Roadblocks to Punjab investment success

LAHORE: Private sector is indisputably considered as the world’s most sustainable engine of economic growth. In Pakistan, it primarily contributed in economic development during the last three decades or so. The resource-constrained country of over 210 million mostly youngling consumers, Pakistan was able to achieve a decade-high 5.3 percent economic growth during the last fiscal year. The South Asian nation expects its largely consumption-based economy to grow at a relatively higher rate of 6 percent this fiscal year on the back of economic activity spurred by more than $55 billion investments China would be making in phases in Pakistan under China-Pakistan Economic Corridor (CPEC) projects.

Some economists, however, feel that the country’s economic managers are not wisely planning as they put all their eggs in one basket, called CPEC, while exploring ways to grow and create employment opportunities for its increasingly young population.

In addition to collaboration with state-owned Chinese enterprises, a vibrant and fully incentivised private sector, they believe, is imperative for Pakistan’s sustainable socioeconomic development.

The country’s private sector has showed its muscles time and again despite all odds. Political leaderships at federal and provincial levels boast of surge in private sector credit off-take. The State Bank of Pakistan attributed this demand to a low interest rate regime and benign business environment.

The rate is, however, not the historically low or export re-financing rates are not to improve confidence and efficiencies of the private investors.

There are some macroeconomic issues that pose challenges to national economy, but overall prospects are positive, according to some economists.

Economy is at the launch pad of robust growth trajectory owing to multiple factors. But, the real threat to new investment in Pakistan in general and in Punjab in particular is believed to be bad governance.

Red tape and unnecessary governmental interferences are the permanent factors to haunt private investors who plan to invest billions of rupees.

Former prime minister Nawaz Sharif and his brother chief minister of Punjab Shehbaz Sharif have been very vocal in inviting foreign and local investors to invest in the country where two major bottlenecks, security and energy supplies, have been relatively bettered.

While the chief minister of Punjab have been holding investment seminars in Lahore to lure investment, the former prime minister, in a meeting last year at Governor House Punjab, chided the businessmen for not making sufficient investments in the province despite improved macroeconomic indicators.

Punjab Board of Investment and Trade (PBIT) is now said to be in place to facilitate the foreign and local investments. Contrary to clear vision of top leadership about importance of private investors in kick-starting industrial activities, it seems that everything is not supportive of the policy-level vision.

The bottlenecks due to unknown reasons and procedural delays are against industrial activities.

For example, the Punjab government is believed to be sitting on more than 80 applications from different companies for the grant of mining lease.

Some of these applicants are vying to build large-scale industry in the province.

Prominent among such applicants are the British Asian Precious Minerals Limited and Lucky Cement Limited, one of the country’s largest cement manufacturers and exporters.

These two examples are sufficed to elaborate the state of investment affairs in the province, which is touted as a hub of good governance.

The two investors had sought the provincial government’s permission, respectively in July and August 2013, to get a limestone mining lease and build a cement plant in district Chakwal.

Thanks to lengthy governmental procedures, the two companies, with billions of rupees investment plans, are awaiting licences.

Investors are eager to build industry in the province, but they are not given the opportunity to do so due to reasons known to top officials in the province.

Moreover, the unpromising investment environment left the two investors with no option but to explore litigation routes with Asian Precious claiming to have already invested around $16 million in exploration and investigation works.

“It is incomprehensible that the investors which intend to invest in Punjab are discouraged by one or the other way,” a company’s official said.

Overseas Investors Chamber of Commerce and Industry President Khalid Mansoor, in a statement, urged the central and provincial governments to proactively address all the issues hindering investment and economic activities.

Pakistan is already far from an attractive investment destination. Punjab that has earlier been considered as

relatively attractive place for investment within the country is now

apparently started to turn sour for the investors. Such unwelcoming

development may lead to further deterioration of investment climate in the country.

World Bank, in the 2018 Ease of Doing Business report, rated Pakistan at 147 out of 190 nations. In 2010, Pakistan ranked 75. Pakistan’s standing at regional level is even worst.

The report ranked Pakistan at the sixth place amongst South Asian countries, below Sri Lanka, Maldives, Nepal, India and Bhutan while alone Bangladesh and Afghanistan are trailing behind. India ranked 100, Sri Lanka 111, Nepal 105, Maldives 136, Bhutan 75, Bangladesh 177 and Afghanistan 183. India has carried out the most reforms in the region in the past 15 years, with 37 reforms, followed by Sri Lanka (22) and Pakistan (19).

Reforms and simplification of processes are the best tools for ease of doing business anywhere in the world. The uncalled-for interference in pure business matters are believed to be a major blow to smooth business and investment activities.

Such bottlenecks will never allow smooth sailing for investment ventures and thus continue to hurt business sentiments in the country.