Despite multiple issues facing the political economy, there is a consensus among businessmen and economists alike that Pakistan’s economic future is very bright. That the country’s unrealised economic growth potential is huge waiting to be realised by improved governance, right policies and deep going reforms. The businessmen are, however, not so optimistic about the short to medium economic outlook.

To renew business confidence Prime Minister Imran Khan and his economic team have been holding intensive consultations with representative of various trade bodies. On March 4, Khan again invited trade leaders to Islamabad for seeking their input on various issues facing the business community and how to push up economic growth.

He advised them to give practical suggestions to introduce a new amnesty scheme so as to remove flaws in the previous ones, says Karachi Chamber of Commerce and Industry President Junaid Ismail Makda. The participants suggested that tax cases being pursued by the Federal Board of Revenue and notices issued by National Accountability to businessmen should be withdrawn.

The government has underperformed as an enabler for the private sector. It is still trying to grapple with issues like electricity and gas supplies to SEZs

The prime minister informed the meeting that the government was working on a comprehensive plan to encourage non-taxpayers and informal sectors to join the documented economy.

The domestic private sector has been complaining of harassment of tax authorities and corruption investigating agencies that is stated to be shattering business confidence. Their view has also found some support in the judiciary. “Who will make investment in the country if businessmen face harassment”, remarked Justice Farrukh Imran Khan of Lahore High Court while ordering removal of the name of Shahzad Saleem, CEO, Nishat Chunian Power from the Exit Control List.

“By all means take swift action against those guilty”, says businessman Shabir Ahmed. But dragging businessmen through the slime of accusation, on the flimsiest grounds, he argues, is neither fair nor just. It merely makes businessmen question if it is worth their while to invest and create jobs. They look for other options. Ahmed points out that “the multiplicity of taxes and collectors, over-regulation, and the excruciatingly long response time taken by government agencies have led that to ‘speed money’ becoming the currency of business”.

The latest American Business Council’s (ABC) perception survey carried out in current fiscal year shows that 100pc of respondents indicated optimism about economic environment for the long-term. But for the short-to-medium term the perceptions differed. 80pc of the respondents felt there was no change in the ‘ease of doing business’ since the PTI-led government assumed office.

ABC President Jamal Mir says the country’s 200 million people are “mired in debt with deep-seated and dire economic, political, and social issues, (thus) change will take time and there is no quick fix”. He acknowledges that the government is trying to “delve deeper and solve problems in an effort to bring about lasting change”.

According to a similar survey carried out by Overseas Investors Chamber of Commerce and Industry (OICCI) in December 2018, the overall business confidence plunged to negative 12pc compared to the positive ranking of 14pc held in May. More marked downward trend was witnessed in services sector, particularly in wholesale and retail sectors.

The perceptions of OICCI members, representing multinationals, may have been influenced by declining repatriation of earnings in terms of dollars when their devalued rupee earnings were converted into greenback. Thus return on investments made by parent companies shrank. The repatriation of profits and dividends fell by 33pc to $918 million during first seven months of this fiscal year from $1.34 billion in the corresponding period of last fiscal year, according to central bank data. Simultaneously the outflow of dividends from foreign portfolio investment fell to $142m from $170m.

The government has under-performed as an enabler and facilitator for private sector development. It is still trying to grapple with issues like electricity and gas supplies to Special Economic Zones (SEZs) under CPEC. For example, the Economic Coordination Committee of the Cabinet has now decided that the cost of provision of gas and electricity to SEZs will be financed under the federal Public Sector Development Programme (PSDP). However, the space for investment and business is being squeezed by cuts in the PSDP. In the first six months of the current fiscal year, it was down by 37pc to Rs328bn from Rs520bn a year ago.

Policy issues are also affecting investment outlook. Finance Minister Asad Umar is reported to have told a foreign investment advocacy body that the government is interested in attracting foreign direct investment in export or/and import substitution projects but not in consumer items sector. The trade-related investment policy to reduce trade and current account deficit is yet to be announced. Meanwhile FDI continues to decline.

Some development economists stress that there is a need to discipline both the private sector as well as the state if their governance and performance have to be improved. The interactions between the two sides do produce some short-term positive outcome but they fall short of long-term solutions to tackle boom and bust cycles.

Published in Dawn, The Business and Finance Weekly, March 11th, 2019