ISLAMABAD, Aug 9: Official planners have proposed to the government to create a market-friendly business environment to enhance industrial investment and the overall economic growth in the country.
“Investment plays a crucial role in growth process by not only adding to productive capacity but also by improving the technological base. Therefore, creation of a market-friendly business environment is absolutely essential,” the planners said in their recommendations contained in the new Industrial Vision also made available to Dawn.
“To develop a viable industrial sector, there is a need to put in place a regulatory and legal environment that is conducive for private business.”
The vision was approved by the federal cabinet earlier this month. It said that the investment rates in Pakistan had been low though in 2003-04 it had increased from 16.4 to 18.1 per cent of GDP. Whereas in the past the resources for investment have been the major problem, at present it is the relatively low levels of demand for investment.
“The investment rates can rise rapidly provided the investors are convinced of long run profitability,” it said.
It added that the business-friendly environment revolved around consistent economic policies, strong macroeconomic fundamentals, deregulation, privatisation, better law and order with credible police, law and judicial system, better regulatory environments, an efficient tax and customs administration and a labour policy that motivates the workers, financial reforms and improvement in infrastructures.
Investment levels exceeded 20 per cent of GDP only in the periods when the investors perceived continuity of policies.
Strong Macroeconomic fundamentals: Lower fiscal deficit, good balance of payment situation, stability of exchange rates, higher foreign exchange reserves, availability of funds at competitive rates, openness of trade etc help a great deal in attracting investment.
At present Pakistan has strong financial macro-fundamentals and can attract investment.
De-regulation and privatisation policies: Pakistan has divested most of public sector manufacturing enterprises and has privatised four out of five public sector banks. It intends to privatise various public utilities. Similar, over the last two decades there has been considerable de-regulation.
“Nevertheless, investors feel that second generation reforms and further de-regulation is absolutely necessary for reducing the cost of business,” the Vision said.
It also pointed out that the law and order situation had deteriorated since the early 1980s and after 9/11 events had deteriorated further. While efforts are being made to improve the situation, more efforts in this direction are absolutely important. “The government may accord priority to police and judicial reforms”.
It also said that the regulatory uncertainty needed to be reduced and that all rules were made transparent by removing discretion from the administration. Regulations relating to labour, health and environment, besides FBR regulations, should be made transparent.
Businesses have to comply with a host of regulations relating to work environment, including health and sanitation, product standards, and taxation etc. Excessive discretionary powers in the hands of the enforcing agencies often lead to harassment of enterprises and opens up avenues for corruption resulting in loss of business confidence.