There are four elements that constitute the key to a growing business economy and prevention of financial instability:

1. Maintenance of macro-economic stability through sound economic policies; 2. Building efficacious financial institutions; 3. Ensuring compliance with recognized governance norms; 4. Putting in place capable, fully empowered and independent regulators Now the fundamental pillars essential to attracting investment and on which economic progress rests for any state are: 1. PEACE, 2. LAW AND ORDER, 3. FULLY FUNCTIONAL JUDICIAL SYSTEM, 4. CONTROL ON CORRUPTION 5. INDEPENDENT FINANCIAL INSTITUTIONS. DFI depend on these five pillars. Let us look into detail how these pillars stand in Pakistan. Pakistan is amongst the important emerging economies of the region, with population of 180 million plus, presenting the ideal location for access to all the growing markets of the world, with liberal and investor friendly policies. In Pakistan, foreign and domestic investors can directly invest in every sector and even there are no limitations on bringing in or taking out capital. Pakistan is a gateway for foreign investors into Central Asia through which the volume of external trade can be expanded. Large size of market, highly skilled, cheap labor, trade liberalization and little indirect taxes are encouraging signs in Pakistan. The investment policy of Pakistan offers proactive facilitation, guarantees of equal treatment to both local and foreign investors, easy tariff structures and a liberal regime on repatriation of profits. Pakistan in the recent past was no exception to global financial crisis coupled with domestic difficulties but the economy has shown resilience to the shocks and has maintained global and regional patterns and has performed better than some of the neighboring countries. Foreign investment in Pakistan is fully protected through Foreign Private Investment (Promotion & Protection) Act, 1976; and Protection of Economic Reforms Act, 1992. Foreign investors are allowed to invest in industrial project on 100% equity basis without any permission from the government. There is no requirement for a No Objection Certificate from the Provincial Govt. In addition to manufacturing sector foreign investment on a repatriate-able basis is allowed in services, infrastructure and social sectors. As the trade rule says, "Investment in any business, any area and any country calls for careful judgment. Over the years, the main worries of foreign investors in Pakistan have been the security of their investment and assurance of policy consistency. Institutions of market governance like regulatory agencies, essential for a market economy to deliver, are being deliberately weakened and no efforts are being made to ensure availability of risk capital and term funding to the private sector on a commercially viable basis. For markets to function optimally and for all economic agents to operate efficiently on a level playing field, sound and competent regulation is a must. The government needs to realize this. Regulators being appointed are questionable and regulation is being weakened. The government lacks vision. The head of a regulatory agency must be technically competent, knowledgeable with respect to the market, brave, experienced in management ability and administrative capacity and above all a person with leadership qualities because the bottom line is that the fish rots from the head down. The government should strengthen all the three vital regulatory institutions to ensure sustained and equitable growth in free market economy. 1. A strong and independent SBP would ensure stability of banking system; 2. SECP needs full autonomy to for better corporate governance; 3. CCP needs autonomy to keep the markets functioning fairly providing equal opportunity to all. If these three institutions operate independently I can bet

my life that Pakistan would not have been very different. To sum up in Pakistan there are a few basic things that we need to do like emphasize on regional cooperation, for free economy make institutions of market governance as strong as possible, make regulators autonomous, accountable and appropriate, widen the tax base, bring more people into the tax net, be fiscally prudent, improve governance, improve the much needed energy sector and above all institutionalize the systems specially the financial system.