Speaking at a function of business leaders, Prime Minister Imran Khan referred to certain deregulatory measures and described them sufficient enough for improving the economic environment for fresh domestic and foreign investment. Streamlining the registration procedure for big businesses and industry and doing away with the condition of registration and getting licenses for small business and online submission of tax returns and tax payment do not go far enough for making investment and business environment favourable. The Prime Minister urged the business community to cooperate with the government in the documentation of economy and assured them that promises made with them shall be fulfilled.
The improvement in economic environment for fresh investment and arresting the fast downturn of economy would need implementation of concrete measures that are emphasised over and over by the trade bodies, which include formulation of long term industrial policy, substantial decrease in the tariffs of electricity and gas, and lowering interest rate. In addition to sky-high tariffs of energy inputs, high rates of excise duty of 7.5 percent on manufactured goods, additional import duty on industrial raw material, and imposition of 17 percent sales taxes at the multiple stages of manufacturing, distribution, whole sale and retail trade have vitiated the business environment. Unless and until these bottlenecks are removed, the economy cannot be rescued from the current phase of stagflation, claims of revival by the ruling political elite and economic managers of the government notwithstanding.
The decline in the current account deficit is worth appreciation yet it is not the sole barometer that could justify the claim of improvement in the economy. The current account deficit was $37.6 billion in FY 18 which dropped to $31 billion in FY 19. It is further narrowing as in the first 6 months of the current fiscal a decline of 11.7 billion has been registered in the import bill.
Although appreciable reduction in trade deficit has been achieved with adhoc trade policy of imports compression yet exports has grown by 3.15 percent. There are bold indications that even the modest growth in exports may not be maintained. China-Pakistan Free trade Agreement (CPFTA) has gone operational, allowing duty free access 313 more export products to the markets in China. But business community is not optimistic that the dream of exports worth billions of dollars to China could be realised due to shrinking economy and de-industrialisation in the country. FCCI President Mian Anjum Nisar and Vice President Sheikh Sultan Rehman said in a statement that Pakistan may not reap the benefits in the shape of quantum leap in exports to China under CPFTA-II despite the elimination of import duties on 313 tariff lines that covers most of the country’s exports of value added products and primary commodities. Major value added export item is textiles whereas primary commodities include rice, sea food, meat, bakery products citrus fruit, cherry, onions and potatoes. According to FCCI president surplus production may not be avialable for exports to China because of shrinking agrarian economy and de-industrialisation.
The present government is not solely responsible for de-industrialisation in the country as its wheel was set in motion in the previous two governments. The interest rate was lower than 6 percent in the previous PML-N government but even then there was a massive flight of capital out of the country and shifting of textile mills went on to the countries wherein incentives of low electricity and gas prices, induction of latest technologies for economies of scale was possible, simple and progressive taxation regime were being given to entrepreneurs. The vested interest group still prevails in the decision making that prevent lowering of electricity and gas tariffs, formulation of business friendly long term industrial policy and liberal incentives for boosting agriculture. In the present government the pace of de-industrialisation has gained momentum and crisis in agriculture deepened.
Satisfaction is being expressed over $2.226 billion investment in government’s treasury bills, which has helped in shoring up foreign exchange reserves. Foreign investors are not much interested in making fixed investment in the industry and other productive sectors that increase national income, output and employment. It is high time that role of vested interest in decision making about economy is eliminated, if government really wants its turnaround.
