Creation of Special Investment Facilitation Council (SIFC) - Institutionalizing the role of military in the economic domain

Creation of Special Investment Facilitation Council (SIFC) - Institutionalizing the role of military in the economic domain

By: Communicators - Research Team (July 27, 2024)

Pakistan has experienced significant political developments, particularly in the context of democratic transitions. Despite flaws in the electoral process and the pervasive influence of the military, the country has witnessed several democratic transfers of power. However, the military's role in governance has remained substantial, often overshadowing elected governments.

Even when democratic governments have been in place at both the central and provincial levels, the military's influence has not only persisted but also been constitutionally entrenched. Successive elected governments have taken steps to solidify the military's role in key areas of policy and governance. This has led to a complex dynamic where political parties, while campaigning for public support, have consistently ceded significant aspects of governance to the military.

This trend has contributed to a fundamental restructuring of the exercise of political and economic power in Pakistan. The military's ascendancy in governance has often meant that elected officials have limited authority in critical policy areas, affecting the overall democratic process and the civilian government's ability to implement its agenda independently. Overall, the interplay between civilian governments and the military has defined Pakistan's political landscape, influencing how power is distributed and exercised within the country.

Within this background, this writeup examines the creation of the Special Investment Facilitation Council (SIFC) and how it has institutionalized the role of military in the economic domain. 

Creation of the Special Investment Facilitation Council (SIFC)

SIFC was announced in a bid to unveil the Government of Pakistan's “elaborated Economic Revival Plan in the wake of economic hardships being confronted by the country. What was unusual about the SIFC was its announced membership which included the Chief of the Army Staff (COAS) alongside Prime Minister's Cabinet colleagues as well as Chief Ministers.

The first meeting, was held on June 20, 2023. The 'Economic Revival Plan' shared during the meeting included envisaging on 'capitalizing Pakistan's untapped potential in key sectors of Defense Production, Agricultural / Livestock, Minerals / Mining, IT and Energy, through indigenous development as well as investments from friendly countries.

In order to 'fast-track' development of projects, the SIFC was created as a single window interface for the potential investors as well as to adopt a unified approach. The SIFC, would shorten the cumbersome and lengthy business processes through a cooperative and collaborative 'whole of the government approach' with representation of all stakeholders.

SIFC would, create 'horizontal-vertical synergy' between federation and provinces; facilitating timely decision making; avoiding duplication of effort; and ensuring swift project implementation. The high-ranking participation from Federal and Provincial Governments, clearly manifests the national resolve to turn around the economy despite all odds.

Chief of Army Staff also assured Pakistan Army's all out support to complement Government's efforts for Economic Revival Plan, considered fundamental to socio-economic prosperity of Pakistanis and reclaiming Pakistan's rightful stature among the comity of nations.

SIFC was created apparently to ensure continuity of economic policies across elected governments as potential investors would not want abrupt change in policies which impact the feasibility of their projects. 

Since the elected government was to complete its term in August 2023 after which a Caretaker Government was to take over for about 3 months and another elected government would hold reins for next five years after that, there were apprehensions among potential investors about possible change in economic policies across three governments.

No matter how absurd and embarrassing it seemed, the presence of the Chief of Army Staff as a member of a committee which has the authority over economic policies and decision making was considered an assurance of continuity of policies at least till the time the current COAS is in his position which currently would run up to November 2025 with the possibility of an extension of further three years. 

Another view is that the inclusion of the COAS in the Council and giving a role to the military personnel in the management of the council is a bid to institutionalize the role of the Pakistan Army in country's business and economic affairs. It was announced that an army official will act as the director general of the SIFC executive committee as well as its national coordinator while the SIFC's implementation committee will also be headed by an army officer.

The SIFC set its task of attracting investment from friendly countries with the immediate goal to increase foreign direct investment to US $ 5 billion and to US $ 100 billion in three years, as well as achieve nominal GDP of US $ 1 trillion by 2035.

External Influence?

Was the SIFC created to institutionalize the role of the Pakistan Army in our hybrid model of governance or was it created in response to external influence where countries such as Saudi Arabia, Qatar and the UAE asked for guarantees for the continuation of policies from the military to ensure that their future investments would not face these issues?

Pakistan has to face pressures from regional friends that have preferred dealing with a centralized entity, not just in terms of business and investments, than with the volatility associated with the lives and times of elected political governments especially when the authority is devolved to four provincial governments in addition to the federal government.

But a larger and more potent question is whether our continued hybrid system and ascendancy of the military has conveyed to the world the primacy of one institution and benefits of dealing with it. In either case, the argument may have been used to gain more control and as another weakness by civilian elected governments to cede and surrender constitutional domain of governance

Legal Cover to the SIFC

As part of its legislative agenda before the conclusion of the term of the 15 National Assembly, the federal government rushed the passage of amendment to the Board of Investment (Amendment) Act, 2023 (Act No. XLI of 2023). A new chapter, 11A, titled Special Investment Facilitation Council (SIFC) was inserted in the Board of Investment (BoI) law regarding establishment of the SIFC, its scope, functions, formation of its committees including the executive and implementation committees, the SIFC's power to issue directions, its power to relax or exempt from regulatory compliance and its immunity from prosecution or any legal action, etc.

Creation of the SIFC was termed by the political and military leadership as a 'bigger' economic project than the China Pakistan Economic Corridor (CPEC). SIFC was termed as a “Ray of Hope” by the caretaker government emphasizing that enhancement of foreign investment under the Special Investment Facilitation Council (SIFC) was among the top priorities of the Federal Caretaker government.

In November 2023, the caretaker government claimed that the SIFC would bring US $ 60 billion in investments in the next 5-years. The government also planned to establish a sovereign wealth fund of US $ 8 billion for privatizing state-owned entities to provide equity to the SIFC-approved projects for both joint ventures with foreign investors and single ownership schemes.

However, economists expressed that after selling the promise of the SIFC to bring to the country nearly US $ 25 billion in investments, the caretaker government “stealthily tried to walk some of those expectations back.”

Meetings of the SIFC are held regularly with COAS in attendance alongside government officials. The role and potential of the SIFC is regularly cited by the COAS in national and global forums alike. The SIFC also invited business community across Pakistan to “exploit huge investment potential in agriculture, livestock, information technology, mining and energy sectors.

SIFC Apex Committee has shown progress in key sectors under SIFC. It enhanced level of economic engagements with friendly countries including finalization of Bilateral Investment Treaty with Kingdom of Saudi Arabia and Qatar as well as signing of MoUs and Framework Agreements with United Arab Emirates and State of Kuwait respectively. 

Corporate Agricultural Land Transfer to the Army

The Punjab caretaker government leased 45,267 acres of land to the Pakistan Army for corporate farming for 20 years (with the possibility of a 10-year extension) in three districts including Bhakkar, Khushab, and Sahiwal. 

National Development Council

Prime Minister Mr. Muhammad Shehbaz Sharif was not the only Prime Minister in the previous 5-years that created a supra-constitutional body by inducting the military into economic affairs solely in the domain of elected governments.

Exactly 10 months after taking oath as PM, Mr. Imran Khan had formed a National Development Council (NDC) which included then Chief of the Army Staff as a member. Much like the SIFC created later to induct the new COAS, the NDC was created at the time by the PTI government to “to formulate development and economy-oriented policies of the country.

Apart from COAS at the time, other members of the NDC included key Federal Ministers, Chief Ministers and relevant secretaries. The NDC met frequently but since it had no obligation to report to the Parliament, it is difficult to surmise what it may have claimed to achieve. The formation of the NDC was termed antithetical to the constitution at that time and in effect over-riding of the constitutional forum of the NEC.

Article 156 of the Constitution establishes a National Economic Council (NEC) with the authority to “review the overall economic condition of the country. It formulates plans in respect of financial, commercial, social and economic policies, and in formulating such plans, ensure balanced development and regional equity. The NEC, determines the Constitution. The NEC consists of Prime Minister as Chair and 4 nominees, Chief Ministers and one nominee each. The NEC must meet at least twice in a year and is responsible to the Parliament. in submitting its Annual Reports. Constitution of the NEC is mandatory alongside the other critical constitutional entity of the Council of Common Interests (CCI).

Observers have opposed the idea of the inclusion of the Chief of Army Staff to the council, which would make the Pakistan Army an official part of the government's economic policy planning and therefore exposing the institution of military to be politically partisan and open to criticism. 

In its editorial on June 30, Dawn also wrote that “the PTI, by including the army chief in a top economic consultative body, the first time this has happened in a civilian government, will be much to blame if there are negative repercussions for the military's public standing. Chief of the Army Staff was included in a government committee, the first of its kind by a democratic government at the time, meant that the institution was made an official part of an elected political government's economic policy planning with concerns that it may expose it to political partisanship. 

Time has sadly proved that those concerns were not without logical basis as the individualized relationship between the former PM and COAS imploded bringing with it unnecessary and unpleasant repercussions for the institution

Future of Democratic Governance

As per the Constitution of Pakistan, it is the job of civil and military bureaucracy to make available to the disposal of elected governments their knowledge and expertise for making and implementing required policies. For civil servants, the field could be as vast as economics, law, administration, or process knowledge and skills. For military, this would essentially be skills and expertise in security and defense.

Given the de-facto enlarged role of the military in nearly every domain of governance now, this may also include bilateral and international relationship management. But to make its expertise available and for elected governments to avail it, newer, supra-constitutional and supra-legal entities are not needed.

Contrary to the objective to “fast track” such forums and bodies add unnecessary and cumbersome layers of bureaucratic procedures, undermine existing constitutional and legal forums that have a well-established system of parliamentary oversight, and diminish and take-away institutional capacity from its original focus.

Hence, what is the future of our democratic governance if enhanced hybrid model, and not the constitution, is our guiding principle? 

Independent observers are of the view that following the constitutional scheme of governance where each institution of the State works within their own domain, is the only way for fixing the governance. Just as challenges have visibly and clearly mounted, solutions, no matter how hard, are also available if there is firm resolve.