May 15, 2006	Monday	Rabi-us-Sani 16, 1427

THE official planners and economists have recommended that the much-needed private sector investment may be stepped up by reducing the high prices of utilities, especially of electricity and gas and by removing a plethora of administrative barriers to investment such as corruption, red tape and high costs of inputs.

The policy-makers have been told that in the current environment of deregulation, liberalisation and privatisation, the “insignificant private investment” is not understandable and that something must be done to revive it. And positive measures are needed in the next budget.

Officials of the ministry of finance and the Planning Commission have advised the government to improve the investment climate by strengthening competitiveness of the private sector. They view the deterioration in the law and order situation as a cause for low private investment for which provincial governments should be taken to task.

The truth of the matter, these officials admit, is that the government continues to face problems in reviving the private investment without which a real turnaround in the economy is not possible.

For the first time, officials did not mince words in recent meetings presided over by President General Pervez Musharraf and the Prime Minister Shaukat Aziz and said “the low private investment phenomenon was still very much there”.

They, however, regretted that despite a host of tax concessions and incentives offered to the private sector, it remains shy and fails to make investment in right quality and right quantity.

“But we have proposed to the government to remove impediments in the way of private investment. These impediments are there for the last many decades and if they cannot be removed, the government should not expect any revival of the private sector investment”, said an official of the ministry of finance. The official is actively involved in the ongoing budget process and maintains that without providing proper physical infrastructure, it would be naive to expect sizeable private investment.

“We have recommended to the government to ensure adequate supply of power and gas and other utilities to the private investors in the next budget, if at all some meaningful investment is to be lured”, the official said.

Similarly, he said, there was a need to make available special funding to construct and rehabilitate roads, rail links and ensure water availability to the private sector.

The government is also said to have been advised to improve custom clearing by reducing waiting period for goods.

The small and medium enterprises (SMEs) should also be offered more incentives to invest. SMEs can be extended loans at market rates and in some cases on reduced rate to ensure increased investment.

Also needed is improvement of the sales tax refund system of the Central Board of Revenue (CBR) which is causing problems to the business community.

“We have informed the president and the prime minister that without luring domestic private sector, it would be difficult to attract substantial foreign investment” said an official of the Board of Investment. Separate recommendations had been made to the higher authorities to remove bottlenecks in the way of foreign investment.

In various meetings held recently, the president and the prime minister agreed with the budget planners that without taking a “policy decision”, it would be extremely difficult to attract private sector.

Dr Ashfaque Hasan Khan, Economic Advisor to the ministry of finance says that the low level of private investment is a matter of concern for everybody. Although, he said, there had been improvement in the private sector investment, it was still insignificant and needed to be adequately enhanced.

“We are at it and are proposing some ideas to the government on how to revive this private investment”, he said adding that the private sector has to be a real engine of growth and that it should be provided further support.

The government certainly realizes that private sector needs assurances of level playing field and better regulatory regime with a view to facilitate entrepreneurial activities across Pakistan, he said.

Generally, it is agreed that sustaining 6-8 per cent GDP growth in next five years is not possible without making the private sector vibrant and extending it all the required facilities.

The element of corruption in the line departments and the highhandedness of the labour departments and Employees Old age Benefit Institute (EOBI) are still snags that deter investors.

Concerned official maintain that the key objective should be to achieve higher level of investment to meet the targeted growth to effectively address perennial issues of poverty reduction, employment generation, better access to basic necessities of life including quality of education and skill development for upgrading human resources, better health and environment for the common man.

“And this is not be possible without increased revenues which will only come when the government removes the genuine problems of the private sector”, admits an official of the ministry of finance.