According to a newspaper report, the Minister of State and Chairman of the Board of Investment Saleem Mandviwalla initialled a Bilateral Investment Treaty (BIT) with the United States on his way back from attending a four-day international exhibition and conference in Canada earlier this month. Prior to looking at the clauses of the BIT it must be acknowledged that a Minister of State or the Chairman of the BOI does not possess the plenipotentiary powers that authorise him or her to sign a binding agreement on behalf of the government.
In other words for his initials on the BIT to be binding it is critical for the cabinet or a full minister with plenipotentiary powers, including the two relevant ministers namely the Minister for Finance and the Minister for Foreign Affairs, to approve the draft treaty.
The Ministry of Foreign Affairs has reportedly sent a note of protest to the BOI over the BIT treaty - a legitimate expression or declaration of objection.
Be that as it may, reports suggest that the US had threatened abandoning the proposed draft of the treaty altogether, a draft that had been due to be signed over six years ago when President Bush visited Pakistan.
Additionally, there are reports that the US had clearly and unambiguously indicated that until and unless the draft treaty was signed as is by the end of the current month it would be revised and contain even harsher conditions - a factor that probably led to a hasty initialling of the BIT draft which, of course, cannot be implemented until and unless endorsed by the cabinet or a full minister.
Some BOI officials, on condition of anonymity, maintain that the Chairman would not have initialled the Treaty until and unless he had received a go-ahead to do so from either the President or the Prime Minister.
The most controversial clause of the BIT which caused delay in signing on the part of the government of Pakistan was the US proposal that Islamabad would pay compensation in case of loss to any US investor due to change in government policy or loss arising from a law and order situation.
Given the state of affairs in Pakistan today, much worse than what was in evidence in 2006 both in terms of law and order as well as in terms of routine changes in energy demand management, this clause would be a recipe for a further drain on our scarce budget resources; or such must be the concern of the related ministries.
However at the same time, it is unlikely that anyone would be interested in investing in this country until and unless there is a guarantee that he would not lose out due to any terrorist-related activity or indeed due to the government's inability to allow the investor to operate within policies that attracted him in the first place.
Continuity of policy and security are two critical pillars required to support investors - both foreign and local - and they remain sadly missing in our country.
The second controversial clause of the BIT stipulates that Pakistan would have to seek prior approval from the US before finalising export, import or tax-related policy.
While at first glance, this may seem as giving the US the right to interfere in our domestic economic policies yet the fact remains that the Pakistan government has a history of not only not taxing its rich landlords, thereby placing the burden of raising revenue on the investors, but also of frivolous expenditure that accounts for rising outlay on current as opposed to development expenditure.
Unfortunately it is doubtful if the government can attract any foreign investment without this clause. The Pakistan government must accept that at the present stage in our history foreign investment remains elusive given a prospective investor's perception of our macroeconomic management as well as security-related concerns.
At the same time, it must be acknowledged that Pakistan is competing with other nations in the world and it has to give greater incentives given the range of negative issues that are prevalent here. Thus in our unique and needless to add challenging context we may be forced to provide guarantees to prospective foreign investors that may not be an issue in another country.