Industrialisation is the way to go

With a little over a year and a half left at the disposal of the incumbent government, it is making yet another attempt towards industrialisation and foreign and local investment mobilisation to boost the revenue and employment opportunities for the good of country’s fragile economy. Prime Minister Imran Khan this week unveiled an incentive package for promotion of industrial sector. The industrial package comprises, among other things, incentives for investment in small and medium industries, as well as, investment for restoration of sick units. The incentives include decreasing tax rate by widening the tax base, granting a five-year tax holiday to overseas Pakistanis and providing no-questions-asked investment environment in the industrial sector to investors.

The aim is to strengthen the country’s export-oriented industrial and manufacturing base. The target investors are overseas Pakistanis with an eye on foreign exchange inflows and the focus is on the promotion of SMEs (small and medium enterprises) through improved regulations, ease of doing business and the revival of sick industrial units.

At around the same time, the federal cabinet accorded its approval to the promulgation of an ordinance to offer a third tax amnesty under which the government will allow industrialists to whiten their black money at a 5% rate by investing money in the manufacturing sector.

A former federal secretary, Younus Dagha, while talking to the electronic media last week is reported to have stated that “Amnesty schemes generally face criticism …that they are meant to attract black money and do not provide benefit to the economy per se. A major drawback of the previous two amnesty schemes was that they were unconditional. Foreign-held assets worth over dollar 18 billion were whitened through them, but they remain out of Pakistan… . The good thing about the current amnesty scheme is that this time, we are channelising it towards industry.”

The government approach to incentivise industrial growth and investment mobilisation is the way to go. But, the challenges are formidable, to say the least. Bureaucratic hiccups at every level of the business cycle, the ever-rising cost of doing business, the ever-rising utility charges are the challenges that need to be addressed to cash in on the opportunity provided to entrepreneurs under the two incentive schemes.

PM Imran Khan’s optimism to invoke the interest of Overseas Pakistanis to invest in Pakistan could not materialize; no doubt, it a huge disappointment. The main issue is the trust deficit in the steadfastness of government policies, bureaucratic obstacles and a non-enabling business environment.

On several occasions, the Prime Minister expressed his desire for growth in Information Technology (IT) sector and said that the present government was incentivizing the IT sector, which had a lot of potential to take the country forward in terms of exports. He said that as against India’s $140 billion annual IT exports, Pakistan’s were just hovering around $4 billion per annum (70% growth achieved during the ongoing tenure of the present government). Since Pakistan stood second in the world in terms of young population, it was important to promote IT sector.

The roll-out of the package of incentives for promotion of industrial sector and investment and the third amnesty scheme aimed at attracting investment to industry do constitute the way to go. Hopefully, some good will emerge out of it during the ongoing tenure of the incumbent government.

(The writer is former President, Overseas Investors Chamber of Commerce and Industry)

Copyright Business Recorder, 2022