate notice and details of the itinerary. The services include co-ordination with local police for escort and advice on making secure lodging and transportation arrangements.