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"Who will make investment in the country if businessmen face harassment?" questioned Justice Farrukh Irfan Khan of Lahore High Court while ordering removal of Shahzad Saleem (CEO Nishat Chunian Power) from the ECL. Are the government, regulators, and watchdogs listening?
After years of indifference the Government seems to have woken up to the issue (crisis?) of Ease of Doing Business (EODB). More than the plaintive cries of business leaders it is the urgings of multilateral donors that have been heeded.
Multiplicity of taxes and collectors, over-regulation, and the excruciatingly long response time of government agencies have led to 'speed money' becoming the currency of business. The message of Naya Pakistan has been lost in translation.
More damagingly, they have created entry barriers and 'information asymmetries', causing unfair competition on the one hand and distorting investment decisions on the other.
Clearly, there is something amiss if businessmen have to communicate with the government through advertisements in the Press! EODB is necessary, but if attention is focused on this aspect to the exclusion of other drivers of investment and competitiveness it will become like climbing a greased pole: one step up and two down.
A holistic approach to greater investments - and the right kind of investments - requires the triumvirate of policy consistency and predictability, responsive government agencies, and recognition of business's contribution to growth and job creation.
On the policy front the government is increasingly coming across as a victim of paralysis. Ministers boldly announce initiatives, even give implementation timelines, and then......more bombast. Direction and resolve elude us.
After seven months we see no smoke coming out of the chimneys of the much heralded Task Forces and Commissions set up to remove impediments to better governance.
We wait for Administrative reforms (stalled at appointment of Secretaries and their tenure), Tax reforms (stalled at segregation of policy and collection), Educational reforms (stalled at nation-wide uniform curriculum). We await the contours of the new Industrial policy, the shape of Strategic trade policy framework, the rolling out of water policy, and so much else.
We all recognize the criticality of macroeconomic stability but how do you plan investments when there is no policy predictability? Business decisions become speculative when the economic road map is a tightly guarded state secret. You gamble on exchange and interest rates, on import duties, on tariffs for electricity and gas.
In the debate on IMF or not, a major factor weighing in favour of IMF is that the programme will lend much greater predictability. Many would happily swap predictability for the short term risks of higher costs and low growth.
Business sentiment has also nose-dived because of governmental 'inaction', and there is no other way to describe it. It seems to act is to invite trouble. "Indecision attracts no penalties. But a decision, even with the best of intentions, could go awry. Why take a chance?" is the conventional wisdom.
The story of a solar power project in Punjab initiated by the previous government but yet to achieve financial close, is instructive. Interest rates went up since the term sheet was negotiated, but the bankers and the officialdom were wary of incorporating the higher interest rates for fear of enquiries. The matter was referred to the Cabinet that too dithered and constituted a Committee headed by the Senior Minister to resolve the matter. The Committee is no less apprehensive, and the matter languishes.
Another variation on inaction is IDIS: incompetence-driven indecision syndrome, best illustrated by the 100 million dollar loan granted by the International Fund for Agricultural Development (IFAD) to Poverty Alleviation Fund (PPAF). For several months ECC could not decide what to do with this loan - there were other claimants - until IFAD brought the broom down: it is now or never; it is PPAF or no loan.
Until very recently policy weaknesses and unresponsiveness were the principal cause of business gripe. Now the so called accountability has multiplied the risk of doing business in Pakistan. The 'push factors' of doing business in Pakistan are growing.
If these 'push factors' are not addressed urgently and adequately businessmen may be forced to look for investment opportunities abroad rather than at home. Many are beginning to think no amount of money is worth it if it comes with the threat of humiliation, or worse.
Certainly, malpractices cannot be condoned. But a bad business decision has to be distinguished from deliberate malfeasance. Also, how you deal with them is important: do you create a business un-friendly environment or go for the really guilty - swiftly and forcefully, without making a song and dance about it?
We have something to learn here from the way Army handles corrupt practices in its ranks: effective action, without risking its image or affecting discipline and morale of the troops.
When you have many 'enquiries' going on, and hardly any convictions, you don't catch the crooked and give the wrong message. You destroy business confidence. Ceremonial distribution of certificates to the highest tax-payers becomes self-defeating when several among them face 'charges'.
By all means take swift action against those who are guilty. But dragging businessmen through the slime of accusations, on the flimsiest of grounds, is neither fair nor just. It merely makes them question if it is worth it - to invest and create jobs. They look for other options.
Isn't it ironic that while the government rolls out the red carpet for foreign investors it pulls the rug from under the domestic investors?
When the top watchdog summons a leading businessman, gleefully played up by the media, it causes an irreparable loss to his reputation, especially when the charges are not proven.
Wealth creation that the Prime Minister extols, and witch hunts that the non-elected revel in, cannot co-exist. One of them has to give, and it does not require a flight of imagination to guess which one will.
Our cup of economic challenges is already over-flowing, as are the challenges of uncertainty and unpredictability that the investors face. Let us not add to them. Our precarious revenue base, and the growing unemployment, will take a hit if investors have to think twice before taking an investment decision.
Law is premised upon being presumed innocent until proven guilty. In one sentence Justice Khan has said it all. Harassment is evil.
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Copyright Business Recorder, 2019

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