Only PM can make a difference

In the 1990s the business community was full of praise for Prime Minister Nawaz Sharif because he saved them time and unnecessary harassment by civil servants. He abolished the office of Controller of Imports and Exports, liberalized the foreign exchange regime, introduced the "green channel" at the airports and abolished octroi. Reducing the footprint of the government, he endeavoured to reduce the government's role in their daily lives. This time it is quite different - the pendulum appears to be swinging the other way. The Companies Ordinance, 2016 will replace the ordinance of 1984. There are good points in the new law such as inclusion of technology which did not exist in the previous law. However, certain laws aimed at giving more teeth to the bureaucracy do not sit well with the business community because they stifle investment. Therefore, there is an urgent need to interact with businesses without getting annoyed.
While Pakistan's GDP growth rate is better than what it was in recent past, it does not compare well with the regional economies. There are ominous signs on the horizon. The trade gap is growing despite low oil prices. Exports represent less than 50 percent of imports, encouraging external borrowing to mushroom. Pakistan's rankings in global indexes do not compare well with those of its neighbours, which are strongly competing for investment dollars. All this points to the fact that we are not doing well. Therefore, we cannot be complacent about economic management any longer. The current economic gains, however modest, can easily dissipate. And we need to work out an inclusive and sustainable growth strategy without any further loss of time. With general elections due in 2018 (if not for next year?) in post-IMF programme the temptation for populist measures needs to be discouraged. The prime minister needs to increase his interaction with the business community. He also needs to integrate the tax returns and collection system. He is also required to successfully address the mistrust of businessmen. Abolishing group taxation and taxing inter-corporate dividends discourage consolidation and is an impediment towards achieving economies of scale that is crucial if Pakistani businesses are to become regional or global players. Capital accumulation, therefore, needs to be encouraged.
The Companies Ordinance, 2016, is a manifestation of growing mistrust of the formal corporate sector of business. Instead of focusing on those outside the formal sector the focus appears to be on companies which by definition constitute the formal sector. We understand that after the passage of the 18th Constitutional Amendment there has been fragmentation of authority. The dire need for more revenue has trumped the need for doing business. Meanwhile, the domestic industry is being neglected and civil service is running the show. The prime minister needs to take charge, as he did on several occasions in the past.
The Policy Board of the Securities and Exchange Commission of Pakistan (SECP) must be headed by an eminent person from the private sector because giving power to the minister concerned is not going to suffice. Issuing an ordinance instead of placing a bill before the chambers of parliament has played right into the hands of the opposition. It was Z A Bhutto's PPP which nationalized industry and showed hostility to foreign investors. SECP high-ups should have exposed the game being played in the Senate.
We already see an alarming dip in Foreign Direct Investment in the country. Let us avoid doing things which complicate the issue further. We need to enlighten the voting public that large profit is good; they must also be told that the country needs capital accumulation. FBR suffers from capacity and technology issues and its discretionary powers are often misused to harass the taxpayer through multiple audits and demands for advance tax payments. That is why those who have the money don't want to be on the radar of FBR for right reasons. Now is the time for Prime Minister Nawaz Sharif to build a consensus on the economy. That he is good at taking bold decisions is a fact that has found its best expression from his decisions of abolishing Friday as a weekly holiday and naming the physics centre of Quaid-e-Azam University after Dr Abdus Salam.