Assurance to businesspeople

President Mamnoon Hussain and Prime Minister Nawaz Sharif in a meeting held at the Aiwan-e-Sadr assured the country’s business community that every possible facility will be provided to businesspeople to bolster trade in the country. The President noted that the government is dealing with major impediments to business activity notably law and order issues as well as the energy crisis which the Prime Minister endorsed and added that “we have discouraged lethargy in the government’s decision-making and are bringing an economic turnaround in the country.” There is no doubt that law and order remains the single most major impediment to economic activity in the country and the fact that the 16th December attack on Peshawar’s Army Public School finally compelled the government to take appropriate mitigating measures must be fully supported. At the same time it has to be acknowledged that the present government is supporting mega energy projects, with foreign financial assistance, focused on enhancing the country’s generation capacity.

The PML-N, in marked contrast to the PPP, has been known to be business-friendly and policies that support this claim are restructuring of state-owned entities (SOEs) with a major component of downsizing as a means to fuel profitability to be followed by privatisation. However, the party in its current stint in power has faced considerable criticism in delays in appointing heads of SOEs and, unfortunately, successfully appealed the decision taken by a bench led by the then Chief Justice Iftikhar Chaudhry that sought to establish a transparent system of appointments on a petition filed by a long-term PML-N loyalist Khawaja Asif. Appointments now can be made by the federal government and once again the process can be abused by successive governments to appoint those who may or may not meet the experience and qualifications that are required for any position.

The PML-N has also focused on large infrastructure projects including road building and energy projects. The party has faced criticism post-2013 elections of flawed priorities with a higher budgetary allocation on road building as opposed to electricity generation (with the latter more directly responsible for below capacity output); as well as failure to improve the performance of the energy sector itself that requires policies designed to eliminate the inter-circular debt (that has resurfaced to over 300 billion rupees at last count) and a reduction in distribution and transmission losses through projects that focus more on rehabilitating the crumbling distribution and transmission systems that can only supply up to 15,000 MW according to the recently retired Secretary Water and Power. Ironically the manifesto of the party envisaged an energy ministry that would support a holistic approach however that commitment appears to have been shelved.

It is extremely unfortunate that our manufacturing sector continues to suffer and as the Finance Minister stated prior to his departure for Japan the growth rate of exports was buffered by the grant of GSP Plus status to the country by the European Union. The country’s reliance on foreign loans (direct loans from multilaterals at market rates and issuance of Eurobonds and sukuk at rates well above the market rate) have already increased our debt servicing from the budgeted 1,153 billion rupees in 2013-14 to 1,325 billion rupees in the current year – an increase of 172 billion rupees which is expected to be higher than budgeted for one major reason: the required releases for the 32 billion rupees National Action Plan that in the budget for the current year received under 1 billion rupees.

For the last seven years at least the redeeming factor of our macro-economy has been rising remittance inflows that are partly attributable to the recession in countries where our emigrants are employed and where interest rates have been historically low as well as the rising inflation domestically that require more remittances. This reliance needs to be reduced with more emphasis on domestic productivity.

Be that as it may, there is evidence to suggest that Pakistani manufacturers like to be mollycoddled by the government in terms of getting protection from imports and tax concessions/rebates; and in the event that such measures are not extended there are organised protests that no government to date has been able to withstand. The result has been a sector that remains highly dependent on government largesse which has disabled it from competing internationally. There needs to be a phased ending of such policies and one would hope that the PML-N government, due to its historically strong ties with the business community, succeeds where others have failed.