How PM Imran Khan can make his China visit successful

Prime Minister Imran khan will be leaving for China to attend opening ceremony of Beijing Winter Olympics. Chinese leadership has scheduled meetings with Prime Minister of Pakistan to discuss bilateral relation. Government is busy to formulate comprehensive agenda for fruitful interaction. On January 26, the PM held meeting with top civil and military leadership to deliberate on possible agenda for the visit. The CPEC was major focus of the meeting along with other subjects.

In the anticipation of visit, Pakistan initiated process of preparations much earlier. Pakistan concentrated on two areas — improving business environment and security of CPEC. To improve business environment, the government has accelerated reform process. We can observe a new vigour on the part of government to inject efficiency in industrialization process under the Special Economic Zones (SEZs). Board of Investment (BOI), being secretariat of industrial cooperation, has expedited efforts to devise innovative or efficient systems to facilitate the industrialization.

However, to make the visit successful, the government will have to concentrate on real problems the business community is facing. The most important issues are complicated institutional framework, complex and lengthy procedures, corruption and political games among the parties. Although, EODB ranking of Pakistan had improved but these problems are still haunting the country. For example, it takes 113 days to get electricity connection (almost 4 months), 125 days for construction permit (more than 4 months) and 105 days for property registration. The 18th amendment has further complicated the institutional framework. In this context, One Stop-Services is a good idea, but it is not ultimate solution.

Thus, real task of government should be to tackle inefficiencies in system, knock out complications and bring down the number of days for all services. It is proposed that the time limit should not exceed 15 days for all services.

Second, tax system is another problem, which really bothered the investors in industrial sector. First, industry has to bear major burden of tax revenue. Services and Agriculture sectors are not paying taxes according to their share in national economy. The tax system is very complicated. There are 35 departments or agencies in the taxation system. On top of that, the provincial tax systems and legal requirements further aggravate the situation. Lack of harmonization of tax policies of provinces is one of the biggest bottlenecks to attract foreign direct investment. Inconsistency is in taxation policy is also impacting the trust of business community.

Therefore, the government should harmonize taxation policies of provinces in line with national policy, and ensure no changes in policy for certain time period. Instead of having various tax agencies, a national tax authority should be created. The concept and working of the authority have been explained by Dr Ikrum in a research paper for PIDE.

Third, the entire insolvency and dispute resolution systems need change. These are extremely complicated at this point of time. The most problematic part is the involvement of multiple institutions, departments and agencies. For example, bankruptcy process, on average takes 2.6 years and success rate is only 42%. Thus, BOI will have to devise tools, which can make the process easy. The government can create single institution to perform the job.

Security is another area on which government is working diligently. Since the Dasu attack Pakistan is putting all efforts to refine the security framework related to CPEC and Chinese investment.

In addition to above actions, the prime minister should also ask his team to prepare a progress report on MoUs signed during his last visit to China. It will be a real positive indicator for the business community. They will consider Pakistan as a serious country to implement MoUs. It will encourage them to sign new MoUs. However, the government should focus on converting the already signed MoUs into investment agreements rather than looking for new MoUs.

The PM should also order his team to prepare comparative analysis of Pakistani SEZs with other potential competitors’ SEZs. The comparative analysis of SEZs will facilitate industrialist to make a decision for investment in Pakistan.

Lastly, the PM should carry the proposed reform list and new security framework with him and share it with Chinese leadership and business community. He may also also seek suggestions from CPC leadership and government officials as China has rich experience to design and implement the reforms.

In conclusion, the Prime Minister should focus on sharing concrete plans or list of actions. A good number of Chinese companies are working in Pakistan. They know the ground realities, status of reforms and state of development of special economic zones, very well. So dream selling should be avoided.