LAHORE: Former Deputy Chairman of the Planning Commission and Vice Chancellor of Pakistan Institute of Development Economics (PIDE) Dr Nadeem ul Haque on Saturday said our focus is to dismantle outdated colonial institutions that have long fostered a suspicion of markets, imposed restrictive measures such as DC rates, and hindered technological advancement and local research growth.
He expressed these views while addressing the third Economy Festival - EconFest in Islamabad. The festival was jointly organised by Pakistan Institute of Development Economics (PIDE), in collaboration with the Research for Social Transformation & Advancement (RASTA) programme and the Pakistan Society of Development Economists (PSDE).
Dr Nadeem ul Haque said that PIDE is proud to present a deep reform agenda aimed at transforming Pakistan’s economic landscape.
He also said Pakistan stands at a crossroads, grappling with a government footprint exceeding 64% of the economy, policy uncertainties, excessive regulations, and a fixation on the Tax/GDP ratio that stifles investment and innovation. Our economy is gasping for breath, and it is imperative to allow people to invest and grow, fostering a society built on trust and opportunity.
He further said key areas of our reform agenda include energy, education, urban development, State-Owned Enterprises (SOEs), the Federal Board of Revenue (FBR), and health.
Nadeem said we emphasize decentralization, professionalization, and the use of technology and research to drive governance improvements. The excessive job security without performance and lack of Results-Based Management (RBM) must be addressed to enhance productivity.
We advocate for corporatization and privatization to break the dominance of Stunted, Seth-owned Companies (SSCs) and a stunted stock market. The stock market should be leveraged for privatization, promoting growth beyond SSCs and providing clear investment opportunities with simplified taxes, digitized processes, and stable policies for at least a decade.
Our regulatory guillotine aims to digitize and simplify rules, decentralize, autonomize, and professionalize governance, and commit to openness with no reliance on import tariffs. We must make markets with clear rules, eliminate colonial-era DC rates, and focus on sectors such as energy, agriculture, finance, and real estate.
PIDE’s adjustment programme calls for a commitment to openness, digitization, and the eradication of import substitution. By aligning local research with policymaking and addressing the brain drain, we can pave the way for a modern, dynamic, and self-reliant Pakistan.
Dr Durre Nayab, Pro Vice-Chancellor of PIDE, emphasized the necessity for a comprehensive approach to address Pakistan's economic challenges. PIDE’s agenda targets key areas including regulatory modernization, tax reform, market liberalization, energy sector efficiency, and improvements in agriculture and banking. A notable element of this strategy is the ‘Regulatory Guillotine’ aimed at eliminating burdensome regulations that hinder business growth and innovation. The reforms also advocate for debt restructuring, intensified cooperation with the IMF, comprehensive tax reforms, and strategic economic openings to prioritize exports and modernize import regulations.
Dr Faheem Jahangir, Chief (Policy) at PIDE, said that in the realm of tax and administrative reforms, PIDE calls for tax simplification and policy certainty, streamlining taxes in a revenue-neutral manner, and ensuring stability for a decade. This includes implementing a uniform tax rate across all income sources, eliminating presumptive tax regimes, and transitioning to Advance Income Tax mechanisms. The plan also emphasizes the need for a uniform sales tax system, increased excise duties on harmful products, and automation in tax administration to reduce human interaction and enhance efficiency. Additionally, PIDE advocates for a pro-export trade policy, easing incorporation and listing processes, and addressing the over-regulation and bureaucratization of Pakistan’s markets to foster an environment conducive to investment and growth.
Daniyal Aziz, Nargis Sethi, and Taimur Jhagra spoke about “Islaah for Public Administration”. They addressed critical inefficiencies in Pakistan’s governance system, proposing comprehensive reforms across various sectors including the cabinet, civil bureaucracy, judiciary, and local government. They highlighted the necessity to reduce the size of the federal cabinet, limit political appointments, and emphasize expertise and performance in governance roles.
Syed Mohammad Shabbar Zaidi, former Federal Minister and former chairman FBR, addressed misconceptions about taxes in Pakistan, highlighting that 54% of tax revenue is allocated to provinces, which often show surplus budgets. He questioned the accountability of provincial spending, noting that funds are frequently used for luxuries rather than essential projects. A significant portion of federal taxes goes towards debt servicing, while provinces also collect their own taxes. Due to political reasons, the government avoids tax collection, especially in real estate. Zaidi compared Pakistan’s low property taxes to higher rates in Indian cities like Pune, pointing out disparities. Non-taxpayers often question the return on their taxes.
At the Economy Festival 2024, experts addressed the critical issue of election manipulation in Pakistan. Rasul Bakhsh Rais highlighted the need to enforce the constitution and ensure judicial independence to achieve genuine democratic transition. Arifa Noor and Saroop Ijaz discussed systemic issues, including media dependence on government revenue and structural voting challenges, advocating for political solutions to restore trust in elections and democracy. They called for broader political engagement, electoral reforms, and better representation for marginalized regions to address these challenges and reduce incentives for election rigging.
Shahid Kardar highlighted that Pakistan has participated in approximately 14 IMF programmes over the last three decades and now has 58 withholding taxes, which account for 70% of direct tax payments. He pointed out that the Neelum-Jhelum project, initially contracted for 85 billion rupees in 2007, has exceeded 500 billion rupees and remains incomplete. Mehtab Haider noted that while individuals in Pakistan are advancing, the country as a whole is regressing due to widespread cleverness and self-interest. He identified elite capture, particularly by the military and judiciary, as a major issue, emphasizing the need for reforms among the powerful. Dr Nadeem expressed opposition to the IMF’s focus on taxation over growth, which he believes hinders economic progress. Kardar called for adjusting misplaced priorities, reducing import duties to foster competition, and reviewing the NFC Award. He stressed that the coexistence of the current power sector and the country’s development is unsustainable, suggesting the formation of a financial commission and the shutdown of the FBR, with Mehtab Haider adding that an alternative should be proposed if the FBR is closed.
Copyright Business Recorder, 2024
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