ISLAMABAD:
Economic rationale and global investment analysis suggest that attracting investment hinges on fulfilling three key prerequisites.
Firstly, potential investors scrutinise a country’s business environment to understand its functioning, registration processes, facilitation mechanisms, bureaucratic attitude and governance system.
Secondly, investors seek policy continuity and implementation stability, avoiding places where policies frequently change. Lastly, security ranks as a top priority for investors, who assess both local and regional situations for potential threats.
In this context, the Special Investment Facilitation Council (SIFC) is seen as an excellent initiative to address all such concerns. The SIFC has been set up in an effort to ensure continuity of policies, provide timely facilitation, remove bureaucratic hurdles, and offer a safe and secure environment to investors.
It is anticipated that the army’s role in SIFC will help ensure continuity of policies, simplify their implementation and provide foolproof security. With a smooth execution of policy actions, Pakistan will be able to attract critical investments.
However, an analysis of the economic history of Pakistan shows that hassle-free execution of policies has always remained a major concern. Investment has not arrived mainly due to weak execution of policies.
To make SIFC a success story, Pakistan must draw lessons from the past, especially from the CPEC Authority. This way, previous mistakes can be avoided and a refined policy can be devised for the execution of perceived plans.
Key lessons
In the past, it’s not that Pakistan did not formulate excellent policies that could cover all critical areas of the economy and security. What it lacked were concrete action plans to back up these policies. As a result, business environment could not be made conducive enough for investors.
The most important challenges that need to be addressed included complicated institutional frameworks, complex and lengthy procedures and rampant corruption.
Though Pakistan has made decent progress in recent years on ease of doing business, real problems still exist. For instance, to register a company, an investor has to deal with different agencies while foreigners also need to acquire no-objection certificates.
It takes 113 days to get an electricity connection, 125 days for a construction permit and 105 days for property registration. It is really a time-consuming process. These time frames are according to the book, but in reality, the process is delayed for months and years.
Pakistan’s bureaucratic system is highly inefficient as the business community always complains about corruption. However, corruption is not a one-way process.
Secondly, the provision of a one-window facility has always been the slogan of successive governments. However, businessmen are unable to find any such facility. They are compelled to deal with multiple windows and the 18th Constitutional Amendment has further complicated the process.
Thirdly, the tax system is extremely complicated where 35 departments or agencies are involved. On top of that, provincial tax systems and legal requirements further hamper efforts aimed at business development and industrialisation.
The lack of harmonisation of provincial tax policies is one of the biggest bottlenecks to attracting foreign direct investment. Policy inconsistency is another problem that dents the trust of businessmen and industrialists.
Moreover, the services and agriculture sectors are not contributing the due taxes while the industry is forced to bear the major tax burden after the common man.
CPEC case study
The case study of the CPEC Authority highlights a few lessons, which are the most relevant for SIFC.
The CPEC Authority was a facilitating and monitoring body, which did not have any decision-making or implementation powers. It was always required to look towards politicians and the bureaucracy for arriving at any decision, which weakened its ability to make vital contributions.
The bureaucracy kept all powers in their hands, restricting the role of the CPEC Authority. Also, the government kept on changing the status of the CPEC Authority and the 18th Amendment devolved most of the powers to provinces, hindering the smooth functioning of the authority.
In this backdrop, if Pakistan wants to make SIFC a success story, it will have to resolve all these problems. It will have to make sure that a one-window facility is offered and all processes are streamlined. We can also learn from the reforms undertaken by Saudi Arabia. It takes only 30 minutes to register a business there, for which online platforms are available.
To achieve that, Pakistan will have to limit the role of the bureaucracy and get rid of outdated technocrats and think-tank experts, who largely prefer to follow the guidelines of donors.
Also, the SIFC should have decision-making and policy implementation powers. For that purpose, the council should be headed by a person with the status of federal minister and constitutional cover to perform his duties. It should not be an additional charge for any minister or anyone else.
The SIFC head should make and implement decisions under the direct guidance and supervision of the prime minister. Moreover, there must be a strong evaluation and oversight committee to assess the council’s work. In this regard, a high-profile monitoring and evaluation committee should be constituted.
The committee should comprise heads of five major political parties, services chiefs, the chief justice, and headed by the prime minister. This composition is being proposed while keeping in view the diversity of SIFC programmes and the political dynamics of Pakistan.
The committee must meet once a year to review the progress on SIFC programmes and make necessary decisions. However, the committee must not have any powers to interfere in day-to-day affairs of SIFC.
It is clear that without reforming the governance and business environment, we cannot move forward. It is not a matter of choice; rather it is the need of the hour where the country must have to act without delay.
It is time to deliver on the ground as mere speeches will not do any good. If Pakistan fails to undertake reforms, the SIFC will not be of any use, like other such organisations in the past.
Lastly, the SIFC should not overemphasise the role of the private sector and undermine state-owned enterprises (SOEs). State units are extremely important, if they perform efficiently, as they bring revenue to the state while the private sector only looks after the interest of individuals. Thus, it is advised that SIFC should not go for privatisation of SOEs, rather it should try to improve the functioning of these units.
The writer is a political economist and a visiting research fellow at Hebei University, China
Published in The Express Tribune, September 18th, 2023.
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