Economic situation of Pakistan has been improving after the completion of the first phase of the China-Pakistan Economic Corridor (CPEC). Consolidation phase will be started with the completion of the special economic zones. It would be the first step to implement a long term plan for CPEC. A long term plan provides an opportunity for the inclusion of third parties or business communities across the world to be a part of it. Pakistan and China specifically brought in the concept of joint efforts to attract international funding for the successful implementation of the different segments of CPEC in the long run. It is an encouraging sign that many international agencies, business communities and countries are expressing an interest to be a part of it. Inclusion of third parties will lead to an inflow of FDI, which is direly needed.
All Pakistani governments have always been keen to attract FDI and have tried to introduce reforms for improving the investment environment. Focus remained on how to improve the business situation in Pakistan. Despite the tall claims, the government’s situation is still very bad and the business community especially international investors are hesitant to invest in the country. Doing business in Pakistan is one of the most difficult tasks, there are several gaps on account of transparency, policy etc, and ranking of key indicators for doing business is very low. Pakistan is ranked 97 on the transparency and policy indicator. It falls on 102 in bribe and regulatory index. Property rights index is even worse at 115 position. Wasting of public resources is another concern for the country and it is ranked on 58 on the competitive index. Legal in-efficiency is also hindering the FDI in a country like Pakistan and is ranked at 83 on this front.
In 1980, we entered with a brand new model. Pakistan started to introduce a mix of national state owned businesses and private businesses. Private businesses were given opportunities and incentives to grow in the country. It was followed by the privatisation and liberalism of trade and economy in 1990, and 2000. From 1970 till today, Pakistan’s economy has been struggling. Experimentation has been a prominent characteristic without any solid plan in place to achieve the goals. IMF and international financial institutions have also played a role in Pakistan’s economy. Trade liberalization without preparation, structural adjustment programs, privatisation and other so called reforms were introduced due to pressure from these institutes. It was envisioned that these interventions will expand the economic base and enhance the welfare of the country. Unfortunately, all these interventions resulted in further deterioration of the economy, increasing poverty in Pakistan.
Pakistan has to take serious steps to attract investment and FDI. First and foremost should be the business and people friendly investment regime. It is required to improve conditions for doing business
Now again Pakistan has an excellent opportunity in the form of China-Pakistan Economic Corridor. Positive impact is already visible, as we witness that CPEC gave an impetus to the economy and Pakistan’s GDP exhibited a steady growth during the last 4 years. The GDP growth rate achieved the benchmark of 5.8 percent during 2018, mainly because of CPEC related activities and the inflow of financial resources.
Enrichment and expansion is the second phase of CPEC. This is the most critical stage of CPEC, it will determine the future and effectiveness of CPEC and the economic status of the country. It’s major elements are Special Economic Zones (SEZs), investment in agriculture, education, livelihoods, skill development and eco-tourism etc.
These interventions will create jobs, economic growth, expand trade and improve livelihoods of the people. These are the prerequisites to pave the way for sustainable peace and prosperity in the country.
Pakistan has to take serious steps to attract investment and FDI. First and foremost should be the business and people friendly investment regime. It is required to improve the condition for doing business. As we discussed above indicators regarding business are very poor, which is a major hindrance to attracting FDI.
Pakistan has to apply a mixture of initiatives for improving, it is extremely difficult to register a business in Pakistan. The investor has to deal with a number of departments and agencies.
It must be reformed. One solution can be to bring all relevant departments under one roof. Second there must be a time limit to decide on registration, like one month or two or six months. Whatever the timeframe it must be implemented so that everyone can have clarity about the timeline. Moreover, the language of the policy frame must be easy and clear and understandable for investors. Third, in the context of SEZs the facility of registration should be established within or near the SEZs or at the relevant district’s head quarter to avoid hassle. China adopted this strategy to attract FDI and it paid in terms of rapid economic growth and development of China.
Second stage would be to introduce an online registration process. The government is already focusing on e-governance. It would be a good starting point. Foreign investors can directly access the process by sitting in their room. All submitted documents could be verified online and there would no interface between the investor and the government officials. Limited interaction will curb corruption in the registration process. Moreover, it would be available to all the relevant stakeholders and there would be no confusion of action.
The third, measure is to introduce new window of opportunities for local investors. Investment model of China also shows us that they encouraged the local industry and businesses with the same vigour as they did the FDI. Local investors and the business community was given support to flourish and play a role in an export led growth.
Failure to reform the investment policy and skill management, will lead us towards missing the opportunity again. However, we can expect good interventions from BOI, Education Ministry and Planning commission with the induction of a new team in BOI, Education Ministry and Planning, Development and Reforms. Although previous governments have also tried to introduce reforms but they could not get the required results. However, we can expect the new government to introduce new reforms with tangible outputs and devise a strategy to ensure the success of future ventures.
The writer is freelance columnist. He can be reached at firstname.lastname@example.org
Published in Daily Times, October 9th 2018.