June 20, 2008	Friday	Jamadi-us-Sani 15, 1429

ISLAMABAD, June 19: Official planners have asked the PPP-led coalition government to implement the recommendations of the Planning Commission to enhance exports aimed at reducing rising trade gap.

Informed sources told Dawn on Thursday that the “weak decision making” at the higher level was causing problems to increasing exports, attracting adequate local and foreign investment and improving the spineless performance of the manufacturing sector.

Planners sitting in the commission expressed concern over the government’s refusal to introduce capital gains tax on stock profits of country’s bourses in the 2008-09 budget. They said that recommendations contained in the mid-term review of Medium Term Development Framework (MTDF 2005-10) should be implemented to remove growing macro-economic imbalances.

“There is no advice being taken from us. We were not consulted in the budget making process. Things are being delayed under the pretext of political uncertainty and this is not good for our ailing economy which needs urgent corrective measures,” said an official of the commission.

He said that a number of proposals, which were agreed with former finance minister Ishaq Dar, were not introduced in the new budget. These also included taxing both the stock markets and real estates.

He referred to the mid-term review, which says that the balance of payments situation is now vulnerable to changes in remittances, expected private foreign investment, uncertain foreign aid inflows and because of non-implementation of commission’s export plan recommendations.

Currently, a large part of remittances are channelled into real estate and stocks where investors seek quick returns, rather investing in productive sectors, including new technology, innovation and R&D.

On the macro-economic front, the review said, the steps that would need to be taken include aggressive fiscal reforms to simultaneously reduce fiscal deficit, while enhancing resources for pro-poor expenditures. There is a need to create fiscal space by gradually eliminating both untargeted subsidies and restrict public investment to fast moving projects and to those critical for pro-poor and inclusive sustained growth.

Prudent monetary policy to reduce inflation, higher credit for productive sectors and interest rates adjustments to encourage investment in productive sectors need to be pursued.

To curb food inflation, market bottlenecks need to be removed. And in the medium-to-long-term, higher investment needed to be directed towards manufacturing sector through the creation of a conducive business environment. Further, better and timely inputs may be provided to enhance farm productivity.

To reduce the increasing trade gap, exports need to be accelerated under a plan that contain industry-specific productivity, quality, and competitiveness enhancement measures, and ministerial/ institutional specific future plan of action to encourage export- oriented investment and production through integrated fiscal, monetary, and commercial policies.

It said that sustained efforts would need to be taken to control food inflation, increase exports, and address the energy deficit, by creating additional generation capacity and take appropriate measures for efficient energy use, and its conservation.

Accelerated growth in the industrial sector is vital for the creation of much needed productive and decent jobs. Given the strong forward and backward linkages of the industrial sector, its growth is impacting heavily on the performance of other sectors of the economy. To accelerate growth in the manufacturing sector, concerted effort is required both for the provision of an enabling policy environment, the development of needed physical infrastructure, an educated and skilled workforce and formalisation of unorganised activities.

“There is need by the key related ministries and the FBR to analyse the recent performance of the manufacturing sector in its entirety, identify shortcomings, and suggest remedial measures to boost manufacturing production.’’