Role of trade associations in economic development - III: future role of the national chambers of commerce

Regardless of the views by different analysts on the power and role of the chambers of commerce in governing the global policies, it is clear and obvious that in the regime of free trade and globalisation, the role of the chambers has been largely extended. It does not only determine the economic and political trends and growth patterns, it affects also the advancement and governance of the human resources in a country.
Another issue about the role of the chambers in future is concerned with the composition and representation of industrialists and traders in the chambers of commerce. Although, the disintegration of industrialists and traders is a difficult task and in most of the cases either they have common interests or their interests depend on each other's activities; sometimes the clash of interests may be possible.
In fact, the industrialists are much concerned with the production activities and majority of their policy related issues are closely related with the scientific development, technological advancement, innovations, productivity, competitiveness, and R&D; while commercial activities are much concerned with the pricing, market access, competition policies and trade facilitation. The operational requirements in industrial and commercial ventures determine their financing and investment patterns.
The joint chamber of the commerce and the industry is a common practice in the developing countries. However, in industrialised countries the industrialists form their separate association. In this case the chambers of commerce represent the traders and commercial enterprises only. The United State Chamber of Commerce is an example of the traders' representative association; it does not represent the US industry.
The relative importance of the chamber of commerce and the industry association depends on the structure of economy. In the consumer driven economies, the chambers of commerce are more important than industry associations, because supply and production of industries output depend on the size and patterns of trading activities.
World economic history has numerous examples of the social, political and economic changes in a country or region because of the trade and investment activities. Indonesia and Malaysia were converted into leading Muslim societies by dominantly growing trading activities of Arab Muslims in the region. Central Asian Mughal empires have been transformed into Muslim dominated societies after Arabians and Persians trade activities in the region.
East India Company has played a subjugated role in determination of the political and social structure of sub continent. Standard Fruits and United Fruits companies in Honduras created 'Banana Republic' maxim.
'Daewoo-Desh' a garment manufacturing company in Bangladesh, 'Diamond Trading Company' a diamond processing company in India, 'Peine EmbH' a cement company in Zambia, 'Korindo-Kodeco' a plywood processing company in Indonesia, 'Barry S.A' a cocoa processing company in Cote d'Ivoire, 'Fiah' a food processing company in Honduras, 'United Fashions Limited', a garment manufacturing company in Jamaica, 'Coban S.A', a shoe manufacturing company in Guatemala, 'Floramerica S.A a flower processing company in Colombia, 'Embraer' an aircraft manufacturing company in Brazil, and 'SZKI' a software company in Hungary have provided catalysts to change the entire economic structures of their countries.
The sustainable economic development is largely dependent on trade and investment activities. The flow of investment, mobility of labour and capital, patterns of business financing and the strength of business institutions determine the fortune of a society. This theory has been validated in all regions and at all times. The only deviation in the present regime is the magnitude of required investment and trade activities.
The competitiveness, global and multidimensional effects of one country's economic policies, increasing role of private sector in the national economies and the increasing size of required investment have led to the formation of powerful trade organisations and the chambers of commerce. Now, the trade associations are considered as engines of economic growth and the powerful catalysts for national development.
Now, the world is passing through a transformation regime where polarisation is under the question mark. The glossary of third world, cold war, communism, and nationalisation are classified as redundant terms. Now, we talk about transitional economies, we prepare ourselves for a new world order, and we plan to face the challenges of globalisation and free trade regime.
In the post communism regime, the responsibility of economic development has largely been shifted to private sector. The increasing role of private sector enterprises introduced the new concepts of corporate social responsibility (CSR), democratisation in business and finance, corporate culture, fair trade, good governance and economic freedom and participation.
The extreme capitalism concepts of the wealth maximisation, limited liability, separate entity, agency cost, professionalism, and competitiveness were redefined. The implementation of the separate entity concept and the code of corporate governance have become more important in the post communism regime. Now, problems in trade and investment are closely linked with the problems of unemployment, income distribution, poverty, macroeconomic growth, regional and infrastructure development, socio-cultural changes, political structure, and the rate of crimes in a country.
Business related issues couldn't be studied in isolation; they are integrated with the socio-political dimensions of an economy. In these circumstances, trade bodies will have to play important and non-traditional role. They will be major catalyst of economic development.
They will not only contribute in the employment generating activities, participation in national exchequer, building of foreign exchange reserves and acceleration in the Gross Domestic Product (GDP), they will have to expand their role in the social, political, cultural and ideological development planning.
Lobbying, policy advocacy, image building of the country's institutions and products, liaison with the planning authorities and the public policy making institutions, revamping and activation of think tanks, co-ordination with the public serving organisations, and linkages with the academia and scholastic institutions are integral parts of the research and development activities of the national chambers. Several peripheral functions are also required to perform such activities.
Multi-dimensional enhancement in the research activities is a natural consequence of present inclination. In the new world order the national chambers have to play their role in economic, social, cultural and political advancements of the nations to a large extent. It requires the redrafting of their visions and objectives by amending their charters and the articles of associations.
To apply private sector led economic growth models and to achieve the targets of economic co-operation, the national and regional chambers - including Islamic Chamber of Commerce and Industry, ECO Chamber of Commerce and Industry, SAARC Chamber of Commerce and Industry - have to play their influential role.
The objectives cannot be achieved by the political strategies and public policies only. To limit the power of chambers as a body regulated by the ministry of commerce may restrict the role of the chamber to serve as a catalyst for national and regional economic development. It is a great misunderstanding that mere ministry of commerce or commerce related organisations could boost the trade activities; this objective cannot be achieved without the association of the foreign and interior ministries.
Communications and transportation authorities are also required for sustainable achievement in this objective. The national and regional chambers can play a role of co-ordination authority among the concerned ministries and institutions. This is the time to reset the standards, measures and objectives of the patterns of industrial and trade development policies.
A wrong decision for regulating or managing the trade bodies and industrial sector may create distortion in the economy. Now, the trade bodies and their representatives have to play a superior role in the national planning and development strategies. The participation of the heads of national chambers in policies' formulation requires their representations in the governance of the country and cabinet meetings. It requires a status not less than cabinet members.
To play a revolutionary role in the economic development, the chambers will have to avoid the rigidity in their systems and leadership. To achieve the great targets, a dynamic and visionary leadership is required in the national chambers. The history of successful visionary leadership show that leaders have been getting new ideas from the thinkers.
The willpower of the successful leaders to implement the visionary ideas through managers is the only way to revolutionise the societies. Both the managers and thinkers have their professional limitations; thinkers cannot implement their ideas and managers cannot bring the new ideas. To lead a team of executives and managers to make practicable the thinkers visions is the job of visionary leaders. Only such visionary leaders can revolutionise the institutions to achieve the desirable goals.
Another notable dilemma for the visionary leaders is the deviation from the routine and popular ways. Sometimes deviation from the popular way becomes necessary for the revolutionary changes. The public views are the media views, which may be classified as popular views; the thinkers provide the research based technocratic views, which give the non-obvious solutions of the problems. So far as leaders are concerned they have to face the dilemma in choice of the views.
It is another dark side of the picture that majority of the leaders do not understand the significance and implication of the vision. In fact, vision is a statement to show the "ultimate achievements" and targeted goals of the activities and mission. It is a common observation that majority does not differentiate between the vision, mission, goals, objectives and activities.
Another problem with the leadership is the overemphasising on the self projection and public relations activities. The business and economic development requires visionary leadership; it does not require the leaders who love to appear in the media, who are ready to speak on every topic and issue, who prioritises the photo sessions. Speaking power and directionless speeches cannot be a substitute of matured leadership. One cannot find any feasible or visionary plan in two hours speeches, while a few minutes discussion with a matured leader can change the entire vision.
It is common observation that majority of long hours speeches confuse the listeners because of the self-contradictory views, misused academic jargons, and misinterpreted theories. Unfortunately, it is being happening in the full day seminars, conferences, written articles, and media dialogues in Pakistan.
UNDERSTANDING THE IMPORTANCE AND LIMITATIONS OF FPCCI The extreme deteriorating conditions in the country at social and economic fronts invite the attention of policy makers and planners. Rapidly growing inflation, poverty, unemployment, killing and sale of children by the parents, suicide attempts, deteriorating law and order situation, bombings, and increasing economic problems indicate the lack of planning and several policy flaws.
The representatives of the private sector and trade bodies cannot ignore their responsibility, because they are ultimate beneficiaries of the economic growth and ultimate losers of the deterioration.
FPCCI - the apex trade body and sole representative of all local chambers of commerce and industry and the registered trade associations in Pakistan needs the role and operational status similar to US Chamber of Commerce to play its role as a catalyst for accelerated economic growth to fill the gap in development stages between Pakistan and its neighbouring countries.
There are several misunderstandings about the status of FPCCI. First of all, it should be clear that FPCCI is not a governmental organisation having powers to implement the policies. So, it is not responsible for policy flaws or weaknesses in implementation procedures.
Similarly, it is not mere a think tank or policy recommendatory institution; it represents entire business sector of the country. From its role, status and jurisdiction point of view, it is not comparable with the local chambers of commerce and industry. FPCCI is a national chamber, which represents all the local chambers and trade associations in Pakistan.
It has a broad role and jurisdiction. It represents Pakistan in regional chambers, including International Chamber of Commerce and Industry, ECO Chamber of Commerce and Industry, SAARC Chamber of Commerce and Industry, Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) and the Islamic Chamber of Commerce and Industry (ICCI) etc.
All 32 chambers of commerce and 80 recognised trade associations in Pakistan are the members of FPCCI. These member bodies form the Electoral College for the election of FPCCI office-bearers. A large number of FPCCI activities are performed by its 105 standing committees, 25 bilateral business councils, 11 economic co-operation committees and 106 trade and industry committees.
By virtue of his position, the president FPCCI represents the private sector of the economy in more than 50 governing and policy-making bodies of the institutions of national capability. Export Development Fund, State Bank of Pakistan, Institute of Business Administration Karachi, Applied Economics Research Center Karachi, Pakistan Council for Scientific and Industrial Research, Institute of Corporate Governance and various other organisations and standing committees for policy formulation are included in those institutions.
The local chambers of commerce and industry in Pakistan and the trade associations are the constituent bodies of FPCCI; they are not its competitors or substitutes, they are its complements. Another misunderstanding was created by formation of the 'Pakistan Business Council (PBC)', which is not a trade organisation under the Trade Organisation Ordinance 2007. PBC has been created as a forum for Pakistani business to address the challenges arising from progressive global and regional free trade, and from the relatively sluggish trends in current national investment flows.
PBC's work would consist of producing position papers for review by business and appropriate government authority, holding lectures and seminars, and sponsoring research.
The International Finance Corporation (IFC), The Center for International Private Enterprise (CIPE), and the Competitiveness Support Fund (CSF) are working partners of the PBC, while Allied Bank Limited, Colgate Palmolive Limited, Dawood Group of Companies, Descon Engineering Limited, Engro, Gatron Industries Limited, Habib Bank Limited, Gul Ahmad Mills Limited, Indus Motors Limited, International Industries Limited, Lakson Group, Millat Tractors Limited, Nishat Mills Limited, Packages Limited, Saphire Group of Companies, Standard Chartered Bank, Siemens Pakistan, Unilever Pakistan and Younus Brothers are its member organisations making the council a powerful institution. Although, the council is working like a think tank, to understand its aims and vision it is noteworthy that it has formed a PBC's Representation on Policy Development Forums, a Real Estate Investment Trust, a Housing Advisory Group, an Infrastructure Task Force, Infrastructure Project Development Facility (IPDF) Group, a Holding Company Taskforce, Special Economic Zones Committee, and a Corporate Law Reform Committee.
The PBC has published position papers on Competition Ordinance 2007, Bonds Market Development in Pakistan, Micro Finance and Poverty Alleviation, Large Trading Houses and SME Development etc. (It is notable that the 'US-Pakistan Business Council' is another organisation, which does not have any association with the 'Pakistan Business Council'. US- Pakistan Business Council is an integral component of the Asia Department at the United States Chamber of Commerce.
The primary role of the US-Pakistan Business Council is to foster a greater awareness of business opportunities in Pakistan, and to further increase US foreign direct investment in Pakistan. The Council provides a forum for dialogue on key economic, commercial and other relevant issues of interest to American companies doing or planning to do business in Pakistan.).
Being a non-trade organisation, the role and status of PBC may confuse or mislead the reviewers. To some extent, it seems a competitor of the FPCCI. FPCCI has a legal mandate to represent the private sector of Pakistan economy at national and international levels, and it provides a forum to debate on business related policy issues. It will be better if PBC joins FPCCI to strengthen the role of private sector in the economic development.
Being an apex trade body the FPCCI feels its responsibility in the process of socio-economic development of the society. The history of FPCCI has numerous examples of its contribution in the societal development of Pakistan. In the past, the federation had launched a monthly magazine to create public awareness on environmental issues. It has been financing various educational and training programs and provided stipends and scholarships to the meritorious and needy students.
The philanthropic role of FPCCI at the time of natural disasters is also very important. FPCCI has been contributing in the policy formulation for the standardisation of products, implementation of the accounting standards and the SECP regulations. The federation has always played its positive role in preparation of the regulations for environment, telecommunication, use, production and distribution of energy, and the employee's old age benefits.
To enhance its intellectual contribution, FPCCI has restructured its research department. Several types of research work including policy research in the areas of business competitiveness, fiscal and monetary policies, and trade related issues are being carried out in the research department. Research Department in FPCCI is responsible not only for economic and business related policy research; it also performs several peripheral activities.
Policy advocacy through presentations at different forums, issuance of press releases on policy related issues, review and comments on the policy papers (including UNO working papers on universal regulations on trade and business, public policy documents prepared by the various ministries and government functionaries, reports submitted for FPCCI comments by the World Bank, IMF, World Economic Forum, USAID Competitiveness Support Funds and other multilateral agencies), preparation of the proposals for federal budget, trade policy, monetary and other economic policies are the usual activities of Research Department.
To highlight the FPCCI's point of view, in various policy forums including the public hearings by NEPRA, OGRA and PEMRA are also included in the responsibilities of the R & D department. Preparation of the synopsis, briefing notes, fact sheets and policy papers for the office bearers to discuss at different forums and meetings is also an integral part of the R & D Department activities. Some functions of R &D Departments are directly related with the co-ordination of other departments and committees.
IN BROADER SENSE, THE FUNCTIONS AND ACTIVITIES OF R & D DEPARTMENT CAN BE CLASSIFIED IN THE FOLLOWING CATEGORIES:
1. Applied Research
2. Policy Research
3. Development and maintaining of a credible data base for ready references (available on FPCCI website for general public and protected by passwords in sensitive cases)
4. Training programs, workshops, and symposiums to update the concerned peoples about the contemporary development in business and economy.
5. Seminars, conferences and policy briefings for intellectual advancement and policy discussion.
6. Liaison with the national and international think tanks, academic institutions and policy-making organisations;;
7. Research publications and presentations;
8. Policy Advocacy & Lobbying;
To perform the above-mentioned activities, the R&D Department has carried out several mega projects. The following is a brief summary of the ongoing projects:
A) DATA BANK AND E-LIBRARY: The e-library is an integral part of FPCCI research library, which is a specialised library, contains important international publications, including economic reports, books, economic and business related journals and various types of surveys. A data bank has also been established in the library to cater to the research requirements.
Currently, the data bank maintains complete record of trade statistics all over the World (Country wise & Commodity wise). It is one of the largest electronic data banks in economics in the country.
This data bank provides readily and up-to-date information on world's economy, including trade policies' parameters of 137 countries, thousands of the business indicators, fiscal and monetary policy variables, competitiveness indicators, several types of rankings and ratings, surveys, global flow of investment, trade and labour mobility, economic and political variables etc. The dissemination of important information from this data bank through official website and on line service would be available in the near future.
B) CONSTRUCTION OF 'BUSINESS PERFORMANCE INDEX FPCCI research department has constructed a 'Business Performance Index' to measure the quantum of investment and operational activities in the business sector. It is important to note that no index to describe the trend and volume of business sector activities in Pakistan is publicly available.
Unfortunately 'Stock Market Index' is erroneously referred to as a measure of the business sector performance in a particular period. The stock market index cannot represent or replace the macro level 'Business Performance index' because of its several limitations and question marks on its composition and reliability.
(To be continued)