LAHORE, March 7: The Lahore Chamber of Commerce and Industry (LCCI) on Wednesday outlined key priorities for the budget 2012-13, urging the government to address the challenges facing the economy.

LCCI President Irfan Qaiser Sheikh urged the government to focus on investment in energy solutions and enforce law and order. He said the customs tariffs on smuggling prone items should be lowered, the share of direct taxes increased and indirect taxes cut in the forthcoming budget.

In order to tackle energy shortages, he said, the government would have to allocate maximum funds for construction of dams and water reservoirs, tap Thar coal, complete Iran-Pakistan gas pipeline and establish LNG terminals.

He said sufficient funds should be allocated in the forthcoming budget for Dasu power project, Diamer Bhasha dam, Munda dam, Gomal Zam, Satpara power project and Kurram Tungi dam. He said that at least Rs200 billion or 10 per cent of the total budget should be allocated for hydel power projects.

Sheikh said the country’s reliance on costly thermal power was jacking up the cost of production and import bill. The country needed an urgent shift in its energy-mix in favour of hydel power and local fuels.

He said the 175 billion tons of Thar coal reserves with a price tag of $13 trillion in the international market were enough to provide 100,000MW of electricity for 100 years.

Uninterrupted and affordable power supplies could turn Pakistan into an economic powerhouse. The LCCI president hoped that the government would earmark funds for the early completion of Iran-Pakistan gas pipeline and LNG terminals to keep the industrial wheel running especially in Punjab that has borne the brunt of recent suspension of gas supplies to industry in the country.

On the poor the state of law and order, he said that it was hurting Pakistan’s potential as a highly attractive investment destination. “Foreign and local investors are losing confidence in Pakistan.”

He said a number of textile-related industrial units had already shifted their operation to other countries. Therefore, the government must be focused on improving law and order situation. Rising risk perception about investing into Pakistan was hitting hard the foreign direct investment (FDI) that fell sharply in the recent months and needed to be tackled through a comprehensive policy approach by involving the business community in the country.

Sheikh said the bad law and order situation was one of the major factors keeping the foreign investors away. He feared that the fall in FDI was likely to affect adversely the country’s economic growth.

He said all the developed countries accorded special importance to economic issues. But in Pakistan the situation was the other way round and the economy was on the bottom of the government’s priority list.

He pointed out that Pakistan’s investment rate was only 13.4 per cent at end of the last fiscal year, which was lowest since 1974. “The low saving rate, coupled with wary foreign investors has led to record low investment rate in the country.”

The State Bank had already reported in its annual report that Pakistan had fared poorly when compared to its neighbours in South Asia, because of domestic and global factors.

He said that direct taxes need to be increased by implementing taxes on all incomes irrespective of the source. He said that hospitals, clinics, restaurants, bakeries, wedding lawns, travel agents etc should be brought into the tax net.

The LCCI president also suggested that the sales tax slab should immediately be curtailed to 10 per cent from existing 16 per cent in order to reduce inflationary pressures.