OVER the past several months, I have had the occasion to interact with scores of businesses across the country. By and large, the business community appears disappointed, as well as agitated, with the supposedly ‘business-friendly’ PML-N government.

My formal interaction with the business community started in June last year, when I was invited to speak at the post-budget conclave of the presidents of business chambers from all over Pakistan. In the process, I got to hear their views extensively in the day-long angst-fest. Since January this year, I have made presentations in Karachi, Faisalabad and Lahore to groups of businessmen from different sectors of the economy, on the state of the economy and its medium-term outlook. In total, over a hundred companies were represented in these interactive sessions, where the refrain of unkept promises and the laundry list of complaints against the government were depressingly similar.

A short summation of the general view that emerged from all these sessions is presented below.

The business environment is ‘fragile’

Businesses do not appear too enthusiastic or optimistic about the investment environment as well as the economic outlook in the near term. While the energy crisis and the sharp increase in tariffs over the past two years weighs heavily on their minds, the growing tax burden and the financial strain caused by withheld refunds are also right at the top of their concerns. Unpaid tax refunds, withheld by the Federal Board of Revenue to artificially boost the overall revenue collection figure, amount to nearly Rs70 billion according to industry estimates. To put this in context, this figure represents approximately 45pc of industry’s borrowing for working capital so far this fiscal year.

Overall business sentiment remains weak two years into the PML-N government’s tenure.

Industry also appears to be waiting for the government to pass on the windfall benefit from the sharp fall in world commodity prices, mainly on account of oil, to businesses. In this context, most businessmen I interacted with also wanted the State Bank to bring the discount rate lower, as the difference between reported inflation and the central bank’s policy rate was too wide. Views on exchange rate management were mixed, with most exporters understandably upset over the ‘unnecessary’ over-valuation of the rupee. (One exporter asked me to solve a riddle: if Japan devalues its currency 25pc to boost the economy, while Pakistan keeps its currency overvalued by 19pc in real terms, what secret does Pakistan have in the bag that Japan doesn’t?).

However, other businesses felt that a downward adjustment in the rupee of 4-5pc would suffice, while many importers — as well as those in the process of capital spending — were satisfied with the over-valuation of the currency.

Two important points that came up were the PML-N government’s perceived bias towards ‘trading’ rather than domestic ‘manufacturing’, and its alleged big business-orientation, especially towards close cronies whose businesses didn’t seem to suffer any tax refund issues or delayed payments in the power sector.

One point that evoked an across-the-board positive response was the improving law and order situation in Karachi, and the army’s firm hand in dealing with targeted killings and extortion irrespective of how powerful the perpetrators.

Nonetheless, overall business sentiment remains weak two years into the PML-N government’s tenure. This is underscored by business confidence indicators (such as the Overseas Investors Chamber of Commerce & Industry’s business confidence index, which has fallen sharply for the manufacturing sector) as well as the anaemic bank borrowing undertaken by businesses for fixed investment.

Lack of communication

Another area that seems to agitate businesses is the lack of interaction of the government with the business community. A common complaint I heard was of a lack of ‘access’ to the power corridors — be it the prime minister, chief minister Punjab or the finance minister. The joke doing the rounds was by now an old one: if cabinet ministers were not given the time of day by the three gents in question and were feeling left out, everyone else had no right to complain!

The absence of a well-established periodic communications channel with the business community was reflected in near-ignorance of the government’s ‘economic plan’. That the business community regarded the government’s Vision 2025 document and the commerce ministry’s pie-in-the-sky target of doubling exports as being irrelevant and lacking credibility was reflected in not a single mention of either of these ‘initiatives’ in any of the meetings.

Lack of transparency

Yet another issue that appears to be affecting the business environment is the lack of transparency — and clarity — of government. The government’s energy sector plans were cited as an example, where massive investment in coal-fired plants was the flavour of the month till recently, only to be replaced by deafening silence on that front. Now imported LNG is being touted as the new ‘silver bullet’ for Pakistan’s energy deficit — without too many people knowing details of the agreement, including the contractual price. In fact, there is even a lack of clarity on who is going to be allocated the RLNG, and by how much.

All in all, there appears to be a widening disconnect between the PML-N government’s image (and its own self-perception) of being “business-friendly”, and the reality or perception on the ground within the business community. This is disconcerting and all the more difficult to reconcile given that the same prime minister and his party had earned their spurs as genuinely investment-friendly in their previous two tenures in the 1990s. In 1992, the PML-N government had introduced far-reaching economic reform that included privatisation, de-regulation and disinvestment. In 1997, Nawaz Sharif had granted independence to the central bank via an act of parliament — making Pakistan amongst the first developing countries to have done so.

And yet, in 2015, the same prime minister and his government are operating very differently — desultory and nowhere close to their own reformist credentials of the past.

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, April 3rd, 2015

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