Fresh efforts for the long-awaited and elusive reforms to ease the cost of doing business and making investments were recently mounted by Prime Minister Shehbaz Sharif.

“Acknowledging that simplifying and rationalising regulations to reduce bureaucratic red tape and compliance costs is a substantial challenge,” former president of the South Asian Association for Regional Cooperation explained. However, with strategic action, this is a challenge that can be overcome.

“The issue of the cost of doing business”, he says, “requires a concerted effort both from the public and private sectors. Over time, sustained high costs can lead to stagnation.”

Critics haunted by repeated past failures cast doubts on the government’s fresh attempts at lowering business costs

The state’s huge imprint on the economy distorts markets, blocks opportunities and raises the cost of doing business through excessive, obsolete and flawed regulations, former governor of the State Bank of Pakistan Shahid Kardar argues.

The government’s move envisages that all the laws and rules for investment would be compiled together and digitalised, and all the unnecessary laws and rules in the way of investment and business would be abolished.

However, the official optimism that proposed measures to ease the cost of doing business are enough to push the private sector towards fast-paced progress is not widely shared. Critics haunted by repeated past failures doubt an effective positive outcome of the renewed efforts. They also note that the required external financing sought by the government for the project has yet to be procured.

According to the Prime Minister’s directive, in the first part of the project, highly important laws and rules are to be collected and compiled on a priority basis by December 2024.

Pakistan’s multiple challenges are deeply intertwined and require a comprehensive and coordinated policy response

There is also a view that Pakistan’s multiple challenges are deeply intertwined and require a comprehensive and coordinated policy response. “No initiative, no matter how well-intentioned or comprehensive, can change the business environment in isolation,” a Dawn editorial piece points out. In the prevailing business environment, it notes that even powerful multinationals are exiting this market or scaling down their operations.

According to a statement by the Dubai Chamber of Commerce (DCC), nearly 4,000 Pakistani companies became members during the first half of 2024, 17 per cent more than the same period in 2023. Analysts say investors need political and economic policy predictability and stability.

Improvement in the business and investment milieu requires wide-ranging economic, financial, judicial, policy and civil service reforms, continues the statement. It adds, “Hence, a whole-of-government approach must underpin business and investment reforms. Otherwise, nothing will work.”

“By implementing thoughtful policies and fostering an environment for business”, says Iftikhar Malik, “we can pave the way for a more vibrant economy and an improved living standard for all.”

There is a growing realisation among the progressive segment of the Pakistani business sector that “businesses must upgrade the present economic model that is outdated,” as observed by Majyd Aziz, former President of Karachi Chamber of Commerce and Industry, in a Business Recorder opinion piece.

Mr Aziz advocates that “the imbalances in the distribution of wealth must be tackled on a war footing. Workers must be given their legitimate share of the returns.”

Under Responsible Business Practices, he further adds how businesses must engage with workers and communities; though profit-making is a natural business objective, the question Mr Aziz highlights is “how much, and how it is shared”. The workers’ share is not just wages, but also better housing for them, upgrading skills, health benefits and education for their children.

For businesses to prosper, it should be noted, the government also needs to invest in upgrading physical and social infrastructure. The size of the government does matter if economic growth and prosperity are to be achieved, says an analyst, adding that in the case of Pakistan, this is missing.

“The country is teetering on the brink of financial insolvency as the economy is hard pressed to bear the burden of a bloated, predatory and extractive state machinery, says Shahid Kardar in a Dawn opinion piece.

On August 9, the Minister for Planning and Development Ahsan Iqbal indicated a likely cut of Rs200-400 billion in development allocation for the current fiscal year as, he noted, the International Monetary Fund (IMF) is not willing to give any relaxation in its conditions.

He added that the ministry has not released any funds so far in the first quarter and is looking to the finance ministry to advise how much of the public sector development programme funds would be available.

There is a view that the “right size” of the government, now on the official agenda, can no longer be ignored, while doubts remain in view of the past experience of this country as to whether there will be an effective positive outcome.

Published in Dawn, The Business and Finance Weekly, August 19th, 2024