WASHINGTON, Oct 2: The law and order situation in Pakistan looks bad from outside because the country has a perception problem, top financial managers told the US investors on Friday.
Dr Salman Shah, adviser to the prime minister on finance and economic affairs, said the country was not under siege and there was no shooting on the streets.
State Bank Governor Dr Ishrat Hussain said what's often depicted in the media was a caricature and not a true picture of the country.
In a discussion at the Pakistan Embassy, the adviser and the SBP governor disputed the argument that current economic prosperity was a windfall of the alliance Pakistan had made with the United States in the wake of 9/11.
Dr Hussain pointed out that the government had already started implementing its strategy for economic recovery two years before 9/11. The terrorist attacks on the US did lead to the lifting of sanctions on Pakistan but it also had certain negative effects, he said while warning that the journey to prosperity would not continue without reforms.
Recounting the benefits of the reforms introduced by the government, the SBP governor said:
*There has been an 18 per cent growth rate in large-scale industries.
*Mortgage financing has given rise to a housing industry that benefits 37 other industries from cement manufacturers to brick-makers, creating thousands of jobs.
*Car loans led to a boom in the auto industry, generating employment.
*Consumer financing has increased the buying power of consumers and the expansionary monetary policy is leading to the revival of the economic growth. However, he said, there were two major concerns: "Is this growth sustainable? Will it cause inflation?"
The SBP governor said the government needed to bring new commodities under the tax net rather than increasing the tax rate. More taxpayers and lower tax rates would be the approach to deal with these concerns, he added.
Also, he said, the government should expand the capacity of industries because industries like auto, fertilizers, steel and cement were all working at their 100 per cent capacity.
"Unless we invest in expanding their capacity, we will see higher inflation," he warned.
Dr Hussain said that overseas Pakistanis could help by investing in these industries and reminded them that the country offered a high rate of return and attractive local financing. There were no restrictions on foreign ownership, he added.
The adviser to the prime minister said there were certain drawbacks that were preventing Pakistan from exploiting its natural advantages to the maximum.
The major problems he counted include a high cost of doing business in Pakistan, power cost and shortage in the energy sector, the cost of regulation and the governance issues.
He said because of high oil prices, Pakistan could not afford to use oil for producing energy and needed to find cheaper sources of energy. To this effect, he suggested building gas pipelines, bringing gas from Central Asia and Iran and developing the thermal power sector.
Dr Shah said all these needed to be done rapidly because 'we are reaching our maximum capacity'.
He said although Pakistan had one of the largest water distribution systems in the world, it should be augmented and the country needed lots of funds for this project too.
In the cities, he said, there was a need for a modern and dependable transport system while in the villages the rural infrastructure for education, health and other basic facilities should be developed.