• Next is for MoI&P (Ministry of Industries and Production), MoITT (Ministry of Information Technology and Communication), MoC (Ministry of Commerce) with MoF&R (Ministry of Finance and Revenue) ensuring environment to encourage Product Development and Improvement, Cottage industry and SMEs by facilitating them for value addition, establishing a conducive process for start-up companies to raise funds through market and without need to establish holding companies abroad with goods and services export growth target of 20% of GDP (9% 2021, World Average 42%) by 2027.
They need to rapidly be creating SEZs (Special Economic Zones) with provinces (Value Added Export, Relocated Industry, Sports, Minerals, IT, Engineering, Chemicals, Auto parts, Surgical) and develop tourism along the coast of Balochistan and in GB with right to source energy directly from producer internationally or locally using third- party access.
This requires merger of TDCP (Tourism Development Corporation of Punjab), TDAP (Trade Development Authority of Pakistan), SEZs (Special Economic Zones), PBIT (Punjab Board of Investment and Trade) organisation into Ministry of New Ventures by merger of MoI&P, MoITT, MoC.
Base Policy with incentives for all industries needs to be in place with continuity ensured and ambiguities removed. SIFC (Special Investment Facilitation Council) and cabinet can approve additional incentives. The numerous agencies need to be merged, their processes improved and ‘controls’ rationalized for improving ease of business.
Power Division and MoI&P are to present a proposal to address the issue of surplus power capacity by developing industrial zones and resolving net metering issues in guess what time frame? 30 days!
• MoMA (Ministry of Maritime Affairs), MoI&P, Ministry of Railways, Ministry of Communications and MoE to define a 30-year infrastructure implementation roadmap and benchmarks for exports and energy imports based on threshold of exports and remittances >2.0X imports, facilitate economic diplomacy and reduce Pakistan Railways annual ~$45bn subsidy within 5 years by increasing freight trains, removing anti-competitive clause in White Oil Pipeline (WOP) and ensuring that MTT-WOP does not have similar restrictions.
• MoD, MoDP, Ministry of Privatisation and BOI merged with MoFA (Ministry of Foreign Affairs) to focus on regional play that regains relevance of country through concentrated economic diplomacy as we are losing the “war” due to today’s battle of economies and now requires a phased adjustment, starting primarily with our neighbours. It is necessary as we move towards Pakistan 2047 with our staggering FDI requirements requiring outsourcing, G2G transactions, multilateral and bilateral funding.
• The Prime Minister is providing focus as Chief Executive of a large MNC, to reduce cost of operations, taking the difficult economic measures, ensuring actions by Establishment Division to consolidate roles, undertaking merger of responsibility and thereby eliminating redundancy in Government structure; reducing bleeding in 206 SOEs by rebuilding and revitalizing through PIDC (Pakistan Industrial Development Corporation) 50/60 SOEs that control over 97% of the assets held; pursuing vertical integration of Discos with generation plants rather than initiating green field development plans over the next 3 years.
Reviewing the role of judiciary in commercial matters with a viable and timely contract dispute resolution mechanism definition, process improvement and that there is no judicial activism as seen in the past, viewing that politics does not replace collaboration and that a toxic environment does not evolve and finally strengthening of defamation, encouraging governance, retribution for false cases, discouraging media trials that are aimed at victimization with accountability that does not hinder development and corrective measures
• SIFC by looking at the bigger picture is to stay focused on ensuring a deregulated market with strong empowered regulators independent of political interference and with enforcement authority when industry’s self-monitoring fails; executing confidence-building measures, advocating making profits is kosher and that investments are not from money laundered funds; walk the talk by ensuring continuity of policies, transparent procedures and contract award with changes effective prospectively and payments made as per contractual obligation, defining consolidated and fewer policies with across-the-board performance-based investment incentives, limited number of permissions and encouraging new approaches and sectors for growth.
These should form Charter of Economy with drafts prepared at lightning speed and presented, discussed and closure obtained from Senate.
And then engaging possibly with PIDE, FPPCI, SDPI, OICCI, ICAP, PBC, Huzaima & Ikram and others to prepare a detailed action plan inclusive of IMF agreement terms for bipartisan approval in the National Assembly.
Will as a result, FDI oblige? Will P3P and G2G mode be effective?
Yes, only if we show visible commitment, make requisite structural changes in the SOEs, ensure timely resolution of issues or passing monkey onto the investor as our chequered history unfortunately depicts. Privatization and efforts for reorganizing and transforming SOEs have had limited success.
The PTI-wealth fund concept, Dr Ishrat Hussain’s effort to restructure bureaucracy, concept of a CPEC and Reko Diq Authority (CIRC) of past cleaning balance sheets of HBL/UBL for privatisation and then…, suggestions and attempts at empowered non-political autonomous boards, signing of performance-KPI based contracts with CEOs selected on merit by boards, have failed as strings continue to be controlled by parent Ministry.
The SOE (Governance and Operations) Act 2023 is the latest with progress at snail’s pace and now a committee is being constituted by Finance Division comprising Power and Petroleum Divisions to propose appropriate amendments to the Act to enable review of Boards of SOEs to bring in competent professionals.
The fear of decision makers has caused loss to country due to fear of NAB/FIA, e.g., denial of out of box approaches for energy procurement under long-term contracts faced corruption mantra and thoughts of CPEC Authority be given immunity from these institutions, said it all; not to forget Reko Diq award resulting in Foreign Investment (Promotion and Protection) Bill, 2022 passage highlighted the extreme protection now sought for FDI.
It is now even more critical in view of the fact that 6 new leases have been or are being issued in addition to the Reko Diq, all together requiring estimated $40-$50 billion investment.
With the Bill & Act in place, the next goal should have been to ensure ease of doing business, encouraging FDI, restructuring SOEs and their assets/debts, learning from “Sarmaya-e-Pakistan” (despite $1.5bn Pakistan Development Fund set up in 2014 being dormant) which aimed to facilitate P3P transitions but lost its direction due to lack of preparedness and political will to see it through to its logical end. And now there is Sovereign Wealth Fund, established last year, capitalized with $8 billion in shares of state-owned enterprises.
We need implementation not more of the same!
It is important to note that outstanding domestic debt of loss-making Public Sector Enterprises (PSEs) soared to Rs. 1,879 billion during the 1QFY23 and their liability in recent years is between 8-12% of GDP.
Unsustainable!
Instead of a big bang hopium-based approach, sustained efforts by an effective empowered leadership team are required to manage the SOEs based on principle of working for profit and not being bailed out beyond 3 years.
Message: If unable to reduce the number of institutions: merge them: corporatize them and force them to be financially self-reliant but do not create more islands (e.g. Naya Pakistan Housing Authority, FGHEA to avoid dependence on CD, KDA, LDA, Ravi Riverfront Urban Development Authority and Pakistan Islands Development Authority).
(To be continued)
Copyright Business Recorder, 2024
The author has served as Managing Director of Pakistan State Oil (PSO) and CEO of EETL, EVTL, and ETPL. He can be contacted at [email protected]
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