Pak FDI to be allowed selectively

Written by Economy Bureau | New Delhi, Sep 29 | Updated: Sep 30 2008, 07:03am hrs
The government is considering allowing investments by Pakistan-based companies on a case-by-case basis, minister of state for commerce and power Jairam Ramesh said here on Monday.

The move comes close on the heels of Prime Minister Manmohan Singh and Pakistan President Asif Ali Zardari announcing in New York the launch of India-Pakistan trade across the Line of Control. The cross-border trade is expected to commence on October 21.

Highlighting that investment is going to be the big locomotive of regional integration in south Asia, Ramesh said, however, at present investments from Pakistan is not allowed and has been placed in the negative list under the Foreign Exchange Management Act. Once the present political situation eases, the government will take up the proposal of allowing investments from Pakistan, he said.

There are security concerns regarding these investments from Pakistan and these can be handled on a case-by-case basis by the FIPB (Foreign Investment Promotion Board), the minister said, adding that such a move would encourage entrepreneurs from Pakistan to make investments in India.

He also rued that direct investments by Indian companies in Pakistan is presently virtually impossible. The minister said several Indian firms have expressed interest in making investments in Pakistan in sectors like IT, but right now the situation in Pakistan is not conducive. The minister said once investments are allowed from Pakistan, over a period of time it would result in increased trade flows. Indias trade with Pakistan was $1.67 billion in 2006-07, an increase of 92.4% from $869 million in 2005-06. Ramesh said even Sri Lankas trade with India recorded an increase under a liberalized investment regime. On Indo-Pak trade across the border, Ramesh said: it is a huge confidence building measure.

Earlier, the government had removed foreign direct investment (FDI) from Bangladesh from the negative list and is now permitting it on a case-to-case basis subject to security clearance. Many Bangladesh businessmen are investing in India in sectors like textile, pharmaceuticals, food processing and paper, Ramesh said.