Saturday June 22, 2024

How to achieve growth

By Atta-ur-Rahman
December 06, 2023

To progress rapidly, Pakistan must create an Ease of Doing Business (EoDB) environment conducive to economic growth, innovation, and entrepreneurship.

The EoDB refers to the regulatory and administrative framework that facilitates and encourages business activities within a nation. A high EoDB ranking signifies a business-friendly environment, attracting domestic and foreign investments, fostering job creation, and driving economic development.

There are a number of important transformative measures that need to be taken to promote EoDB that can contribute to the economic transformation of nations. Pakistan is ranked at a lowly 108 in the EoDB index. This deters foreign investment.

A broker looks at an index board showing the latest share prices at the Pakistan Stock Exchange in Karachi. — AFP/File
A broker looks at an index board showing the latest share prices at the Pakistan Stock Exchange in Karachi. — AFP/File

We must streamline our regulatory processes. Cumbersome bureaucratic procedures, lengthy approval timelines, and excessive paperwork deter entrepreneurs and investors from engaging in business activities.

We therefore need to simplify and digitize all approval processes to reduce the time and effort required for compliance. This can be achieved through the implementation of online portals, electronic document submission, and automated approval systems with complete absence of human intervention that fosters corruption.

Easy access to finance is a critical factor in the success of businesses, especially for small and medium enterprises (SMEs). Pakistan should implement policies and initiatives that facilitate easier access to credit for businesses. This may involve creating a robust credit information system, establishing credit guarantee schemes, and promoting financial literacy among entrepreneurs.

Also, fostering a competitive and diverse financial sector can provide businesses with a range of financing options. Encouraging the development of venture capital and angel investor networks can also be instrumental in supporting innovative startups and fostering a culture of entrepreneurship.

The death blow to the Pakistan industry has been the huge increase in interest rates on IMF bidding. This has destroyed most industries of Pakistan in one fell swoop. The maximum limit to interest on loan to industries should be 3.0 per cent, so that industries can flourish, jobs become available, and poverty is reduced.

The State Bank needs to intervene immediately for this to happen. At present the banks become fatter and fatter with prohibitively high interest rates of about 20 per cent to 24 per cent while the industry of Pakistan dies. Most industrialists are therefore shifting their operations to other countries while Pakistan dies a slow death.

Another crucial factor to be considered to attract foreign investment into Pakistan is the need for adequate infrastructure that is essential for the smooth functioning of businesses. Governments must invest in developing and maintaining infrastructure such as roads, ports, airports, and digital connectivity.

Efficient transportation systems reduce coordination costs, improve supply chain efficiency, and enhance overall competitiveness. In the SITE area in Karachi, for instance, most textile dyeing industries have closed down as water pipes supplying water essential for dyeing have not been repaired for the last 15 years. Complaints fall on deaf ears, and there are no punishments for corrupt officials.

As a result, the once booming textile industry in the SITE area lies devastated and most industries have closed down; many either shifted to Korangi, Karachi or left for Bangladesh. The incumbent chief minister of Sindh is known to be a just administrator and he needs to have a survey conducted and water supply resumed to all industrial areas within SITE.

Reliable energy supply is another crucial factor for businesses to operate seamlessly. Investment in renewable energy sources not only contributes to sustainability but also ensures a stable and cost-effective energy supply for businesses. The situation in Pakistan is dismal in this respect with repeated power failures, necessitating most industries to install and operate expensive electricity generators.

Also, a robust legal and judicial framework is essential for protecting property rights, enforcing contracts, and resolving disputes. We should focus on implementing legal reforms that simplify contract enforcement and provide timely resolution of disputes. This involves establishing specialized commercial courts that have a mandatory limit of resolving disputes within three weeks, introducing alternative dispute resolution mechanisms, and ensuring the complete independence of the judiciary.

Clear and enforceable intellectual property rights are vital for instilling confidence among investors. We need to work towards modernizing land registration systems, reducing the complexity of property transactions, and ensuring the protection of intellectual property rights. The Pakistan Patent Office needs a complete overhaul with competent staff and evaluation systems of international standards as presently we live in the stone ages in this respect.

A fair and efficient tax system is crucial for businesses to thrive. In Pakistan, governments are under a feudal stranglehold so that agricultural taxation is negligible, and the concept of a technology-driven knowledge economy, essential for socio-economic development, is virtually non-existent.

We should immediately implement land reforms, break the hold of powerful landlords over our parliaments, tax agriculture so that some relief is provided to industry from the overall tax burden, and focus on simplifying tax codes, reducing tax compliance burdens, and ensuring transparency in tax administration. Lowering corporate tax rates can attract foreign direct investment (FDI) and encourage domestic businesses to expand.

Massive smuggling at all our borders in connivance with corrupt agencies can also generate a huge amount of revenue. Moreover, promoting a predictable and stable tax regime is essential for long-term business planning. We should avoid frequent changes in tax policies and ensure that tax laws are clear and easily understandable.

Additionally, introducing incentives for research and development, innovation, and job creation can further stimulate economic growth. A skilled and educated workforce is a key driver of economic development. We should invest in education and skills development programmes to ensure that the workforce is equipped with the necessary skills for the evolving demands of the business environment.

The rapid advancement of technology has a profound impact on the business landscape. We should actively promote the adoption of digital technologies across industries. This includes the implementation of e-governance initiatives, digital payment systems, and the integration of technology in business processes.

Facilitating a digital infrastructure and promoting the use of emerging technologies such as artificial intelligence, blockchain, and the Internet of Things (IoT) can enhance productivity and efficiency. Establishing public-private partnerships (PPPs) can be particularly effective in addressing infrastructure gaps and promoting sustainable development.

We can learn in this respect from the successes of other nations. Singapore consistently ranks high in global EoDB indices. The city-state’s success can be attributed to its commitment to regulatory efficiency and digitalization.

Singapore streamlined its business registration process through the BizFile online portal, reducing the time and paperwork required. The Inland Revenue Authority of Singapore (IRAS) introduced the myTax Portal, allowing businesses to file taxes electronically.

Such initiatives exemplify how embracing digital platforms enhances the ease of doing business.

Enough of talk – it is time to act!

The writer is the former federal minister for science and technology and former founding chairman of the HEC. He can be reached at: