ISLAMABAD, Sept 5: The government is contemplating a set of proposals to do away with a number of existing regulatory hurdles which are creating problems in increasing export of various products.
Informed sources told Dawn on Wednesday that the focus is expected to be on the “Market Act” which gives too much regulatory authority to the government.
“A thorough overhaul of the Market Act, with a view to facilitating private sector’s entry, with the involvement of the private sector, is badly needed here,” says a latest study conducted by the ministry of commerce.
In most of the cases, the government was suggested ways of addressing these issues.
Regarding agriculture marketing, it was stated that Pakistan clearly has a significant potential in export of fruits, vegetables, dairy products, meat and grains, and these are important domestic sectors as well. But the potential has so far not been fully exploited. In some of these sub-sectors, there are significant regulatory issues that could be crucially hampering further development in these sectors.
Most of the small businesses, it was stated, do not have access to formal sector financial institutions. Since the bulk of Pakistani businesses fall in the category of SMEs or micro-level businesses, lack of access to finance poses a significant problem for growth. There is a lack of reliable and contractible information on individual small firms as well as the sectors they work in. Moreover, there is a lack of formal registration of small businesses, lack of physical collateral, high cost, for formal sector banks, to deal with small loans, and high cost of collecting firm and sector specific information.
The solution of the problem is in balance- sheet lending instead of asset-based lending, training in balance-sheet lending for bankers, creation of credit bureaus that keep detailed information of small firms, generation of reliable sector specific information, pooling of risk through creation of guarantee funds for initial lending.
Income and sales tax levels are considered to be high, time costs of dealing with customs clearance are also high, compliance costs, with all rules and requirements are high, there are distortionery threshold effects in our tax system, and the tax system has relatively high levels of corruption (or a perception of it).
It was proposed that there is a need for documentation of supply chains, widening of tax net, rationalisation of tax rates, move towards self-assessment with limited interaction with tax officials. There should be a move against corruption and lowering of compliance costs by streamlining the administrative systems.
Detailed studies should be undertaken to identify threshold effects in the tax system so that they can be removed. Custom clearance process needs further improvement in terms of time required for clearance as well as for reducing discretion in setting tariff rates.
It was further pointed out that very few businesses were happy with the infrastructure being provided to businesses in Pakistan. The main complaints relate to electricity and gas provision, road quality, and water/sewerage access and quality.
For electricity, the main issues are about high tariff rates for commercial and industrial activity, load-shedding, poor quality of service, delays in getting connections, corruption, the arbitrary powers given to Wapda, and the need to have back up (raising costs) arrangements.
Better planning to get to an optimal mix of hydro/thermal generation is needed for tariff adjustment. Tariff differentials, across activity, need rationalisation.
Nepra needs to be better resourced to be able to protect the consumers better, impose more discipline on Wapda, and ensure a level playing field for all (private and public) players. Benchmark or real competition needs to be introduced at distribution level as well.
The law and order situation, especially in some parts of the country, like Karachi, is quite poor and businesses complain that it imposes a significant cost on them through hiring guards; direct losses through hold-ups and so on; reduced business volumes due to reduced hours or reduced traffic.
In some areas, payments are made related to protection money as well.
In the transport sector, it was stated that losses occur due to delays and slow movement of goods, accidents, and fatalities which are costing businesses and people of Pakistan a fairly significant amount.
Roads are the main carrier of goods and passengers in Pakistan, and railways and airlines share a relatively very small part of the total traffic. Port Qasim and Karachi are the main ports of entry for international trade.
Regarding ports, it was stated that dwell time and docking costs at Pakistani ports continue to be high as compared to other ports in the region.
Longer customs clearing time, lack of processing facilities outside the docks, and lack of adequate inland transport network contribute to longer dwell times. Rationalisation of port charges should also be a high priority item on the agenda for reform.Regarding warehousing and storage, it was stated that storage and warehousing is a very important link in supply chain management in modern economies.
It is particularly important for Pakistani economy as significant issues in transport and logistics imply a higher need for managing inventories. Being an agricultural economy, the need for storing perishable items is significant.
It was further stated that though the government announces procurement targets every year, it has not lived up to the promises it made.