Experts say that an efficient transport system is a pre-requisite for Pakistan to become globally competitive.

SHAMIM AHMED RIZVI, Bureau Chief, Islamabad
Nov 13 - 19, 2006

It is heartening to learn that the government has decided to establish an Economic Reforms Unit to promote private sector development by reducing the cost of doing business. The unit approved by Prime Minister Shaukat Aziz last week will be established within the Ministry of Finance with immediate effect. It will work in close coordination with all stakeholders, including the private sector, provincial governments and international agencies to formulate a Private Sector Development Strategy.

In its recent report the World Bank has urged Pakistan to reduce the cost of doing business in Pakistan, especially by lowering tariff of power, gas and other essential utilities and improve transportation facilities by upgrading road network.

One of the failures of the present government, official sources conceded, is its inability to reduce the cost of doing business in Pakistan and that inexpensive and timely infrastructure facilities such as land, electricity, gas etc were needed to be offered to the local and foreign investors. Some government officials privately admitted that Foreign Direct Investment (FDI) could double within one year if the government removes various hurdles and impediments in the way of businessmen.

However, the concerned government officials frequently quote the new report of World Bank/International Finance Corporation (IFC) which says: "Doing business has became easier in India and Pakistan in 2005-06, as five refoa targetndia and two in Pakistan have reduced the time, cost, and hassle for businessmen to comply with legal and administrative requirements. Experts are of the opinion that government urgently needs to simplify business registration, cross border trade and payment of taxes as well as easing access to credit and strengthening investor protection without which no meaningful investment could take place in the country. "The problem is that we have too many laws, our bureaucracy is non-cooperative and our tariffs, especially those relating to customs, are still high compared to other countries. Then we do not have proper infrastructure, which is particularly in bad shape in transport sector. All these things have become a gig hurdle in the way of the investors," they believe.

According to official sources, Planning Commission, Central Board of Revenue, Ministry of Railways, Ministry of Communications/National Highways Authority, Ministry of Ports & Shipping and Ministry of Defence will make joint efforts to achieve the project objectives through a comprehensive multi-sector reform program aimed at streamlining procedures and improving services and physical infrastructure.

The scope of the current program includes railways, road transport sector, ports, trade facilitation and air transport. At the end of the reform program, official sources stated, the following outcome is expected.

* Reduced share of domestic transport and cost of non-factor services in the total value of commodities;

* Overall reduction of transport and transit costs as well as duration for goods using the National Trade Corridor;

* Increased rail share of long distance freight traffic;

* Reduction in the operating deficit of railways, with objectively determined and targeted subsides;

* Better corridor user satisfaction;

* Improved safety and reliability of transport operations and

* Improved procurement practices and enhanced accountability of the entities involved in NTCIP.

In a project study report on 'Key Development Issues and Rationale for Bank Involvement', the World Bank experts have stated that the poor performance of the trade and transport logistics sector significantly reduces the competitiveness of the actual and potential export industries and ultimately hurts the country's overall economic growth. The transport system in Pakistan generates high economic losses from a mismatch between supply and demand for transport services and supporting infrastructure. It is estimated that the inadequate and inefficient transport system is imposing a cost to the economy of about 4 to 6 percent of the GDP, constraining economic growth, reducing export competitiveness and hindering social development, they added.

Experts say that an efficient transport system is a pre-requisite for Pakistan to become globally competitive. They said that the Pakistan government with World Bank support has developed a strategic approach for the transport sector, focusing first on the National Trade Corridor linking Pakistan's major ports in the South with its major cities and trade corridors to the North. The objective is to promote an integrated approach to planning, investing and managing the National Trade Corridor transport logistics system.

The Pakistan government and the World Bank have agreed on a financing program, which includes a programmatic Development Policy Loan (DPL), specific sub-project investment lending and technical assistance loan. The bank and GoP agree on a multi sector policy oriented DPL to support implementation of reforms. The technical assistance loan will help prepare and monitor reforms and provide the additional analytical underpinning. Investment lending will ensure that the transport infrastructure provides the capacity and the level of services expected to satisfy the increasing demand, they added.

Finally the authorities concerned have demonstrated their will to bring down the cost of doing business in the country, which is a key determination in attracting foreign investment and enhancing exports to the optimal level. We have been hearing since long the promises by successive governments to realize the objective but this is perhaps the only tangible measure to that end. In fact, this should have been done much earlier to make the country competitive in terms of investhere hasraction. The cost of doing business in Pakistan is very high despite easy availability of manpower and raw material. The first and foremost hindrance is the bureaucratic attitude that forces investors to resort to palm greasing and this is a factor that increases the cost of doing business. Then comes the implementation state during which an entrepreneur has to repeat the same to get different connections and facilities. Again the input cost is very high despite easy and abundant availability of both skilled and semi-skilled manpower.

Revision of rules and regulations, as the mandate of the Economic Reforms Unit envisages, would hardly lead to reduction in cost of doing business when the government is not willing to check price hike of petroleum products and energy. How can this objective be achieved when the government is not willing even to pass on the benefit of reduced prices of petroleum products to the industry and the general public, whereas quarterly increase in the prices of electricity and gas is being allowed. Under these circumstances, it is to be seen as to what extent the proposed unit would be successful in meeting the high expectations in this regard.