ISLAMABAD, Oct 28: Political instability, law and order situation and higher tax and cost of doing business were identified by the speakers at a seminar as the major irritants, slowing industrialization in the country.
The seminar, organised by the Ministry of Industries and Production was also attended by the governor State Bank of Pakistan Dr. Ishrat Hussain, Minister for Industries and Production Jehangir Tarin, Adviser to the Prime Minister on Finance Dr Salman Shah, former federal minister Abdul Razak Dawood and Industrial Strategy Group led by Dr. Ijaz Nabi.
The Industrial Strategy Group also presented a broad framework of the strategy, which suggests that Pakistan required at an investment to GDP ratio of at least 24 per cent to compensate for the lost decade of 1992-2002 to meet the international competition.
Based on the recommendations of the strategy group, the national industrial strategy would be finalized by January 10, 2005, which would be supported by a workable action plan for implementation immediately, said industries minister Jehangir Tarin.
The strategy group has stated that Pakistan continued to face severe structural constraints on investment growth due to residual factors like law and order and political instability which required to be over-compensated.
The group has identified reliability and improvement in four key areas of energy, transport and port facilities besides the creation of industrial clusters and improvement in labour laws to trigger fast track industrialisation competitive to the world markets.
Former commerce minister Abdul Razak Dawood said he was encouraged with the deliberations of the seminar in view of the fact that the present government has started to move forward on four or five initiatives that have been pending for over two years now.
He said he had proposed change in labour laws by reducing the number of such laws form 26 to six, an exercise on cost of doing business, reliability of energy, improvement or ports and transport sector and standardisation of cotton that could not move forward since he left the cabinet position two years ago. The participants that also included representatives from some of the major industrial groups pointed out that a total of 42 per cent tax rate was applicable in the country that also included about seven per cent of workers participatory fund which was being misused.
Mr. Jehangir Tarin suggested that the strategy group should look into the question of taxation rate and see whether seven per cent workers welfare fund utilization could be improved or to do away with it if improvement was not possible.
Dr. A R Kemal, the President of Pakistan Institute of Development Economists said that while there was need for reduction in taxation and rationalisation of duties and tariffs, there should be no more protection to any industry because that was resulting in negative impact on downstream industry.
Most of the private sector participants pleaded that central board of revenue should not continue to enjoy the dual role of tax policy formulation and revenue collection because they introduced only such policies that help them meet revenue targets.
The participants also opposed to the idea of continuing with policy of providing guarantees on rates of return to different sectors by the government and if necessary, these should be carefully examined first.
Some participants also pointed out that Pakistan has lost the opportunity to develop its shipping industry and the only thing to compensate this loss was to improve logistic network like ports and transportation means.
Dr. Ijaz Nabi said one way of meeting the industrial challenges was the policy of buying technologies and adopting them according to local market conditions like Malaysia and Korea instead of spending on research.
He said most of the Pakistani scientists have got their education in the developed western countries and hence fail to come up with ideas without research facilities.