THE high cost of doing business is an obstacle to private investment in commodity producing sectors (CPS). A big factor that deters the flow of funds to the real sector is inadequate and inefficient infrastructure.

The government facing big deficits of 7.5 per cent of the GDP is in the midst of a grave challenge of high expectations and low delivering capability. It does not seem to be in a position to do much to bridge the gap in demand and supply of infrastructure facilities. Could private sector be lured into partnership to ride out the challenge of developing the infrastructure to support growth and development at this juncture?

“It is pretty long haul. In Pakistan, public sector gives and private sector takes. Their profit-making horizon is narrow. They all seem to be in a big hurry and not inclined to invest even in manufacturing that takes at least three years from the time of conceptualisation to materialise and longer to give higher returns. The infrastructure projects are gigantic with long gestation periods. I do not see vision, capability, passion and patience in corporate Pakistan to pour in their capital in this sector”, said a senior banker with an extensive experience in project financing .

It is true that manufacturing sector has under-performed even during periods of high liquidity when cheap bank credit was available on easy terms. However, private business anywhere in the world is in the field to make profit and they prefer to invest in low-risk high-return ventures. If money was being invested in the capital market, the real estate and the commodity trade, it was because these offered high returns without hassles. Besides, the political uncertainty and law and order discouraged the private sector from taking a longer term view.

“It would be unfair to blame the private sector for follies of the policy-makers. The businessmen know how to multiply their assets. Look around, and there are hundred success stories against one failure. They did what they aught to do - make money”, a corporate ideologue defended the class.

“The expansion in manufacturing was less than optimal but it would be wrong to paint the picture in grey and black. Over the last few years against all odds, auto, cement, fertiliser and pharmaceutical sectors grew at a fast pace. If done with proper homework, providing for all eventualities keeping interests of both private and public sectors in view, public-private partnership can be made to work to cover the gap in infrastructure”, Khawaja Shahab, federal secretary industries, said while giving his comments.

There is also a proposal under discussion to form public limited companies with broad ownership base and a very effective small nucleus of professional managers with bigger stakes to make it work on a sustainable basis.

“It all depends on how well you plan. The concept of public-private partnership is a real workable option in the present situation to make infrastructure expand to meet the demand”, said another senior management consultant.

No one has the power to put a lid on rising prices. The fear of cost of production increasing more are not baseless as land, labour and raw material become dearer with persistently rising aggregate demand locally and internationally.

However, infrastructure can and should be improved to make it dependable if performance of agriculture and manufacturing is to improve.

In agriculture, how could a farmer strive to improve yield if the supply of water was inadequate? In Pakistan many a times farming community actually suffers for giving a better crop as per unit price fall in absence of its capacity to manage supply lines. If he does not have access to a facility to store his produce and other supporting facilities even where supply of water is steady, he loses incentive to improve acreage and productivity.

In manufacturing, there are many business-related problems but the prolonged power outages, insufficient poor quality water and weak logistic facilities make the experience of running a factory so painful that people with ability to invest prefer to branch out of industry.

The medium-term development framework (MTDF) developed in 2005 for the next five years recognises development of infrastructure as one of the three elements of growth. It envisaged to invest Rs2162 billion to the development of large infrastructure embarking on an ambitious plan to upgrade roads, railways, air, power, water, irrigation etc and hoped to invest Rs440 billion per year on related projects.

There are no firm figures to show how much the government actually invested but the general observation is that the investment was nowhere near what was planned out on yearly basis. In the current budget the total PSDP is Rs550 billion.

Last year the World Economic Forum ranked Pakistan 67th out of 125 countries on the basis of a survey carried out in basic infrastructure category. The report said: “Historically in Pakistan the demand and supply of infrastructure facilities has faced a chronic imbalance”. The report also gave about some astronomical numbers to quantify the amount of investment needed in different categories of infrastructure facilities.

There is little hope for any significant improvement in the quality of ordinary citizen’s life and the macro-economic indicators of the economy unless stress on supply of commodities is eased by higher investment and growth in agriculture and industry. The government should try out of box ideas to cope with the challenge.