LAHORE: Though the Pakistani diaspora supports our economy through remittances that surpass our exports, it has been reluctant to invest its foreign-earned income in productive industries, with most investments being directed towards real estate.
In contrast, the Indian diaspora has heavily invested in Indian industries, contributing over 30 per cent to their exports. Even the Bangladeshi diaspora has made significant investments in the textile industry, where Bangladesh excels.
Pakistan’s diaspora is approximately nine million strong, with remittances in 2023 totalling $29.9 billion, which is 108 per cent of its exports amounting to $27.7 billion. The Indian diaspora, with a population of around 32 million, received remittances worth $111 billion in 2023, while its exports were valued at $447 billion that year, making remittances only 25 per cent of its exports. The Bangladeshi diaspora, now about 10 million, sent remittances amounting to approximately $21 billion in 2023, with exports for the same year valued at $55.5 billion, making remittances 38 per cent of its exports.
Around 15-20 per cent of the Pakistani diaspora has invested in various sectors, primarily real estate and small industries. However, industrial investment has been slower, with only a small percentage focused on establishing export-oriented industries. Recent success stories include the development of IT services outsourcing and software development companies (eg, startups in the IT sector), while remittance-backed investments have largely been in construction and housing.
In contrast, 20-30 per cent of the Indian diaspora has been involved in industrial investments, with key areas including IT, technology, pharmaceuticals, and textiles. Notable success stories include companies like Infosys and Wipro, which have significant NRI investors, and the Indian startup ecosystem has gained substantial NRI support, especially in tech. The percentage of the Bangladeshi diaspora involved in industrial investment is lower, estimated at around 10-15 per cent, mainly in the garments and textile industry. Success stories include Apex Footwear, BEXIMCO, and PRAN-RFL, where diaspora investments have played a role in growth.
To attract its diaspora to invest in industry, Pakistan must implement several strategies that address key challenges and opportunities. The government should establish dedicated bodies or initiatives, such as a diaspora investment fund or Pakistan diaspora bonds, tailored specifically for the overseas Pakistani community.
This would provide structured and secure avenues for industrial investments. Pakistan should offer tax breaks, customs exemptions, and subsidies for diaspora-led industrial investments and establish special economic zones (SEZs) where Pakistani expatriates can receive preferential treatment for setting up industries. Reducing red tape and bureaucratic hurdles through better governance is a necessity.
Encouraging joint ventures between local companies and the diaspora, especially in emerging industries such as technology, renewable energy and agro-processing, can help diaspora investors team up with trusted local entities, reducing perceived risks. The government should also initiate state-supported programmes that promote co-investment between Pakistan-based companies and diaspora investors, targeting growth sectors like manufacturing, IT, and logistics. Concerns around political instability, inconsistent policy enforcement, and corruption should be addressed.
Stabilizing the economy by tackling issues such as inflation, currency depreciation, and ease of repatriating profits is crucial for attracting diaspora investments. Enhancing connectivity and networking is also important. The diaspora needs online platforms to explore and invest in industrial projects remotely.
This could include crowdfunding opportunities, industry-specific investment opportunities, or technology incubators for those interested in Pakistan’s tech sector.E-commerce and logistics infrastructure must be strengthened to attract diaspora investors interested in technology, trade, and retail sectors. Infrastructure in SEZs and export processing zones (EPZs) dedicated to diaspora investors should also be developed.
Establishing investment insurance or credit guarantees for diaspora-led projects would mitigate the risks associated with economic or political uncertainties. Many diaspora members work in high-tech sectors globally. Pakistan should encourage the transfer of technology and knowledge by offering incentives for establishing high-tech industries.