The visiting US Commerce Secretary Penny Pritzker made some relevant observations during the two-day third Pakistan US Business Opportunities Conference in Islamabad that are fully supported by Business Recorder and have been supported in editorial comments over the years. Citing Pakistan’s poor ranking in the World Bank’s “Doing Business 2015” report she highlighted procedural issues facing investors in terms of construction permits, regular access to electricity, property registration, access to finance, tax administration and contract enforcement.
It is unfortunate that in spite of the PML-N government’s commitment to set up one-stop shop for investors this remains a pipedream. Electricity shortages continue and the PML-N government must be held responsible for following the flawed policies of its predecessors namely relying on upping tariffs to absorb the sectoral inefficiencies with massive energy shortages accounting for at least eight-hour loadshedding in all major cities with the situation in rural areas much worse. The recent two to three weeks petrol shortage that cost the country loss of billions of rupees was a crisis for which the incumbent cabinet has to be held responsible though bureaucrats alone were made the scapegoats. The qabza groups in major cities continue to plague the genuine owners of property and former Punjab Governor Sarwar lamented the fact that the qabza groups are illegally occupying the property of overseas Pakistanis that would have repercussions on remittances, the only source of foreign exchange inflows that does not have a cost attached to it. Access to finance also remains a problem and this is particularly so with government borrowing escalating to over one trillion rupees domestically, which is crowding out private sector space.
Tax administration remains appallingly poor given the low tax to Gross Domestic Product (GDP) ratio and it is unfortunate that the government continues to rely on fuel products to collect a hefty 20 percent of its total revenue – a reliance that has negatively impacted on not only domestic costs of production but also on the competitiveness of our exports. And finally contract enforcement remains an issue and can be sourced nine times out of ten to the failure of the awarding government to ensure transparency and adherence to public procurement rules and regulations.
What needs to be highlighted is that irrespective of the PML-N government’s sustained attempts to lure foreign direct investment into the country it has been steadily declining since June 2013 – the year the government presented its first budget. According to the State Bank of Pakistan, in July-January 2014 foreign direct investment was estimated at 553.2 million dollars while in the comparable period this year the inflow declined to 545.4 million dollars. The major source remained telecommunications subsector and that perhaps explains the rise in taxes on this sector leading to its negative growth this year.
Irrespective of the ground realities, it has become the norm for our current batch of economic managers to extol their policy decisions and cite flawed data released by the Pakistan Bureau of Statistics that comes under the administrative control of the Ministry of Finance as proof positive that the economy is improving. Both the Federal Finance Minister as well as the Federal Commerce Minister addressed the conference and invited US entrepreneurs of Pakistani descent who accompanied the US Commerce Secretary to engage in productive activities in various sectors as the environment is conducive to their entry. If Pritzker’s comments are anything to go by the two ministers did not address the genuine concerns of foreign investors and therefore failed to successfully persuade entrepreneurs that the time is right to enter the Pakistani market. Be that as it may, one can support the conference being held in the country’s capital as opposed to undertaking expensive foreign tours for the purpose that have failed to produce any results for the past two years.