KARACHI, April 30: Business and industry want the government to focus on 'supply side economics' in the next budget (2004-05) by adopting liberal import policy and removing duties on industrial raw materials and capital goods.

Instead of framing revenue-oriented policies the government should take care of the supply side which would also enhance revenue by increasing business and industrial activity in the country.

These are the general observations and demands of business leaders who feel that after achieving macroeconomic stability the government was in a position to adopt liberal import policy and also give concessions to consumers to improve their buying power.

Most of the business leaders who were contacted by Dawn were of strong opinion that time have come that the government should seriously look into the supply side of economy which help generate employment and also boost exports.

Former vice-president, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Maqsood Ismail said that once the supply side of economy was encouraged and its problems were taken care of, there would be industrial activity throughout the country.

He said that the economic planners should adopt such policies, which were helpful in enhancing business and industrial activity. Maqsood Ismail suggested that the last five decades revenue oriented policies should be scrapped altogether and instead business and industrial promotional policies be adopted.

However, he said by allowing zero duty raw materials and capital goods the government should ensure that cascading of duties was maintained so that no finished good was allowed to enter the country with lower than the raw material duties.

Maqsood Ismail said there was urgent need that tax collectors should bring in change in their attitude and adopt business friendly policies. The most damaging factor in the past had been fixing of revenue targets which allowed revenue and tax collectors to adopt harsh measures which were contrary to economic development.

Senator Ilyas Ahmed Bilour said that there was greater need that the government should also reduce the Sales Tax rates as the present rates were much higher. He said a poor country like Pakistan could not afford high tax rates as they retarded industrial growth and also reduced buying power of masses.

He said once the rate of taxes were reduced it would have healthy impact on industrial activity as consumers would be in a better buying position. If cut in tax rates increased industrial activity the government would not lose any revenue, he said.

Former president, Karachi Chamber of Commerce and Industry (KCCI) Amjad Rafi said the government should also look into such mirco issues which were the main cause of retarding business and industrial activity.

He said the Sales Tax Refund issue was an irritant to not only industrial and business activity but also for country's exports. "It would be better if exports are allowed zero rate because the entire refund system creates problems as well as corruption."

Similarly, he said income tax rates should also be reduced as this would help in capital formation as well as enhance the buying power of general public which is presently hard-pressed with rapidly rising consumer goods and POL prices.

Asif Aziz Balagamwala, managing committee member of the KCCI said in the coming budget the government should increase its development expenditure, which would create general economic activity and ultimately generate employment.

He also suggested that measures should be adopted where in cost of production was reduced because the textile industry in the quota free regime from 2005, will have tough competition from other nations.

Mr Balagamwala said presently the power rates in the country are much higher than those in other countries of the region and similarly the raw material input is also costly. He also pointed out that some serious flaws are there in the labour laws which have to be removed so that smooth industrial activity could be carried out.