Prime Minister Imran Khan will leave for China to attend the opening ceremony of the Beijing Winter Olympics. The Chinese leadership has scheduled meetings with the Prime Minister of Pakistan to discuss bilateral relations. The government is busy working out a comprehensive agenda for a fruitful dialogue. On 26 January, the PM held a meeting with the top civil and military leadership to deliberate on the possible agenda for the visit. CPEC was the major focus of the meeting along with other subjects.
In anticipation of the visit, Pakistan had started the process of preparations much in advance. Pakistan focused on two areas - improving the business environment and protecting the CPEC. To improve the business environment, the government has accelerated the reform process. We can see a renewed vigor from the government to inject efficiency into the industrialization process under Special Economic Zones (SEZs). The Board of Investment (BOI), being the secretariat of industrial cooperation, has accelerated efforts to develop innovative or efficient systems to facilitate industrialization.
However, for the Yatra to be a success, the government has to focus on the real problems that the business community is facing. The most important issues are complex institutional framework, complicated and lengthy process, corruption and political games between parties. Although Pakistan's EODB ranking had improved but these problems still haunt the country. For example, it takes 113 days (approximately 4 months) to get electricity connection, 125 days (more than 4 months) for construction permit and 105 days for property registration. The 18th Amendment has further complicated the institutional framework. In this context, one stop-services is a good idea, but it is not the ultimate solution.
Thus, the real task of the government should be to tackle inefficiencies in the system, remove complexities and reduce the number of days for all services. It is proposed that the time limit for all services should not exceed 15 days.
Second, the tax system is another problem, which really bothered investors in the industrial sector. Firstly, the industry has to bear the huge burden of tax revenue. The service and agriculture sectors are not paying taxes as per their share in the national economy. The tax system is very complex. There are 35 departments or agencies in the taxation system. On top of that, the provincial tax system and legal requirements further exacerbate the situation. Lack of harmonization of tax policies of the provinces is one of the biggest hurdles to attract foreign direct investment. The discrepancy in taxation policy is also affecting the confidence of the business community.
Therefore, the government should harmonize the taxation policies of the provinces in line with the national policy, and ensure no change in the policy for a given period of time. Instead of having different tax agencies, a national tax authority should be created. The concept and functioning of authority is explained by Dr. Ikram in a research paper on PIDE.
Third, the entire insolvency and dispute resolution system needs to be overhauled. These are very complex at the moment. The most problematic part is the involvement of multiple institutions, departments and agencies. For example, the bankruptcy process takes an average of 2.6 years and the success rate is only 42%. Thus, BoI will have to develop tools which can make the process easier. The government can form a single body to function.
Security is another area on which the government is diligently working. Since the Dasu attack, Pakistan has been making all efforts to refine the security framework relating to CPEC and Chinese investments.
In addition to the above actions, the Prime Minister should also ask his team to prepare a progress report on the MoUs signed during his last visit to China. This will be a real positive indicator for the trading community. They will consider Pakistan as a serious country to implement the MoUs. This will encourage them to sign new MoUs. However, the government should focus on converting the already signed MoUs into investment agreements instead of looking for fresh MoUs.
The PM should also order his team to prepare a comparative analysis of Pakistani SEZs with SEZs of other potential competitors. The comparative analysis of SEZs will facilitate the industrialist in taking decision for investment in Pakistan.
Finally, the prime minister should take the proposed reform list and the new security framework with him and share it with the Chinese leadership and business community. He can also seek suggestions from the CPC leadership and government officials as China has rich experience in designing and implementing reforms.
Finally, the prime minister should focus on sharing a list of concrete plans or actions. There are a large number of Chinese companies operating in Pakistan. They are well versed with the ground reality, status of reforms and development of Special Economic Zones. That's why dream sales should be avoided.