Boost­ing Pak­istan’s pri­vate sec­tor by un­lock­ing the true po­ten­tial

Enterprise - - Cover Story -

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.

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