Incentive for construction sector
Addressing a press conference, Information Minister Senator Shibli Faraz urged black money holders to avail the last chance for whitening their hidden wealth and channelize it into the mainstream economy before December 31after which the concession period for its regularization will expire. He told that there was a recess till this cutoff date in international obligations binding on all countries to curb the growth of black economy. He cautioned that international organisations will impose sanctions after the expiry of recess period.
The initiative is aimed at mobalising sufficient financial resources for Naya Pakistan Housing Scheme, out of compulsion in a cash strapped regular economy. The intention behind it is to boost production activities in over 40 industries that have linkage with construction sector. For this purpose a national level committee shall be formed. No doubt such like adhoc measure will give impetus to increase output in the industries such as cement, steel rerolling mills, electrical goods and paints in addition to generating daily wage employment. The same measure was taken in the mid-70s when government policy of nationalization of private sector industries and banks led to acute stagnation of economy. It later turned out a bubble burst. Moreover, the construction boom had jacked up inflation and overall economic growth rate remained stuck at 2.2 percent. It remains to be seen how putting old wine in new bottle brings wonder. Adhocism is no substitute for long term industrial policy, if lessons of the past are any guide. Despite the directive of the Prime minister to finalise a long term industrial policy by September 2019, its formulation missed several deadlines and there are no indications that the policy be mwill out within the next few months.
President Pakistan Business Forum (PBF) Sahibzada Usam Zufiqar, while taking to business leaders at Islamabad on Sunday, the same day Information Minister was asking for investment of black money in construction sector, reminded the government that chronic issues of rampant unemployment and poverty could not be tackled without creating conducive economic environment for achieving GDP growth rate of 7 percent. He substantiated his point of view that economic growth rate of over 6 percent had not been affected by the Pak-India wars of 1965 and 1971 and the economy was almost at full employment level. The primary driver behind the economic stability was that governments at that time did not stop the process of fiscal and institutional reforms, the wheel of which came to grinding halt in 1972 till date. Since then no institutional and tax reforms have been implemented in the tenures of successive governments. Greater reliance has remained on regressive indirect taxes and increasing the prices of electricity, gas and petroleum products for easy revenue generation.
President PBF has pleaded for wide ranging structural and institutional reforms, particularly in tax administration, power and gas, civil service, management of state owned enterprises, central bank, corporate sector and regulatory agencies. Former Governor State Bank Dr. Ishrat Hussain is the Advisor to Prime Minister on Institutional Reforms.
But the draft of reforms, if any, is yet to see the light of the day. Yes the banker had suggested to the previous PML-N government to announce tax amnesty scheme, which turned out a futile exercise like the previous such schemes. Yet again the tax amnesty on foreign bank accounts and immovable properties in the present government could not achieve the intended results. Candid expert opinion against these botched exercises was expressed by the economist Dr. Ashfaq Hassan Khan.
The government has not succeeded in bringing reforms in FBR, power and gas sector. Assuring the business community of resolving the issue of power outages in Karachi, Planning minister Asad Umer suggested to them to switch over to expensive imported RLNG. The reforms suggested by PBF are worth consideration, if government really wants to put the economy on the path of 6-7 percent GDP growth on sustainable basis to effectively address the problems of poverty and unemployment.