PAKISTAN’S need for foreign direct investment is well understood. What is less understood is that capital does not flow toward need; it flows toward certainty. An investor comparing Pakistan to Vietnam, Indonesia or the Gulf is not merely comparing tariffs or resource potential; he is comparing the probability that the rules in place on the day he signs will still hold on the day he seeks to repatriate his return. While we have to guard the national interest, we cannot shy away from practices around the world. We will have to devise a mechanism to facilitate and shorten the processes to ensure that the investor is not frustrated.

Four assurances recur in almost every serious FDI negotiation, whether in power, mining or infrastructure. First, protection against expropriation, not just outright nationalization, which is rare today, but “indirect” or “creeping” expropriation, where regulatory changes quietly strip an investment of its value without a formal seizure; the right time to guard one’s national interest is at the time of negotiating the contract, where normally we are in a hurry. Second, fair and equitable treatment (FET), a guarantee that the state will not act arbitrarily, discriminate or deny due process; this is fundamental and can´t be denied. Third, full protection and security for the physical investment and its personnel. Fourth, and most contested in Pakistan’s experience, free transfer of........

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