Foreign investors have advised the government to remove negative perception that prevents Pakistan from emerging as a strategic destination for global capital.

Among other things, the negative perception emerges from a high profile presence of security forces in major urban centres that makes them easy target for terrorists.

Truckloads of armed men moving on the streets and stationed at strategic positions give the impression to visiting foreigners that they are in a high security risk area. This is one dimension of the negative perception, say executives of multinationals interacting with their foreign visitors.

The social elite moves around the cities with gunmen, many of whom face no security risk. It has become a status symbol, says head of a multinational. Another negative aspect is the news reporting by Western media of various incidents, handiwork of al-Qaeda and other militant Islamic groups exposing the security risks to the foreigners. This perception is reinforced by travel advisories issued by the United States and European governments from time to time though public announcements.

Latest warning to US citizens in Pakistan came from Washington on Wednesday. The US administration warned the US citizens of the real possibility of terrorist attacks and advised them to take security precautions. The US consulate in Karachi believes that a series of recent attacks in and around Karachi indicated that extremists might be plotting additional strikes, particularly against "soft targets."

Earlier this month, local businessmen told a visiting American trade delegation that US travel advisory has been a major impediment to the inflow of foreign investment and should be withdrawn. Some promises were made to ease the situation but the warning repeated earlier this week reveals the mind-set of the US administration.

Despite the negative perception, more foreign trade teams visit Pakistan than in the recent past. Oil drilling and investment companies have invested about $1 billion in the past 2-3 years.

But the low level of investments have exploded many myths about how to woo foreign investors. How does Pakistan suffer from a negative perception among global investors when it is front-line state against the US-led war against" terror", when multi-layers sanctions by West have been lifted and access of US and European markets for textiles have been widened. Pakistan is no longer a" pariah" state and is now part of the US-led international community and has been promised the non-NATO status by Washington.

President Pervez Musharraf is one of the most acclaimed leaders of the so-called civilized world and the US-led coalition. But these positive developments have not helped realize the foreign investment potentials.

It is now universally recognized that it is political economy and not economics alone that shapes the world. Pakistan stands on the right side of the West and its economic reforms and performance have been applauded by the IMF, World Bank, Asian Development Bank and coalition partners.The growth rate for current fiscal is estimated at 5.8 per cent against 5.1 per cent of last year.

Pakistan is still not seen as a strategic destination for capital spending. The question arises as to what are the other factors that prevent large inflow of large foreign capital. One of them is the negative aspect of Pakistan's status as a front line state in the war against terror with its global and domestic fallout on security concerns.

Managing law and order becomes far more difficult and complicated than fighting terrorists in normal times. And terrorism cannot be easily combated as is so evident from the statement of EU's External Affairs Commissioner Chris Patten. He says the war on terrorism will shape the 21st century. This is the large canvas on which history is being written.

The war against Soviet occupation of Afghanistan brought the gun and heroin culture to Pakistan. This time, Pakistan is fighting "foreign terrorists" in its own territory.

On Wednesday, President Musharraf complained that war in Iraq was drawing resources from the battle against al-Qaeda leaders/supporters. Pakistan was receiving" very nominal" assistance as it tried to pacify tribal areas along the Afghan broader.

Pakistan needs to be developed as a model state that combines democracy with economic prosperity to win the hearts and minds of Muslim militants. War is no solution.

With low levels of foreign investments as long as the country's status as front-line state lasts, a distinct possibility, the US could step up its economic assistance.

The $3 billion assistance for five years, $600 million per year, is " peanuts" in the words of late military dictator Ziaul Haq when he was offered a similar sum in real terms. It minimizes Pakistan's political and economic status and its potentials before global investors.

It indicates how much stakes they can risk in Pakistan. It was the outcome of the two Afghan wars that Pakistan suffers from the negative perception. Pakistan had been told that once the IMF was on board, foreign investment would start flowing. It did not happen.

Then the expectation was built that the lifting of multi-layer sanctions would yield positive results. Foreign capital spending remains low. 9/11 brought Pakistan into the mainstream of global politics which was soon to be split at the seams on Iraq issue. The outcome is there for all of us to see.

Now, the policy makers say that exit from the IMF would signal to the investors that the national economy is out of the woods and the investment environment would improve.

Euro-bond was floated to put Pakistan on the radar screen of international financial markets so that there would be no need to borrow from IMF and this would provide the policy makers the space to exercise economic sovereignty.

Much is made about over-subscription of the $500 euro-bond issue in a market flooded with excess money for lack of productive investment- that too at a high rate of 6.75 per cent for 5- year bond. With the same credit rating as Pakistan, Indonesia was able to raise funds against ten- year bond at 6.70 per cent.

If market reports enjoy any creditability, the overseas Pakistanis in Dubai had offered to subscribe to the entire $500 bond at 5 per cent. But this was not the objective of policy makers. Incidentally, Dubai is a bigger financial centre than Hong Kong and Singapore and is a regional financial hub.

It is unlikely that foreign investment would pick up with ongoing war against" terror." The policy makers may, as well, focus on domestic investors. Pakistan is located in war zone. India and Pakistan fought two wars. Now, Pakistan is supporting a US-led war in Afghanistan, for the second time.

The security concern remains paramount with adverse consequences for the economy. Yet some difference, though not substantial, can be made perhaps by the suggestion that foreign tourists should be attracted to visit areas that are free from security concerns. They may go back home with a better image.