ENERGY CRISIS, POOR LAW AND ORDER SITUATION AND HIGH COST OF DOING BUSINESS

INDUSTRIALISTS SHIFTING INDUSTRIES TO COUNTRIES LIKE BANGLADESH, CHINA AND MALAYSIA

KANWAL SALEEM
(feedback@pgeconomist.com)

Oct 15 - 21, 20
12

Persistent energy crisis, poor law and order situation and high cost of doing business in Pakistan are causing the flight of capital and shifting of industries to other countries like Bangladesh, China and Malaysia .

The trend is increasing unemployment and adversely affecting exports. What is more disturbing is the fact that the government is not taking any action to stop the outflow of money and experts believe in case the trend is not checked the economy will receive further serious blows in the days ahead.

Business leaders said, "We are facing terrible situation because there is no electricity and gas. If we get electricity and gas, it is very expensive, that makes the cost of production very high. We are not able to compete within the country what to talk about competing exporters in globalised competitive environment."

They said the textile sector is short of their productions and customers are gone, they are all going to other parts of the world.

They said the government is destroying the industry by not ensuring proper supply of gas to industries. Our industrialists and traders are flying out. We strongly condemn this. It's an economy genocide that will subsequently crush the labour class, they added.

The recent Indian offer to Pakistani investors may worsen the situation further. The government has no statistics about the flight of capital or how many industries have been shifted out of Pakistan.

A leading businessman told PAGE that in Bangladesh no one disturbs the textile sector even during strikes or other political issues. The Pakistani industrialists' vehicles are issued special number plates due to which even protestors on streets do not stops them. Being least developed country the Bangladesh enjoys duty-free access to the European markets due to which industrialists prefer business there.

Experts believe that basic reason for the energy crisis in Pakistan is because for nearly 20 years the price of producing electricity has significantly been higher than the price of electricity is sold to end consumer. And as a result, no new investments are being made in power infrastructure and no new generation plants have been set-up. The government has to revamp its national energy policy if Pakistan wants to join a competitive global economy. Other economies are better placed than Pakistan because they've indigenous energy resources, so they use own coal, gas even oil reserves to meet local demand. In Pakistan's case, nearly 70 to 80 percent of energy demand is met through oil imports, they added.

Businessmen said that Bangladesh and China are providing numerous tax incentives and better opportunities of market access across different regions. Since the government has failed to provide any relief to the investors, they are forced to take their investments and businesses to other countries for higher profits.

It may be noted that the government missed the annual exports target of $26 billion by some four percent during the last financial year 2011-2012.

Although there is official data regarding the number of industries shifted to other countries from Pakistan , there are 53 industrial units that were closed in Punjab due to power crisis. In KP, 1500 industrial units were badly affected due to power crisis. Another 2,000 industrial units in the province have been closed down because of the ongoing war on terror.

Ministry of Foreign Affairs has expressed its concern over relocation of factories from different areas of Pakistan to Bangladesh and sought comments from trade organizations through the Trade Development Authority of Pakistan (TDAP) for this shift.

The Ministry of Foreign Affairs through a letter informed TDAP that Acting Foreign Secretary of Bangladesh , while briefing a delegation of the National Defence University disclosed the figure of US $400 million Pakistani investment in Bangladesh . The Ministry, however, was of the view that dual nationality holders (Pakistani with Canadian and UK ) had made investment in towels, food processing and restaurants.

The letter further says that Pakistani investment in Bangladesh is primarily in the services sector. National Bank of Pakistan, Habib Bank, the City School and Beacon House Schools System are the main investors. Bangladesh imports raw materials from Pakistan for manufacturing readymade garments for the exports purpose.

The letter also says that Pakistani Mission has no knowledge of any joint venture in the process. Pakistani prospective investors have apprehension on energy shortage in Bangladesh .

On the other hand, there are divergent views of traders on the Indian government's decision to allow Pakistani investment on its soil. Some believe that this decision will further trigger capital flight from Pakistan due to deteriorating law and order and energy crisis, while many others welcomed the Indian government's decision and believe that the trade between two countries could increase to $10 billion from existing $2 billion if a business-friendly environment was provided to the people of Pakistan and India . Those, who have some reservations, said allowing investment in India was risky for the Pakistani investors, without removing the Non-Tariff Barriers (NTBs) and easing visa regime.

All Pakistan Anjuman-e-Tajran General-Secretary Naeem Mir told PAGE that foreign investors had already shied away from investing in Pakistan because of several factors including inconsistent government policies, regulatory impediments and red tape. He said the crisis in industrial sector was not only causing flight of capital and relocation of industrial units to the countries like Bangladesh and Malaysia , but had also reduced government revenues drastically.

He said given the size of the two economies and trade level, Indian firms were likely to gain much more than Pakistani businesses. "This is simply about export competitiveness and level of readiness to participate in international markets. This is where India has advantage over Pakistan."

Mir said criticised the government for making massive increase in petroleum prices in one go and termed it bad omen for the country's economy. He said the government did not bother to pass on the benefit of decrease of oil prices in international market and earned billions of rupees, which was sheer injustice.

All Pakistan Hardware Merchants Association Chairman Sardar Usman Ghani said, "We should find ways and means to bring prosperity and hope to our people," adding the process of growth and investment should be inclusive.

If our financial managers want flow of capital from the country, they would have to set its priorities right. The businessmen need to be facilitated by the government in real sense. All basic necessities and conducive atmosphere must be provided to businessmen not only for giving a boost to the country's exports but also put the country on right path. It is only the industrial boom whereby the problem of unemployment could be checked.