June 30, 2003	Monday	Rabi-us-Sani 29,1424

Pakistan is a member of the World Trade Organization (WTO),the goal of which is to help producers of goods and services, exporters, and importers conduct their business. All trade quotas would be abolished effective January 1, 2005.

Many sectors of our economy particularly trade, agriculture and industry shall then be fully exposed to the globalization challenges.There is no doubt that the Pakistani people would effectively meet the competition on quality, price and delivery schedule basis, as they have the tenacity and ingenuity to successfully face all such challenges.

However, for that they have to plan now and improve their weak areas to the international standards. Moreover, their efforts would only succeed if concurrently there were similar improvement actions by the government and its various agencies for creating conducive environment. There is not much of a time left for the gigantic restructuring tasks ahead.

Major improvements are to be implemented by the entrepreneurs as well as the government. The entrepreneurs would largely be removing the weaknesses on the cost or quality of inputs/utilities, the machines/technology involved, capitalization structure, organizational set-up, knowledge of the WTO and other rules, technical/marketing tie-ups with experts and making realization to the personnel on buyers’ prescribed quality, cost and delivery schedule of the goods being produced. However, the government has to implement the main improvements in areas that are beyond the control or capacity of the entrepreneurs.

The areas in the government domain include the overall business environment, law and order situation, security to investors, attitude of the government officials towards industry/business, suitability of the applicable laws and their fair implementation, adequate physical infrastructure, utilities and their tariff structure, etc. These are more difficult areas to improve. Suggestions to improve some of the weak areas are discussed below.

Every country has natural comparative advantage in one or more agriculture produce, manufactured goods or services. The government should see that the entrepreneurs concentrate on manufacturing or marketing only such products and services for which the country has strong comparative advantage. This advantage might be enhanced through better technology, innovations, technical/marketing tie-up with experts and training of the personnel.

The research at the PCSIR and local institutions may also be exploited for overcoming some of the production problems or for producing new products for a niche market. Entrepreneurs who are able to attract to Pakistan the special status manufacturing facilities under joint venture arrangements with foreign investors might also be supported. Policies might be developed to attract such projects to the country.

Entrepreneurs, in their effort to effectively compete internationally, should in a planned manner re-examine the cost, quality and quantity of all inputs including utilities. This is expected to result in considerable savings and thus enhance the competitive advantage of the company. They should also critically review the capitalization structure and organisational set up of the company for efficient operations. They should also train the company personnel in the rules,laws and regulations of the WTO and the government.

Training of the production personnel particularly labour is called for making them aware of the buyers’ prescribed quality, cost and delivery schedule of the goods being produced. These measures are expected to have positive impact on the morale of the employees. This should result in higher productivity, lower unit cost of manufacture, less rejection or wastage and better profits for the company.

Power or gas are used in manufacturing process for all products. Some products use more units of energy and therefore are more sensitive to the price paid per unit of energy.

For such products electric power/gas may be provided by the utilities at rates that are reasonable and are not likely to make the products expensive compared to the competing products.

Due to various reasons the tariff is high and there is little likelihood of the tariff coming down in the next year or so. Wapda and its distribution companies have weak financial positions and therefore there is no chance of lowering the tariffs unless all the issues are examined threadbare and the solutions implemented properly.

It would provide some relief if the government, as has been done for agriculture, lowers the industry tariff. For a sustainable solution of tariff, the government might set up a special committee to review the entire power situation in the country and suggest ways and means to strengthen Wapda on the one hand and make recommendations for lowering the high tariff on the other.

Some of the industries have already established their own power plants to meet their requirements. It has been reported in the press that such industries are apparently having more reliable power at a cost that is lower than that of Wapda or the KESC. These industries feel, and rightly so, that reliable power is more important for producing quality products and the ability to meet the tight delivery schedules prescribed by buyers.

Existing utilities must improve their operations with lower tariffs if they wish to arrest the trend of self-generation by the industry. The industry may be able to enhance power reliability through installation of stand-by generators, financed by the local banks that have excessive liquidity these days.

Business and industry can improve weak areas over which they have control and that too up to a limit. There are many large weak areas the improvement of which is beyond their control or capacity and only the government can bring an improvement.

These areas include the overall business environment, law and order situation, security to investors, attitude of the government officials towards businesses, suitability of the applicable rules and their fair implementation, adequate physical infrastructure and utilities with their tariff structure.

Despite claims by the government, the law and order situation is not ideal.Recently exporters and industrialists of Sialkot expressed their anxiety over the indifferent attitude of the government departments towards their problems. The president of the Sialkot Chamber of Commerce and Industry reportedly said that a one-window operation should be made applicable to revenue collection and various federal and provincial taxes. He said that the delay in the refund of duty and sales tax was a big problem affecting exports.

It is not uncommon that the attitude of the government functionaries towards the industry and business people is harsh. Instead of helping them and guiding them to be in full compliance of the prescribed requirement, they are reminded of the possibilities of big fines and punishment when not in full compliance of the rules. The government has to streamline the workings of various departments that come into contact with the trade and industry.

This adversely affects the working capital situation and the businesses suffer substantially. The government is urged to let businessmen concentrate on producing quality goods at competitive rates. The government has already initiated reforms in the civil services. Reforms in the Central Board of Revenue are also on the cards.

Trade and industry appreciate the importance of pollution control measure and in due course would be in full compliance of the prescribed standards. This however, might be planned for implementation in stages.

The federal government has been taking measures for making the country investor friendly. Therefore, the government is expected to take all steps that are required for making industry and agriculture competitive internationally.