February 04, 2007	Sunday	Muharram 15, 1428

ISLAMABAD, Feb 3: Badly designed regulations and policies have created "unnecessary barriers" that are obstructing adequate local and foreign investment in the country.

Informed sources told Dawn on Saturday that President Gen Pervez Musharraf had directed senior officials of the ministry of finance and the Board of Investment (BoI) to remove all hurdles in the way of the investors so that they could get timely infrastructure facilities for setting up of their new industries.

During recent high-level meetings, the president expressed his disaffection over the prevailing rules and regulations as they were largely contributing to low local and foreign investment.

The government is expecting to receive over $4 billion in foreign direct investment (FDI) during this fiscal, which according to the sources, president said was not much compared to other countries especially that of the region.

One of the major issues was the expensive electricity and gas tariffs which the investors wanted to be lowered to remain competitive. Also, they wanted the timely power, gas, telephone, land, water and other facilities. “There cannot be one window operation to offer everything to the investors like that of Dubai,” a concerned official said, adding that the government needed to be tough against its various offices and departments who failed to deliver in terms of providing timely and inexpensive infrastructure facilities to the local and foreign investors.

Sources said that the World Bank believes that Pakistan’s current economic landscape requires active policy and institutional reforms for attracting investment and deepening competitive forces.

The bank is also of the view that Pakistan needed an effective competition policy framework having a multi faceted set of initiatives. An effective competition policy, the bank said, was needed to provide equal opportunities for all capable entities to participate in the economy, thereby creating opportunities for entrepreneurship and giving rise to innovation.

The objective of the competition policy should be to foster a strong competition culture throughout the economy and equal opportunities for all businesses with a view to have fertile ground for innovation, skills development and product diversification.

In doing so, the power of consumers increases and confidence among domestic and foreign investors enhances. Firms are not only pressured to lower prices, increase the quality, choice and availability of goods and services but are also encouraged to engage in good corporate governance and higher standards of business behaviour.

It is said that fostering effective competition at home through an effective competition policy is supportive of a business environment which improves efficiencies, leads to allocation of resources in the best manner and in which abuse of market power is prevented through competition.

In recognition of the need for higher rates of productivity, Pakistan’s policymakers have been proposed to deepen and expand reforms to new and more complex areas. Such second generation reforms include as a centrepiece, introducing rules for market governance and establishing autonomous bodies to reinforce these rules.

Such rules include focus on strengthening transparency and prudential behaviour on the part of firms operating in the corporate sector. In areas where market power is naturally vested with private firms, such as in some dimension of utility sector, rules limiting use of that market power are established through licencing and enforcement of the licence conditions by the sector's regulators.

The World Bank is also of the view that competing at home markets is a pre-requisite for integrating effectively in international markets and as factors limiting competition at home have become increasingly important, the case for an optimal competition policy has become stronger in recent years.

Monopolies and ‘oligopolies’ have been privatised and in cases dominant markets that were previously the preserve of government, agreements amongst firms which may have been necessary before, may no longer be appropriate and as foreign competition increase, in the form of FDI and competitive imports, the pressure for firms to merger in order to gain efficiency is increasing.

An autonomous institution, the bank maintained, is required to be set up which should be accountable and whose dealings are transparent, fair, and in accordance with law.

Examples of many countries are being given which are ensuring competition and fair play by their investors. Amongst them in Asia includes India, Indonesia, South Korea, Singapore and Thailand. Japan has had fair trade practices act since 1948. China has recently introduced new legislation to address competitive matters which is under discussion.

In Africa, countries such as Kenya, South Africa and Tanzania have enacted competition laws five years ago. Among Islamic countries, Algeria, Jordan, Morocco and Tunisia have such laws and currently Egypt is in the process of establishing and staffing its implementation agency, while Kuwait is currently in the process of drafting its first comprehensive competition law.

Even industrialised economies like Australia, Canada, the European Union (EU) and United Kingdom have amended and updated their competition laws.