Home »BR Research » Miscellaneous » Expanding, not levelling the playing field

When it comes to competition, businesses in Pakistan have often taken the road of seeking protection from the government time and again in order to “level” the playing field, as it is known.

The question always comes down to how much and for how long until this illusive level playing field is established. In fact, this is what has made import policy over the years problematic in Pakistan—not only to keep businesses at bay and it being the easy way out but also to raise revenues—import duties have remained high. But over the years no tariff or non-tariff measures on imports or barriers to entry has helped any industry to grow to scale; and perhaps those which managed to grow (think cement), have done so at the expense of consumer welfare.

Is it any wonder then that Pakistan does not have industry-specific policies or even an industrial policy that builds the roadmap for the industry’s growth and offers time-stipulated incentives and protective measures with sunset clauses? Its hard work to come up with such policies but it is also necessary. Especially after devolution, and with so much of CPEC-adjacent growth expected, provinces ought to be alerted to this widening gap that needs to be bridged.

From the businesses perspective however, it is important to distinguish between seeking unnecessary measures to limit competition and legitimate regulatory or remedial actions to protect them from harm. In the case of imports, many industries want the government to increase tariffs or levy regulatory duties to curb massive imports that are apparently hurting them (think cement and steel).

In the case of steel, the said injury came from Chinese dumping of steel products across the world including Pakistan. Such was tackled by the National Tariff Commission (NTC) in the form of anti-dumping duties on several items.

On the other hand, the government decided to retain the “temporary” regulatory duties imposed on steel items for an indefinite period of time, which adds distortion to the system, and gives unfair advantage to many steel makers.

Again in this example, there should be a national steel policy that provides targeted incentives and protections to the industry for specific period of time. This requires a lot of coordinated effort on the part of the industry and the government which, clearly, neither have the motivation to devote time on.

Cement manufacturers lately have been speaking against dumped cement from Iran that’s cheaper and possibly below quality. They feel there should be an anti-dumping duty on cement imports—which they should take up with the NTC by filing an application without hesitation. On the other hand, they also want the government to increase the import duty which makes no rational sense.

If the quality of the imports are in question, as we said in an earlier column (Read full: Why we should embrace competition), the Pakistan Standards and Quality Control Authority (PSQCA) needs to be mobilized. And the burden of the responsibility then falls upon that government body. The cement lobby should push the government until it listens.

Governments are often not transparent, are heavily bureaucratic, and overwhelmingly inefficient. We all get it; Pakistan is a glaring example of this. As more layers of ministries and government bodies exist in the federal sphere, less work is actually done, less effectively. One can keep criticizing the government, but it’s pedantic and redundant to do so. Businesses must fight for the right causes. Fight for government efficiency, rather than to use that to their advantage.

Most of all, instead of seeking a “level” playing field, businesses should be thinking about expanding the playing field. Some sectors and businesses have started to think along those lines. More on that in this column next time.

Copyright Business Recorder, 2017

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