October 18, 2002	Friday	Sha'aban 11, 1423

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ISLAMABAD, Oct 17: The World Bank is awaiting the formation of new government to come to an agreement on shared private sector development agenda in Pakistan, sources in the economic affairs division told Dawn on Thursday.

The WB, these sources said, has prepared a private sector assistance strategy for Pakistan in consultation with the military authorities which will have to be implemented by the new administration.

The strategy is based on three major objectives. Firstly, to establish a more neutral incentive regime that significantly reduced the apparent bias against exports, labour intensive industries and small and medium enterprises and productivity growth in key industries.

The key elements of this objective include further trade liberalization, policy adjustments to facilitate the reallocation of resources from less to more efficient industries and firms, and restructuring of large-scale manufacturing industries.

Secondly, to create an investment-friendly regime that is attractive to foreign and domestic investors. Key elements of this objective include transparent trade policy formulation, tax administration reform, and policy stability.

Thirdly, to strengthen the financial sector to mobilize resources for private sector investment. Key element of this objective are: commercial banks’ privatization, development of capital markets and expansion of commercial microfinance.

Under the strategy, the WB would support economy-wide policy and regulatory reforms through balance of payment operations and technical assistance in areas such as tax administration by the central board of revenue and deregulation of industrial, business and labour regulations.

This would dovetail with the WB’s programme of support to strengthen government effectiveness. Priority would be given to elements of trade regime that discourage export orientation and participation in global production sharing, productivity growth, and international competitiveness.

Actions would include timely implementation of scheduled tariff reforms, the phasing out of regulatory duties that still provide protection well beyond the maximum tariff rates, the elimination of SROs that distort resource allocation or undermine business confidence, and reforms of the tax administration to eliminate the shortfalls of general sales tax refunds and duty drawbacks to exporters.

The WB believed that external trade reforms would need to be complemented by selected economy-wide or sector-specific regulatory reforms to relieve constraints that are holding back private investment and productivity growth.

The bank would continue to encourage the federal and provincial governments to pursue the trade liberalization and modernization of industrial, business, and labour regulations that are already underway.

On the key growth sector, the WB would be selective in terms of addressing specific sectoral policy and regulatory issues and promoting private investment. Priority will be given to sectors with significant impact on economic growth and the balance of payments like gas, mining and the telecom sectors.

The WB said that it would give top priority to natural gas which offered the largest potential for reducing macroeconomic vulnerabilities for attracting foreign direct investment, restoring private-sector confidence, and encouraging efficient substitution of domestic resources for imports.

The objective will be timely and consistent in the implementation of regulatory reforms to create an environment for accelerated development of gas reserves.

The strategy will support implementation of planned programme of retail and producer-price adjustments, including bringing feedstock-gas prices to the fertilizer industry in line with the price to the rest of the industrial sector, and reflecting any subsidy in the budget.

The strategy also includes privatization of Pakistan Petroleum Limited, restructuring of transmission and distribution companies, and liberalization of transmission under a common carrier regime.