Saturday, November 22, 2014
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Opportunities for Foreign Investment and Trade in Pakistan
While citing the importance of trade in a country’s development, absence of any provision in Constitution of Pakistan regarding trade and commercebrings shock. Being one of the important trade routes of the world, Pakistan has traditionally been a center of exchange for cultures with no such legal provision in the constitution. Hence, realizing the importance of such lack there is a dire need of policy recommendations to government towards seeking amendment in constitution of Pakistan for legal provisions on trade and commerce specifically. Having such legal provisions in the constitution of Pakistan, would serve for a more prosperous and developed Pakistan.
In spite of arguing in favor or against of formalizing the informal economy,even though there is no consolidated independent study on doing business in Pakistan, the World Bank and the International Finance Corporation Survey on doing business (2012) provides a rich snapshot of the barriers encountered by businesses in the formal sector in Pakistan. The report is based on in-depth evaluation of law and regulation and input form more than 5000 government officials, lawyers, business consultants, accountants and other professionals involved in the legal and regulatory framework. As per theresearch, doing business in Pakistan’s formal economy is an activity that is placed at a lowly 105th out of 183 countries. Getting electricity at 166th rank is highly un-attractive for investment in industrial sector while enforcing contract is rated at 154th which makes Pakistan very prone to deceptions and frauds. The picture in informal sector is very different. In developing countries entrepreneurship largely occurs in informal sector. But entrepreneurship always follows opportunities and without the presence of viable businesses opportunities the informal sector will cease to exist. The state sanctioned opportunities, though theoretically available to all citizens, are highly influenced by political dimensions and a large majority of entrepreneurs and workers are compelled to seek opportunities in the informal sector. It is thus recommended that efforts directed towards formalizing the informal economy be directed towards understanding the dynamics of opportunities occurring in the informal. Universities and other training institutions should focus on tactical domain and personal domain to enhance the managerial capacity of the individuals while bolstering their personal capacities towards value creation. The performance of educational institutions must be evaluated through facts and figures about relevancy of managerial capacity they produce and the level of commitment they inculcate in the individuals. The model is not only relevant to business entrepreneurs but also useful in terms of career management. All students must be given the habit of self-reflection so that they can evaluate their own capacities in terms of productivity and marketability. The state machinery together with civil society institutions and researchers must contribute in formation and employment of a robust framework that can unearth opportunities in the informal sectors. Clearly, it is the strategic domain which can prove to be the best marketing tool for presenting Pakistan as an investment and trade friendly country.
Acknowledging the troublesome issues of formal sector, in spite of strong incline towards informal economy, we should remain focused on the point of encouragement towards formal sector at all costs. Informality has been labelled in varied ways such as ‘unregistered, hidden, shadow, underground and, in a more restrictive sense black, economy’. A business will be considered in formal economy if both its process of production and the final end product are considered legal. However, if process of production and distribution is not legally registered but the end product is completely legal then the business will be considered a part of informal economy. Pakistani economy is largely made up of informal sector. Although the exact measure of informal economy is not known but it has been estimated that in emerging and developing economies, at least 60% of workforce is informally employed. The size of informal economy is projected to further increase due to recent economic crises in the country. The deteriorating law and order situation in the country has added to the economic depression bringing Pakistan to the brink of economic collapse. Henceforth there are internal security threats which primarily draw impact on foreign investment in Pakistan. Sound law and order situation, political stability, macro-economic stability and removal of bureaucratic hurdles, are the highlighting important areas where Government of Pakistan should take steps on priority basis to enhance foreign investment in the country. Before arguing in favor of or against formalizing the informal economy it is important to understand the difference between legal and legitimate.In extreme cases minority groups who hold an opposing view of legitimacy to what is considered lawful by the state lead to armed violence and terrorism.
Pakistan today meets most of the essential requirements which the foreign investors and traders are looking for. Macro-economic stability, deep-rooted structural reforms, high standards of economic governance, outwards looking orientation, liberalized trade and investment regime, easy access to policy makers, low production cost, sophisticated financial sector and its location as a regional hub makes it a highly attractive country for business and investment. It should be realized and well understood that without economic development we can neither progress nor develop as a nation, country or state. Admittedly terrorism is a menace which has spoiled our entire social order but yet it is a challenge which needs to be dealt with in such a manner that on one side we should restore peace and on the other side we require to institutionalize our economy, business trade and commerce. There is a dire need to identify the mechanism which may create an environment of secure trade and business through import and export mechanism.Pakistan has the capacity and potential to grow progressive economy and to make a sustainable and batter place in the international market and for doing so it must overcome its fear of security and survival. Let us work on this preposition together.
We as a state require progress and development in the country whereas we can neither progress nor develop unless there is a smooth flow in our trade and financial activities, therefore, though the initiative has to be strongly taken on ground to engage stake holders and policy makers for developing an institutionalized infrastructure and policy mechanism to assure consistent operation in trade and commerce activities with durable impact.Our banks, financial institutions and business community shall not leave everything to the sweet will and discretion of our politicians and public servants or even policy makers who may have some edge due to their positions or placements but do not possess equal competency as compare to those traders or business community who though their practical competency have acquired batter excellence in the field, however we need to interact fairly without any compromise on smooth flow of our trade or commerce.
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