Pakistan has done badly on the World Economic Forum’s annual competitiveness rankings, its position of 124th of 144 in the Forum’s 2012-13 Competitiveness Report, reflecting a worrying weakness in its economy for a country of its size. More importantly, this weakness also reflects why Pakistan has done poorly in attracting foreign investment, both direct and indirect. There are two major causes given for this, the level of corruption and poor governance. With corruption stopping at the top, it has not found favour with the government, which does not realise that the illegal but short-term gratification obtained by an individual, harms the entire country.  Corruption also automatically leads to poor governance, as the decision-making process is not based on economic benefit but on illegal payments to officials. More specifically, the country’s participation in the war on terror has also cost it competitiveness, because it has meant a debilitating uncertainty in the law and order situation. So has loadshedding, which has meant delays in production and an inability to fill orders on time.The rankings mean that the government’s performance depends on how other governments are doing. The report is based on more than 100 economic indicators, including many which are determined by government action, such as general government indebtedness and budget balancing. It goes almost without saying that the government should not take steps because of the report, but it must view the results as indicating why the undoubted decline in foreign investment has occurred. If it takes the kind of actions that would encourage such investment, it would find that its position on the index would improve automatically.Pakistan is not an attractive destination for outside investors. The report’s ranking merely reflects this. In today’s globalised world, capital goes where it can make the highest profits even more than in the past. The government has a crucial role to play in making it an attractive destination. Apart from ending the country’s participation in the USA’s war on terror, the government must also bring to an end the energy crisis and the corruption that runs from top to bottom within it. There is just enough time before the general election for these measures to bear some fruit.