Romanticism aside, OICCIs latest business perception and investment survey highlights one of the least talked about issues by the Pak-India trade hopefuls: comparison of costs of production and factors thereof.
Compared to 2011, when 61 percent of the respondents favoured improved trade relations with India, the just released 2013 survey notes that only 43 percent favour the move. Similarly, in 2011, 38 percent favoured granting of MFN to India. Now, that number has gone down to 25 percent. This is despite the fact that most respondents rated Pakistan better compared to India in terms of ease of doing business.
OICCI suggests that "perhaps" some members changed their opinion about trade with India due to rigidity on the Indian side about removal of tariff and non-tariff barriers. But the voice of overseas investors is more certain in stating that the "negativity is also because the cost of doing business in India is relatively lower in many business sectors than in Pakistan where costs have gone up significantly in the recent past".
One could argue that while OICCI may be representing overseas investors, at the end of the day, they are businesses, and, therefore, are only being wary of the competition, which is a natural process. But thats for the critics to respond.
This column would only argue that there is very little scholarly work on comparative analyses of sector-wise differences in costs of production and productivity differences across the border which could be brought to the debate by parties on both sides of the podium.
A somewhat related concern highlighted by the OICCI perception survey is the inefficiency of the judicial system that clips the time and resources of businesses and business leaders. The average time for resolution of commercial disputes has been reported to be 7.4 years, with some cases pending for 15 years. By comparison, it takes about 4 years to resolve a commercial dispute in India, according to the latest World Bank report on Ease of Doing Business.
On an entirely different tangent, however, here is one of the strangest findings of the OICCI survey. The survey reveals that a wholesome majority (78 percent) of the respondents were satisfied with the ethics of the tax officials in terms of unethical practises for tax refunds.
The survey also noted that despite a common social perception that demand for unlawful payments exists in Pakistan, 74 percent of the respondents stated that they had not been approached for unlawful payments and favours, and furthermore, such solicitations have decreased as compared to 2011.
These findings run contrary to other perception surveys out there. For instance, the BR Research perception survey (published in its Fiscal Review, 2013) found out that ethics of tax officials were the most problematic factor faced by businesses. Bear in mind that BR Research perception surveys findings about regulatory bodies and major economic challenges were very similar to that of OICCIs 2013 survey.
Perhaps this difference in perception stems from the fact that is overseas investors--as international players--would rather be tight-lipped about sensitive matters such as ethics. That or perhaps, the tax department has suddenly become corruption-free. We leave the answer to your judgement.
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