The national economy is at a critical crossroads. It is burdened by a huge debt, dwindling foreign exchange reserves and sluggish growth. Successive governments have launched ambitious initiatives to attract foreign direct investment (FDI), but the results have been disappointing. The much-eulogised China-Pakistan Economic Corridor, once hailed as a $62 billion game-changer, has failed to deliver the promised transformation.

The Special Investment Facilitation Council, created to fast-track FDI, has proved yet another bureaucratic exercise in signing memorandums without tangible outcomes. Even the recent staff-level agreement with the International Monetary Fund emphasises structural weaknesses that continue to deter serious foreign investors. The reluctance of the local investors to make further expansions, too, is understandable.

The fundamental flaw in Pakistan’s approach lies in its failure to recognise that attracting investment requires more than high-profile announcements and photo opportunities. The CPEC is a prime example of this. While state-owned Chinese enterprises completed some infrastructure projects, private investors have stayed away due to security concerns, regulatory challenges, complicated tax system and bureaucratic red tape.

The attacks on Chinese nationals, including the 2021 Dasu bus bombing and 2022 Karachi University attack, exposed Pakistan’s failure to provide a secure environment for investors. Rather than addressing these systemic security challenges, the government relied on temporary measures like military escorts that do little to reassure long-term investors.

The SIFC’s disappointing performance has further exposesd our faulty investment policy and its perpetual failures. The council, created with much fanfare in 2023, was meant to cut through red tape and attract investments from the Gulf countries in agriculture, mining and energy sectors. Yet despite big claims of investor eagerness in Saudi Arabia and the UAE, visible investments remain elusive.

The shadow of past failures looms large. The Reko Diq mining dispute, which cost Pakistan billions of dollars in penalties, should serves as a constant reminder of the risks foreign investors face.

Without robust legal protections and transparent dispute resolution mechanisms, no amount of establishment support to the SIFC can overcome the trust deficit that plagues Pakistan’s investment environment.

The recent staff-level agreement with the IMF following the first review of the current $7 billion programme highlights these persistent structural weaknesses. Though the agreement provided short-term breathing room, IMF’s conditions, including fiscal consolidation, energy sector reforms and improved governance emphasise fundamental changes needed to attract sustainable investment. The Fund’s emphasis on “rebuilding external buffers and eliminating distortions”aptly exposes Pakistan’s chronic inability to create an investor-friendly environment.

The agreement includes a new 28-month programme under Resilience and Sustainability Facility aimed at climate resilience, an area where Pakistan has failed to attract significant green investment despite its vulnerability to climate change.

The meeting between Finance Minister Muhammad Aurangzeb and Russian Deputy Prime Minister Alexei Overchuk at the Boao Forum exemplifies Pakistan’s tendency to prioritise optics over substance. Discussions on energy cooperation and the North-South Transport Corridor sound promising but such diplomatic engagements rarely translate into concrete investments.

History is replete with similar high-profile meetings that yielded little in terms of actual capital inflows. The Economic Coordination Committee’s virtual approval of project escalations for Reko Diq and a Skardu sports facility further demonstrate this disconnect. These decisions address specific projects but do nothing to improve the overall investment climate.

The upcoming budget and the period following the current IMF programme offer critical opportunities to demonstrate real change. Whether Pakistan’s leaders grab their chance, remains to be seen.

Pakistan’s launch of its first Green Bond represents a rare bright spot, displaying potential in climate finance. However, this isolated success cannot compensate for systemic failures in economic diplomacy.

The country’s foreign policy apparatus remains stuck in a bygone era, with many ambassadors functioning as glorified postmen rather than active promoters of trade and investment.

Unlike India’s aggressive Made in India global campaign or Saudi Arabia’s relentless pursuit of Vision 2030 investments, Pakistan’s diplomatic missions show little initiative in organising trade exhibitions, investor conferences or sector-specific roadshows.

The foreign minister’s absence from key global forums represents perhaps the most glaring failure. At a time when economic diplomacy should be Pakistan’s top priority, the foreign minister remains conspicuously absent from international forums where investment decisions are made. This neglect stands in stark contrast to countries like Vietnam and Indonesia, whose leaders personally court investors and actively reshape their nations’ global image.

The solution to Pakistan’s investment drought lies in fundamental reforms, not another bureaucratic committee or high-profile signing ceremony. First, Pakistan must establish credible legal safeguards for investors, including robust dispute resolution mechanisms and protection against arbitrary policy changes.

Second, the government must empower and restructure its diplomatic corps, replacing ceremonial ambassadors with business-savvy envoys capable of promoting trade and investment. Third, Pakistan needs to develop sector-specific investment strategies, targeting industries where it holds competitive advantages, such as textiles, agriculture, and renewable energy.

The IMF agreement provides a temporary lifeline, but real economic recovery will require attracting substantial foreign investment leading to enhanced exports. This demands more than just policy announcements. It requires a fundamental shift in how Pakistan approaches investment promotion.

The government must move beyond its reliance on China and actively court investors from Europe, Southeast Asia and the Middle East. It must address the security concerns that deter private investment and implement the governance reforms that its international partners demand.

Time is running out for Pakistan to reform its investment environment. Debt servicing consumes nearly 60 percent of government revenues and foreign exchange reserves cover barely two months of imports, Pakistan cannot afford another decade of failed initiatives and missed opportunities. The choice is clear: it must either implement genuine reforms to attract investment or face prolonged economic stagnation.

The upcoming budget and the period after the current IMF programme offer critical opportunities to demonstrate real change. Whether Pakistan’s leaders will grab this chance, remains to be seen.

Without significant FDI and local investment, Pakistan will remain trapped in a cycle of IMF bailouts and economic crises. The government’s ability to deliver on its reform commitments will determine whether the country can break this cycle and embark on a path of sustainable growth.

For now, evidence suggests that the authorities continue to prioritise short-term fixes over fundamental changes needed to attract export-oriented investments, domestic and foreign, a strategy that has failed repeatedly and will continue to fail until there is a paradigm shift and a pragmatic approach is adopted.

The international community, including multilateral institutions and potential investors, are watching closely to see if Pakistan is finally ready to learn from its past mistakes. The ingredients of success in the form of a large consumer market, strategic location and young workforce are available. However, without genuine fundamental structural reforms, these advantages will remain untapped.

Pakistan’s economic future hinges on its willingness to confront hard truths and implement the difficult changes required to become an attractive investment destination. The time for half-hearted measures and empty promises has passed; only courageous, consistent and concrete actions can change Pakistan’s investment directions and secure its economic future through export-led growth enabled by FDI and local investments, rather than more reckless borrowing.

Dr Ikramul Haq, writer and an advocate of the Supreme Court, is an adjunct teacher at Lahore University of Management Sciences.

Abdul Rauf Shakoori is a corporate lawyer based in the USA.