April 14, 2008	Monday	Rabi-us-Sani 7, 1429

Economists have long been pleading for unleashing the potential of domestic commerce – which includes retail and wholesale trade, entertainment, construction, transport, storage, warehousing, communication, real estate, financial and personal services, etc – for sustainable economic growth.

Yet little has so far been done to fix this under-developed sector as it remains the most neglected area owing to the skewed official policies, the successive governments’ obsession with production for foreign markets and over- regulation of the national markets.

The growth of domestic commerce and trade remains as distorted as ever in spite of the recent years of economic expansion and consumption boom. While the previous government – particularly its former commerce minister Humayun Akhtar Khan – showed interest in the development of domestic commerce, the momentum generated seems to have died down.

Recognising the critical importance of domestic commerce – which employs some 35 to 40 per cent of the country’s total labour force and contributes above 50 per cent to the GDP, the trade policy for 2007-08 promised to undertake projects and put in place policies to improve this vital sector.

The commerce ministry also undertook a review of the sector and commissioned several studies on the state of domestic commerce covering sub-sectors like competitiveness, protection, subsidies, market regulations, wholesale and retail markets, storage and warehousing, transport and real estate.

The findings of these studies brought to light numerous factors constraining growth of domestic commerce and gave specific recommendations for removal of impediments hampering its smooth functioning. A Domestic Commerce Wing was also created within the commerce ministry and the minister announced in the trade policy to enhance its scope to engage additional core experts and consultants to prepare specific action plans.

The trade policy describes a ‘vibrant domestic commerce as a pre-requisite for innovation, entrepreneurship, quality assurance and product development. It stimulates private sector led growth and positions countries to effectively tap international markets.’

But its growth and development continues to be stunted by a number of factors – poor physical infrastructure, high land prices and rentals, insecure and unclean land titles, costly utilities, over regulation of the markets, absence of efficient transport, lack of space for commercial activities even in major cities, missing links in the distribution chains of agriculture and industrial products, deteriorating law and order conditions, weak contract enforcement, paucity of warehousing and storage facilities, a visible official bias in favour of industry against trading activity, lack of access to formal finance, inequitable and cumbersome taxation, etc.

“Domestic commerce can be used for poverty alleviation, job generation and overcome crisis caused by food shortages like the one experienced by the entire country last winter. No pro-poor growth strategy can afford to ignore the state of domestic commerce,” says Dr Sohail Jehangir Malik, an economist and one of the authors of the studies on the subject. He is of the view that the government could obtain one to two per cent growth every year by creating enabling conditions for domestic trade.

In addition, the development of domestic retail markets could also help build up brands and later shore up value added exports.

Commerce ministry officials privately admit that the focus on the development of domestic commercial and trade activity had been lost in the recent months because of a number of factors – political as well as economic. “It is true that we could not sustain the momentum generated before and after the announcement of the trade policy. The political situation obtaining before and after the Feb 18 election was the primary reason for the ministry to lose its focus on domestic commerce,” a senior commerce ministry official, who does not want to be identified, says.

Besides, political reasons, the official says, there were a number of other issues involved that had and would continue to obstruct the implementation of actions recommended for the removal of snags in the growth of domestic commercial and trade sector.

The official further observed: “Most of the recommendations made by the consultants in the studies relate to several other federal divisions and provincial ministries, city and district governments, and the central bank. Unless all these federal and provincial agencies and departments evolve some mechanism for co-ordinating with one another on the issues and snags identified in the studies on various aspects of domestic commerce, it would be presumptuous to expect a change.”

“And before agreeing to coordinate and work with each other, all these departments and agencies would have to agree on the importance of domestic commercial and trade sectors.”

“It is now for the new government to look into and examine the issues obstructing the development of domestic commerce and decide its priorities.”

. But the new government is not expected to focus its attention on the issues facing domestic commerce in the immediate future as it is more likely to remain engaged in fixing the deteriorating fiscal imbalances for quite some time.