Officials of the ministry of industries and many corporate thinkers are going back to basics in order to unleash an industrial revolution restrained by recent fiscal distress.

It is after a long time that the government is promising a national industrial policy and a task force has been set up to formulate recommendations for the next budget. Incidentally, this is being synchronized with the tenth five- year plan.

In the recent past, the planning process was disrupted by the IMF driven-fiscal stabilization programmes in the face of growing fiscal deficits and market dogmatism.

With financial markets awash with money and macro-economic stability in place, it is time to launch a national industrial policy, say corporate executives.

Indeed, the paramount challenge facing policy makers is to turn Pakistan into an industrialized state with clear vision, road map and time-set targets. Industrialization promotes self-reliance and employment and imparts economic muscle to a nation's political strength.

Going by the corporate views, a mere announcement of an industrial policy may not work. A former ICI chairman Munnawar Hamid believes that for an industrial policy to succeed, it must be comprehensive, it must be focused and it should be supported by all elements in the economy.

Everything, energy charges, customs tariff etc, all elements that impact on investment, should move in tandem and in agreed direction. It is only then that an industrial policy can serve as a powerful policy tool. And the policy should be part of the tenth five-year plan.

Talking about some specific issues, Munnawar says: With WTO regime coming, the tariff regime should be simple and clean. It should not encumber investment. The focus should be on sectors with competitive export advantage or with a large domestic market.

The former ICI chairman classifies industries into three categories, one which cannot be retrieved and should be left alone; the borderline cases which can be helped to gain strength but not at the cost of other stakeholders; and the strong ones that can be encouraged to become stronger.

At a pre-budget seminar organized by MAP recently, some speakers stressed that the government should allow accumulated losses of a manufacturing unit to be offset against profits of a profitable company in case of merger.

The financial firms are eligible for this merger incentive. Such a step would help revive sick units (borderline cases) and lead to industrial consolidation.

To boost investment,a former president of Engro and now PTCL chairman Zafar A.Khan told Dawn that the duty on import of machinery and plants be completely removed. Referring to the anxiety (and vote) of the rural poor that toppled the BJP government in India, he said the situation in Pakistan was not dis-similar.

The government should at GST on imported phosphate and potash fertilizer, whose prices are very high, to make it affordable to the farmers. Combined with urea, phosphate and potash provide a balanced use of a variety of fertilizers to raise farm yields. Finally, to tackle poverty, the government should increase public sector spending and ensure timely execution of projects and schemes.

But many manufacturers want a breathing space to acquire sufficient industrial strength to face global competition. A conducive environment is needed for investment and employment without which it would become difficult for the country to survive, says Yusuf Shirazi, chairman of the Atlas Group of Companies.

He says that official policies need to be formulated on research reports prepared by local consultants and experts. The foreign consultants with global perspective cannot co-relate the local genius or the ground realities in Pakistan while making their reports. It does not help to make appropriate policies for investment, local or foreign.

"The overall environment for foreign investment is not very conducive, if not hostile", says a top executive of a multinational company, which in recent years, has strengthened its presence in Pakistan with quite a bit of capital spending.

A key issue is the perception of foreign investors created by foreign media by focusing on events that leave a negative impact and lack of any efforts by the government to improve the country's image. This is a consensus among foreign investors that emerges from informal discussions.

According to a report of American Business Council, a trade group of 54 US-based multinationals, 90 per cent of the firms have improved their revenue in 2003 and 86 per cent of them have made higher profits.

Yet, to attract foreign investment, these multinationals stress the need for the government to focus a number of issues including effective enforcement of intellectual property rights, pushing de-regulations across various sectors, especially oil and pharmaceuticals, making government more transparent, reducing corruption and smuggling.

Chairman of Shell Pakistan Farooq Rehmatullah told Dawn that any foreigner wanting to come to Pakistan would look to the return on his investment. In Pakistan, the corporate tax rate, highest in the region, is 35 per cent, which combined with welfare levies, comes to 42 per cent. In our neighbourhood(the Middle East including UAE) there is no corporate tax.

The corporate tax rates in East Asia are as follows: Singapore 22 per cent, Malaysia 28 per cent, Korea, Indonesia and Sri Lanka 30 per cent each, China 33 per cent and India 36 per cent.

Incidentally, the Overseas Chamber of Commerce and Industry submitted its budget proposals as early as February this year that was followed by presentations to the finance minister Shaukat Aziz, CBR chairman and other officials.

The OCCI has now a powerful team with Shell Pakistan chairman Farooq Rehmatullah as president and Unilever Chairperson Musharaf Hai as head of the OCCI taxation sub-committee.

On pre-budget proposals Musharaf Hai told Dawn that the OCCI engaged the government not on its "wish list" but" on key points or big ticket items." First the reforms should continue.

The issues related to reforms must be tackled at an accelerated pace. Human intervention in organizations like CBR should be reduced. Customs duty and tariff needs to be further rationalized to provide even playing field. In discussions with the officials, specifics were also included on the agenda.

The government has decided in principle to do away with excise duty under a phased programme though it is still lingering on in some areas. "Nowhere, in the world there is excise duty on soap and detergents, says Musharaf Hai.

The problem was taken up with the federal finance minister and the ministry of industries by representatives of the soap industry, and the Unilever chairperson is confident that the outcome would be positive.

As it would appear from press reports, three major business demands are: cut in corporate tax (from 35 to 30 pc), sale tax rates (from 15 to 10 per cent) and rationalization of income tax regime for salaried class. Press reports indicate that the government is looking at fiscal stimulus to build corporate Pakistan.

In the context of SAFTA, trade representatives say engineering and pharma industry need to be made competitive. For engineering to develop, the prices of steel and energy tariff should be globally competitive.

Identifying foreign investment issues, the Shell Pakistan Chairman also referred to high cost of doing business, weak infrastructure, high power tariff rates etc. "It takes three days for transportation of goods to Lahore, when on international highways, it would take just 18 hours," says Farooq Rehmatullah.

Security problems add to the cost of doing business. Representatives of multinationals are reported to have discussed the issue of security with the federal interior secretary recently. More than half a dozen companies informed the secretary about their costs on security arrangements.

Incidentally, businessmen are also being asked to repair the roads in urban centres which is an undesirable policy shift, says a local industrialist. Some have conceded, others have protested. The private sector should be left to make industrial investments, a trade representative said. Yet another key foreign investment issue is the country's perception, says Farooq Rehmatullah.

Asked how could the image improve, Karim Rammal, President J. Walter Thompson Asiatic responded: " brand it, "positively Pakistan". Karim Rammal added: "The whole world out there is curious to know about us, especially after 9/11, 2001. We have not fed them with any information.

In fact, we have allowed for a vacuum to be created which has led to the external world judging us through the wrong images that the media picks up-terrorists' haven, susceptible to bomb blasts and violence, loaded with social issues, etc."

"We have not tried to pro-actively address the media by inviting them in a planned way to discover who we really are and what we are all about." Once the people begin showing interest in Pakistan, Karim says "our true DNA will kick in. We will begin to make sure that we cash in on it."