PESHAWAR: A study conducted by National Influencers, a think-tank of the newly merged districts (NMDs) of the erstwhile Federal Administered Tribal Area (FATA) has shown that all factors related to ease of doing business in the region have deteriorated after the merger.

The study explores the influence of the Constitution of Pakistan on crush plants and mining operations in the newly merged district (NMD) Khyber of the Khyber Pakhtunkhwa. The region, along with six other districts has been regulated under British era Frontier Crime Regulations (FCR) since 1901. The region was merged with the province of Khyber Pakhtunkhwa in 2018 with the hope of initiating a new era of prosperity to bring it at par with the rest of the country.

During the study, open ended interviews of a total of 50 individuals including local businessmen, workers, owners and political representatives have been conducted. Representatives of three most relevant departments i.e. Mines and Mineral Department, Industries Department and Environmental Protection Agency were included amongst them.

The study shows that increasing footprint of regulatory is perceived negatively by the local stakeholders and is clearly in favor of the premerger regulations. It says that starting a business related to mines and mineral industry or setting up a crush plant has become tedious, time consuming and very expensive as compared to the premerger era and might take more than six months to go through all approval for a mining lease and/or crush plant license. Getting electricity connection is now more expensive due to additional taxes that were not a part of the premerger era. The situation regarding getting credit has remained the same as no mentionable credit lending facility has been extended to crush plants and mining operations.

The payment of taxes has become a very contentious issue due to constitutional tax break promised to all NMDs. However, the government departments insist on charging loyalty and excise duty and argue that it is not a tax. Furthermore, they insist on collecting these payments while the court case is behind heard. Additionally, the stakeholders expressed dissatisfaction about the assessment of excise and royalty. The premerger situation was much simpler, and a single royalty was levied and paid with ease.

The study shows that contracting with the government and enforcing contracts has become a pain point for the stakeholders. The government insists on getting the mines leased through a tedious process; however they are unable to enforce their lease because local inhabitants have the physical possession of the area and they do not accept government jurisdiction without taking them on board.

Furthermore, the mine owners perceived that they are being forced to enter joint venture (JV) with external companies on very favorable terms and surrender the right to their previous resources

The post-merger scenario has shifted starting and legalizing businesses from one-window operation to a web of regulatory bodies. Entrepreneurs must navigate a complex maze to obtain approvals, licenses, and operational permits. They must make various types of payments in the name of policy, excise and visitation fees of government officials to keep their businesses operational.

In wake of the findings of the study, it has called for making policy recommendations on two major fronts. Firstly, to address the post-merger loopholes and inconsistencies in laws that stifles the business environment through policy reforms. Secondly, awareness programmes and training must be initiated to educate the stakeholders and decrease their negative perceptions, fear and pessimism regarding registration and becoming formal.

The study has suggested several urgent policy reforms to stop further deterioration of the situation and build a positive future through creation of gradual implementation plan, check on corruption, one-window operations, swift approval and licensing, conflict resolution and decriminalize business violations. The stakeholders have an increased perception of corruption among government officials. They argue that government regulations exist to mint money from them and extra-ordinary hurdles are created for them only to be softened after making underhand payment. The stakeholders are not in favor to get themselves register and in addressing these negative perceptions, it must be realized that the lack of education and no contact with formal government structure over the last 75 years has resulted in high mistrust.

It further states that stakeholders are not equipped with knowledge to deal with documentation requirement. Thus, once the policy reforms become visible through concrete on ground steps with visible benefits to the stakeholders, proper awareness and training programmes must be launched. A programme should be offered on a continuous basis and should be based on addressing the practical difficulties faced by the stakeholders.

Copyright Business Recorder, 2023

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