Capital is the most important resource of our times. Unfortunately capitalism is brute, ruthless and driven solely by profits, both short and long term. In the last two decades there has been no serious investment in the country both in the private and public sector.
Under the IPP (Independent Power producers) programme of the mid nineties direct foreign investment (DFI) of $6.0 billion was projected.
International companies came to Pakistan but each had their horror story to narrate. Then the feud with National Power of UK over HUBCO dragged on causing serious repercussions.
For ages, local entrepreneurs have been raising loud voices about the unfriendly investment climate in the country. Instead of improving, the situation has worsened over time making Pakistan an investment hazard country. No government has succeeded in building an investment friendly environment.
During the days of Nawaz-I administration, a high level delegation of Cargill International visited Pakistan. A meeting was arranged with the prime minister at the governor’s house Lahore. Relevant federal secretaries were also present.
Cargill management pointed out the obstacles in doing business, the PM gave on the spot instructions and the secretaries implemented them. Cargill was facilitated, their delegates were impressed.
Although relief was provided but the rules of business were not amended to facilitate future business transactions. Unfortunately till today the same impediments remain. Cargill eventually pulled out their business interests.
The managing director HUBCO told his story during the establishment phase of the company. Their machinery was being cleared at the Karachi Port. The customs inspector wanted Rs 50,000 gratification.
The HUBCO showed the waiver issued by the President of Pakistan. Finally the inspector asked HUBCO to call the President. After failing to get the President on line the company paid the amount.
The same scenario was faced at the octroi post. The octroi barrier operator wanted Rs5000. The company showed the letter of the President, when it did not work the money was paid. The MD insisted that they could only cover budgeted expenditure. For a company to survive it must know the cost of doing business.
What is the cost of doing business in Pakistan? No one has the answer to this question. The ministry of industries and production has initiated a programme to understand this cost. The sooner this exercise is completed the better for the investment climate.
It probably will expose a lot of vultures and parasites in our system. Unless a methodology is developed to deal with these termites of the system the business environment cannot improve. In the era of globalization, capital has all the options.
Money from the USA can be invested in Bangladesh to produce garments and then marketed in Germany under a brand name. All links have to function in a predictable manner. There can be no mid stream hiccups otherwise the investments go dry. Most investments both foreign and local have dried up due to the administrative and procedural obstacles created by the Government of Pakistan (GOP) to kill business in the country.
The system was designed to produce clerks and sepoys and it has lived upto its design.
Many people argue that the judicial system can help. Expeditious disposal of cases can provide protection to the investors. Law and order followed by an independent and efficient judicial set-up play an important role in society. Security is an essential ingredient for investment.
Over the years the law and order situation has deteriorated to alarming proportions. The Police Force has become a party to crime. Criminals have become custodians of law. A massive purge of the force is needed.
The administrative set-up is a major impediment in our growth as a nation. Lack of accountability is primarily responsible for the bureaucratic abuse. Judicial accountability cannot improve the system. There has to be on the spot administrative accountability. Imagine standing at a port to clear your consignment and the inspector asking for gratification.
Going to a court is the last option one can think of. There has to be a mechanism to check the ‘Baboo Terror’.
The 1972 interim constitution called for administrative accountability (section 212(1)). Administrative courts or tribunals were to be established.
In the 1973 Constitution, administrative accountability was replaced with judicial accountability. The courts in Pakistan are poorly managed and overloaded with cases. Civil litigation can go on for ever with no relief. While the judicial system must be strengthened, administrative matters have to be tackled by separate tribunals.
The Mohatisbs are ineffective as they have limited powers. All they can do is to highlight grievances and send a report to the President of Pakistan. The President has no mechanism to get the job done. He is again at the mercy of the ‘Baboos’.
The World Bank has reported that the CBR and Wapda harass investors who then get discouraged to invest in the country. Considering the donor clout in Islamabad it is not a bad idea to reform these two departments. New investors should
be provided complete immunity from CBR for a period of
at least five years while
the CBR is cleansed of parasites.
Mr Moin Khan was appointed chairman of the CBR to improve revenue collection while reducing corruption within the department. Moin struggled for over a year. Finally he left dejected. Perhaps it was the trauma which eventually took his life.
The CBR is in brutal hands. Their main aim is to kill all the businesses in the country unless they learn to follow the dictates of the CBR. New investments need protection.
The size and success of the un-documented economy should be taken as a challenge for the CBR to improve its service to the documented customers. No business likes to pay tax unless there is return although we are one of the highest charity paying nations of the world.
By some estimates Rs64 billion is collected every year for the welfare of the poor but it never reaches them.
Wapda is another story of terror. The mafia within the authority has resisted all efforts at change. Corporatization of WAPDA should have been completed by now bringing commercial discipline and consumer orientation.
Instead the old method of harassment continue. Wapda is run by meter readers and linemen who have un-limited authority. The reading on the meter is of no value, any amount can be billed which the consumer must pay before even a complaint can be entertained. Pilferage continues to be in billions. Electric power is a basic requirement for any investment.
The GOP seems helpless against the mafia within Wapda. PEPCO, the holding company for corporatizing the distribution of power by creating DISCOS (distribution companies), should have completed the task within two years.
The chairman Wapda continues to be the chairman PEPCO with obvious results. All discos have become extension of WAPDA and its tyranny.
Investment is a risky business. Entrepreneurs have to wade troubled waters to succeed. The environment has to be supportive and conducive.
The risk takers have to be appreciated as they create opportunities and employment. It is much easier to deposit money in National Saving Schemes and relax or buy dollars to protect the decline of value of wealth.
Unfortunately, hounds continue to hound genuine investors. The investment climate has not improved an iota. The increase in Forex (foreign exchange) reserves is not due to enhanced business activity as claimed by the finance minister but rather due to buying of dollars by the State Bank.
The bank can hold on to these dollars and save them from the vultures but we must learn to create wealth. For a population of 140 million GDP, (gross domestic product) of $62 billion is grossly inadequate. The amount must be doubled in the next five years.
The nation must be put to work to generate wealth. If nothing else the GOP can pull back its hounds giving the nation an opportunity to invest and grow.
At the time of partition the Quaid appealed to the Muslim businessmen in India to invest in the new country and they responded to his call. Now the investors are leaving for more temperate zones. We must put our house in order and retain them for our future.
