Short-term measure are necessary for dealing with the immediate challenges to the economy, and the only way to sustain macro-economic stability is through fundamental reforms, which require political will, the CEO of Pakistan Business Council, Ehsan A. Malik, said. The country will also require substantial financial space for implementation of these reforms, he added. With the election cycle precluding an IMF programme and the low likelihood of donor funding, Pakistan needs out-of-the-box solutions to create this space.
A model to consider is Indonesia which in 2017 was able to unlock 330 billion dollar of undeclared wealth, representing 40 percent of its GDP. This include 77 billion dollars of assent abroad of which more than half have returned to the country. To enable domestic industry to thrive, fiscal and other policies should facilitate rather then encumber the formal sector. Equally, if there are long-term investment-friendly policies, the private sector can invest in skills, capacity and capability for Pakistani exports to be globally competitive in cost and quality.
State-owned enterprises should be restructured under the ownership of a government-operated holding company along the lines of Temasek of Singapore and Khazanah of Malaysia. Privatization of state-owned enterprises would be dependent on private sector's capital and risk appetite and the country's strategic interest.
Competition laws should be strengthened to protect consumer interest. Levelling the playing field with the informal sector and encouraging domestic business will increasers the tax revenue necessary to fund social development. Pakistan lags in nutrition, education and health. Consequently, its human capital is weak, productivity is low and talent for the knowledge economy is short.
Government and business need to work together to address these deficiencies and help Pakistan meet the UN Sustainable Development Goals. The PBC made the following recommendations:
1. Stop undermining the domestic industry through ill-negotiated trade agreements. Renegotiate with China, be smart with Turkey and Thailand. Start factoring impact on jobs and tax revenue into future agreements.
2. Create a more level playing field for the formal sector. Arrest under-invoicing and smuggling.
3. Craft a "Make in Pakistan" policy through full alignment of all stakeholders. The prime minister should visibly lead this.
4. Open more sectors to competition to improve productivity to world class, business will invest if policies are conducive, long term and consistent.
5. Make net job creation and correction of the trade imbalance with China cornerstone of Pakistan's policy on CPEC. Ensure that the Pakistani industry is not undermined by the SEZs.
6. Provide energy at competitive cost to fuel industrial revival, pending which, factor this disparity in the export rebate.
7. Reverse the trend towards trading and restore faith in the taxation system. Separate policymaking from tax-collection to avoid short-term knee-jerk measures. Policies must be for the long-term and for promotion of capital accumulation, consolidation and investment. Multiple taxations must stop, in the case of dividends, for example.
8. Simplify and reduce business interfaces with authorities to ease and bring down the cost of doing business.
9. Transform agriculture from low-yield subsistence farming to world-class productivity.
10. Generate jobs by addressing the acute shortage in low-cost and medium-cost housing.
11. Encourage new ventures, especially in the information, communication and technology sector.
12. Strengthen public/private partnerships to enable businesses to promote inclusive and sustainable development.
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