Boosting Pakistan’s private sector by unlocking the true potential
The American Business Council (ABC) Economic Summit 2011, titled ‘Unlocking the true potential. Boosting Pakistan’s private sector’ held in Karachi during September invited experts from various fields and backgrounds, including Shaukat Tarin, former Finance Minister, Syed Muhammad Shabbar Zaidi, Advisor to the Federal Board of Revenue, Saleem Mandviwalla, Chairman of the Board of Investment, Nadeem Naqvi, Managing Director, Karachi Stock Exchange and Jehangir Khan Tareen, MNA. The experts deliberated on how to make the private sector in Pakistan more vibrant since the national economy is not growing in proportion to the country’s burgeoning population.
Economic growth is primarily driven by government polices and their ability to create a conducive business environment through robust infrastructure, transparent competition and protection of intellectual properties and personal assets. The summit stressed on the need for shifting the organized and unorganized private sector paradigm and moving Pakistan on the path to strong double-digit growth by helping and assisting the private sector to grow proportionally.
In his welcome address, Humayun Bashir, President ABC, highlighted the support of the private sector in times when the government faces difficult economic challenges. He said that the role of private sector is important for economic growth, as it is the biggest employer in the country. It has 77 percent share in the banking sector, 100 percent in the telecom sector besides a significant share in cement, textile and other sectors.
Saad Amanullah Khan, Vice President ABC, while sketching the overall economic situation in the country listed crucial facts contributing to the country’s dismal economic conditions that need to be addressed on priority basis. He pointed out that Pakistan’s GDP growth has been erratic over the last 5 decades and quite dismal over the last 3 years (averaging 3.2 percent per annum). “The world is leaving us behind as countries like China and India have posted GDP growth rates of 9.7 percent and 7.9 percent, respectively, over the same period,” he pointed out.
He said that after reducition of the poverty rate by nearly half during 2000-2007, it has started to climb up again. Unemployment, which had declined during that time period, has started to creep up since 2007 and inflation has been in double-digits for nearly 12 quarters. This has made life extremely difficult for the general public. There is no clear long-term vision and the government economic team has had 8 key changes in the last 2 years; not a good sign as consistency of policy and clarity in direction are two critical factors for existing and foreign investors.”
Amanullah’s presentation highlighted the underdevelopment of industry and services sectors as the first factor that hinders the expansion of the private sector in terms of GDP percentage. In 80 percent of the top 30 economies in the world, these sectors account for 90 percent of GDP. In order to achieve the same level, the industry and services sectors in Pakistan need to be grown by 2.5 percent of its current size. Pakistan is now challenged to find ways of tapping this huge potential and driving disproportional growth of this underdeveloped private sector.
The second major factor mentioned was the disorganized and undocumented private sector. In order to export or to gain access to international markets, companies must be documented. By staying undocumented, these companies continue to grow only locally as they pay no taxes, do not follow the rules (under invoicing, unfair market practices, etc.) and, hence, are not competitive vis-à-vis global competitors. According to the latest issue of the World Economic Forum’s “Global Competitiveness Report”, Pakistan has dropped by 22 points in its 2011 ranking and is now ranked 123rd out of the 144 countries tracked.
To arrive at workable solutions to these major problems faced by the private sector, the three key areas that the experts focused on are the 3Cs:. What government policies will drive ‘corporatization’? What do we need to do to become more ‘competitive’? And how do we gain the ‘confidence’ of local businessmen and foreign investors?
From left: Nadeem Naqvi, Saad Amanullah, Humayun Bashir, Saleem H Mandviwala, Shaukat Tarin and Muhammad Shabbar Zaidi.