The high cost of doing business

Speaking at the inauguration of a training scheme in Karachi's Korangi Industrial Area on Monday, Minister for Textile Industry Mushtaq Ali Cheema, disclosed that his ministry has prepared a comparative study of cost of doing business in Pakistan and its competitors in the world market.
He also asked the business community to provide him with a comprehensive report regarding its exports made and taxes paid, apparently to have a better understanding of the issues and concerns confronting the textile sector.
Textile industry being the mainstay of the economy and the leading player in the export sector, it is only proper that the government should devise a well thought-out strategy to make it competitive in the international market. But it is also necessary to look at the wider picture with a view to addressing the issue of high cost of doing business in the country.
The government has been trying hard to attract foreign investments. Only last September it launched the President's Investment Initiative, simplifying procedural requirements and other formalities for the setting up of new businesses.
It also vowed to enhance foreign investments from $1 billion to $27 billion within a five-year period. So far there is no sign of that happening. Despite all the pro-business measures and policies, foreign capital remains shy.
Reasons for that include political uncertainties, law and order problems, administrative bottlenecks, and a socially restrictive atmosphere. What also acts as a major disincentive for local as well as foreign investors is the high cost of doing business in this country.
The price of basic factors of production - namely, power, water and communications - is the region's highest, which makes the production costs unreasonably excessive. Given the resource constraints, such pricing may be permissible, but what is hard to accept is the poor state of infrastructure facilities as well as human capital, which further contributes to cost increases.
Power failures are frequent, especially in a place like Karachi, the country's key industrial/ commercial centre, while gas supply cuts are a recurring problem in its northern cities. Consequently, businesses are impelled to install their own power generators, putting a lot of strain on their resources both in terms of man-hours wasted and money spent to make alternative arrangements.
Then there is also the sad reality that the human resource remains largely underdeveloped. Successive governments have been long on the rhetoric and short on action with regard to achieving hundred percent literacy as well as improving the standard of education and making it relevant to the development process. A lot of lip service is also paid to the need of bettering health care.
But annual budgetary allocations to both these sectors have remained abysmally low - lower than every other country within our SAARC neighbourhood. It hardly needs saying that when important infrastructure facilities are either missing or are undependable, and most of the workforce is without education and the required skills, both work efficiency and quality suffer.
It is plain, therefore, that unless and until the government pays urgent and focussed attention to infrastructure, human resource development and removal of political uncertainty, its dream of making this country a preferred destination for foreign investors will remain unfulfilled.