PM should resolve the brewing impasse


Business people supported Pakistan Muslim League (Nawaz) as a political party in the last elections in large numbers because they felt that Nawaz Sharif being a scion of a noted business family would display a better appreciation of their needs and difficulties, and be more accommodative/supportive of their demands and also provide a higher degree of protection.

On the other hand, they viewed Pakistan People’s Party (PPP) as being excessively pro-labour. But it now increasingly appears that PPP government under Asif Ali Zardari was strongly sympathetic to business community’s demands.

Prime Minister Nawaz Sharif has left the entire job of political and economic decision-making to his Finance Minister Ishaq Dar. And, he does intervene only in response to Finance Minister’s desperate calls. Dar himself has interacted with traders and industrialists – as well as with the farmers’ representatives. And, being a chartered accountant and an auditor he is, as he should be, familiar with the shenanigans of Pakistani businesses.

Nawaz Sharif after assuming the reins of government took nine months in appointing a Minister for Textiles. As the senator-ministerial appointee has now retired from the Senate – the country does not have a textile minister since March this year.

Even when there was one, members of Prime Minister’s ‘kitchen cabinet’ could over-rule him. So it may be worthwhile if the prime minister looks into the possibility of appointing a Textile Minister from among his kitchen cabinet or a battery of trusted lieutenants and asks him to focus exclusively on the cotton-based textile division’s policy to reverse the falling trend in exports, especially the textile sector.

The government strictly needs to act as a facilitator for businesses. We are cognisant of the fact that local businessmen do evade taxes and abuse incentives. However, all governments whether khaki-clad or civil have to cumulatively share the blame for this. The real reason is the government’s imposition of a Final Tax Regime on various businesses.

And, collecting income tax, at the customs stage, for ease of collection, rather than on the real profit earned by businesses. This has led to a minimum tax on turnover as well as collection of advance tax on consumption of electricity and imposition of very high surcharge on natural gas.

This deviation is because of the political leadership’s heavy reliance on the bureaucracy, instead of their own think tanks, for proposals to improve the revenue collection mechanism because our politicians rarely do the homework needed for better policy formulation. This is the root cause for a consistent failure of governmental policies regarding revenue collection.

The higher revenue collection so far has been possible in quantum terms, through indirect tax and collection methodology of Sales Tax collection surcharge on petroleum products and natural gas supplied instead of a fair equitable direct (income) tax. All this has resulted in digging the nation deeper into a hole from which it is increasingly becoming more and more difficult to get out of.

As a result of this revenue collection failure, coupled with unimaginative views on the PKR parity and a consistent rise in electricity and gas tariffs, businesses are worried as they become increasingly uncompetitive with regional competitors and their trade bodies are now at loggerheads with the present government.

The Prime Minister’s intervention at this stage is needed to end the present turmoil faced by the major component of export sector. He will be required to meet the challenge head on as exporters, who were complaining and citing their difficulties prior to the FY16 Budget, now appear to have passed that stage and are planning to shut down their industries unless the government reverses the imposition of new levies.

In a global context there should be no taxes or levies on exports. Thus, all kind of exports need to be zero-rated. However, due to misuse and flagrant violations that are prevalent in the system by unscrupulous elements, authorities have taken a route where even the genuine exporters are feeling the pinch. This is indeed sad. But businessmen also need to share the load equitably with other segments of society.

The government also needs to understand that it cannot print dollars and cannot depend on aid and loans indefinitely. There is, therefore, a dire need to raise its export earnings as well as investment to GDP ratio for achieving real growth. Thus, there is a need for the leadership of all political parties to get together and put an end to the gamesmanship with regard to the economy.

Furthermore, Finance Minister Dar, PTI MNA Asad Umar, PPP Senator Saleem Mandviwala and MQM Senator Nasrin Jalil should explain to their colleagues why Pakistan needs to reduce its fiscal deficit and keep inflation within a range. Economic policy needs be consistent and should be formulated with a long-term view to restore confidence of existing businesses.

Only then would we be able to entice new investors to come forward. The driver of the train can change but it must proceed in the set direction. The tendency to undo the good done by the predecessor must end. The train must move towards its determined destination on the set course.

The speed could change with change of priorities. But the aim to achieve economic stability and a seven percent plus growth over the next decade needs to be our goal. The real reason why bureaucracy depends and trusts multilateral institutions, such as the IMF and the World Bank is because businesses in the past have made false promises and not delivered.

These trade bodies have all along clamoured for relief and complained about failure of the system to work for the larger interest of the country. However, it has been seen over the years that the rich have become richer and income inequalities in the country are on the rise. Getting angry with business representatives is no solution. Politicians need to explain to trade leaders why they feel that businesses are not growing instead of appearing to be at loggerheads with them.

After all, whether good or bad, local businessmen are a valuable resource. If private sector has to be the engine of growth then their genuine needs should be met without any further loss of time. It should be encouraged and supported to speed up development in the country with a view to arming it with an ability to project creation of new job opportunities.