Economy paying the price for poor governance

LAHORE: One of the reasons for the high cost of doing business in the country is the absence or thinness of the writ of the government as it has given rise to many counterproductive menaces ranging from unchecked power/gas theft to extortion.

Power cost, for instance, in Pakistan is almost the same as that in neighboring countries; however here the government is forced to levy an equalisation surcharge of over Rs3.40 per unit to cover of the leakages in the system. If this surcharge, termed as theft or corruption surcharge by businessmen, is deducted, the power tariff would be the same as in India or Bangladesh. The most painful aspect in this regard is that instead of declining, the power sector inefficiencies have continued to increase in past 20 years. This shows no serious efforts have been made to reform the system. It also lays bare the beneficiaries of this loot of hundreds of billions of rupees every year are very influential. It appears that each of them gets their due share from this large pie.

The high cost is borne by domestic, commercial and industrial consumers. The commercial suppliers pass on this cost to the consumers. The industries also pass on this cost to domestic consumers but lose the export markets where they have to compete globally.

The gas losses from distribution networks were nominal at the start of the century, but since then have been rising continuously. More than 10 percent of the gas injected in the distribution system is unaccounted for. The consumers have to pay the penalty. It is worth noting the imported regasified liquid natural gas (RLNG) is supplied mostly to the industries through dedicated networks where theft is not possible but they are forced to pay 10 percent higher price to cover the losses incurred by the gas utilities. With the RLNG prices increasing globally the theft penalty is also increasing accordingly. The government is doing nothing to stop this rot and reduce the cost of energy for the industries.

Two decades back there was no concept of hiring security for businesses. The security provided by the state was deemed enough to operate businesses with peace of mind. Now we see security guards at most of the retail and wholesale networks. The industries have their own security system. Even after spending billions on security of operations the threat still persists. The business tycoons have to travel under the thick blanket of private security in their own country. This has increased the cost of business substantially. The government lacks the writ to control the criminals and security has to be ensured privately. This is not so in India or Bangladesh.

While the Punjab businessmen face high cost of the RLNG, the businessmen operating in Karachi, though getting gas at much cheaper rates, have to cough up heftly amounts of extortion money to stay safe. The extortion has only been partially controlled.

Businessmen fear that once the vigilance by security forces is withdrawn the extortionists would resurface again with an even louder bang.

The businessmen in Sindh also pay very high price for water. There is no scarcity of water in the province or Karachi but the water supplies are in the hands of a cartel that flays the consumers for profits. For industries these supplies cost a fortune because water is the lifeline for the operations of this sector. The industrialists in India, Bangladesh or even Punjab may have never heard of it. The cost could be minimised if the government musters the courage to eliminate these mafias. The above and many other similar higher costs are further increasing the burden on the industries. These costs are not endured by businesses in competing economies. They may be facing red tape or may be paying speed money for faster movement of their files like in Pakistan. But they are not confronted with problems of ever increasing costs due to absence of the writ of their governments.