Stable policies will bolster equity investor sentiment

Islamabad: Pakistan's equity investors are paying little attention to President Pervez Musharraf's political future as they weigh prospects for their own investments in days to come.

The prevailing sentiment among equity investors is a sea change from the time when Musharraf was considered virtually indispensable for Pakistan's stability. Clearly that era is gone.

In this new phase of Pakistani politics where Mush-arraf has virtually lost all ground, the community of equity investors is now driven by other important considerations.

As time goes by, investors who have recently left Pakistan could consider returning, but only in consideration of the following three issues.

First, an end to Musharraf's rule must be followed by a significant improvement in the overall political climate which is essentially built around an end to the tradition of political infighting, political vendettas and revenge seeking.

This kind of behaviour is often justified as part and parcel of a free democratic environment.

The truth is that for many investors, their political concerns are driven by worries over the sustainability of policies. Political infighting has caused widespread disruption to prevailing policies, forcing many prospective investors to turn away.

Second, there has to be a new formula to begin lifting prospects of growth for the Pakistani economy at a time of an overall slowdown. Too frequently in the past, governments have failed to tackle issues such as the need to radically improve agricultural productivity. This is important for a country where almost two thirds of the population relies directly or indirectly on farm incomes.

Too often in the past, economic planners have simply ignored this vital connection and paid little heed to the need to revive the agricultural sector, all in the interest of not just improving the economic environment, but also the stock market's atmosphere.

Sectors such as production of chemical fertilisers involves large companies listed on the stock market like Engro chemicals and Fauji Fertiliser company, whose fortunes will driven by rising demand for their products, will in turn benefit those equity investors who hold their stock.

Finally, going forward, the government must also initiate a new dialogue with key players in the stock market, aimed at withdrawing tax exemptions in place for equity investors. Such exemptions were given on the ground that incentives will work wonders to attract equity investors.

However, payoffs to investors in the shape of tax holidays is no way to improve sentiment surrounding the equity markets. For too long, Pakistan's investors have lived with the hope of getting benefits from different governments.

It has been proven that incentives do not necessarily add large-scale value to the investment climate. If a government focuses singularly on ways to lift pros-pects of the industrial sector, the sentiment surrounding equity investments will indeed improve.

- The writer is a journalist based in Pakistan.