Growth driven by private sector

of another country similarly placed economically but with a more credible history. This is reinforced by a government having a short time horizon, as in our case. It is patently ridiculous for the government (which must take the lead in signalling direction) to expect the private sector to take a long-term view while regarding itself entitled to take a shortterm view, whatever the reason.

It takes time for the philosophy of a competitive economy based on merit rather than patronage to get entrenched.

Since incentives for strict and fair implementation are weak, officials can openly violate internally issued interpreta- tions of laws and rules or refuse to accept rulings of superior courts on the subject — without much fear of being held accountable — at the behest of, or in collusion with, the political and bureaucratic leadership, despite a more assertive judiciary and media. Persistent issues of law and order, political instability, poor implementation of policies, frequent policy changes (even if prompted by the need to correct a faulty design) and the high cost of doing business (resulting from corruption) contribute to weak investor sentiment in Pakistan.

This sentiment is also affected by an inhospitable regulatory environment, the lack of transparency in decision-making and failure of legal and judicial systems to enforce contracts and resolve disputes in an efficient and timely manner.

The high cost of contract repudiation increases costs for investors in two ways. First, it increases the risk for larger investments. Secondly, it forces firms to diversify their operations into activities which are not their core competence, thereby lowering the efficiency of investment.

Since it takes years to get disputes resolved through courts, contract violators have much to gain by getting a case stuck in the queue. As a result, business transactions tend to be restricted among parties that have developed a degree of trust in each other’s business ethics. Development of trust requires long-term stable interactions. If trust cannot be established, contracting remains restrained, the cost of conducting transactions remains high thereby discouraging business development and growth.

While these factors disincentivise investment, hindering prosperity and growth of the private sector and economy, additionally there’s the general mindset of the bureaucracy.

This views private entrepreneurs as making money by exploiting others and stems partly from the value system and