PIDE unveils comprehensive reform agenda for economic revival

ISLAMABAD  -  Unfolding its reform agenda for economic revival, Pakistan Institute of Development Eco­nomics (PIDE) has anticipated that rezoning and market-based high-rise developments, removing bureaucratic hur­dles in seeds approval for ag­riculture, and resolving issues faced by real estate stands have the potential to gain ap­proximately $66 billion.

The Pakistan Institute of De­velopment Economics (PIDE) has launched an ambitious re­form strategy, “ISLAAH: Imme­diate Reform Agenda - IMF and Beyond,” to propel Pakistan towards economic stability and growth amid its looming financial crises. The Pakistan Institute of Development Eco­nomics (PIDE) has outlined an agenda aimed at tackling key areas such as regulatory mod­ernization, tax reform, market liberalization, energy sector efficiency, and improvements in agriculture and banking. A central component of this strategy is the implementation of a ‘Regulatory Guillotine’ to eliminate burdensome regu­lations hindering business growth and innovation. 

Vice Chancellor of the Paki­stan Institute of Development Economics (PIDE), Dr. Nadeem ul Haque said that the agenda outlines a series of innovative reforms designed to rejuvenate Pakistan’s economic landscape. These include debt restructur­ing and intensified cooperation with the IMF, comprehensive tax reforms for a more busi­ness-friendly environment, and strategic opening of the economy to prioritize exports and modernize import regula­tions. Additionally, it addresses energy sector inefficiencies, agricultural and banking sec­tor improvements, and the de­velopment of real estate and capital markets to encourage investment and deepen capi­tal market participation. The anticipated impacts of these reforms are substantial, prom­ising to catalyze investment, foster job creation, and facili­tate higher GDP growth. PIDE’s groundbreaking economic re­form initiative aims to stream­line governance by addressing the burden of 122 regulatory bodies operating directly un­der the federal government, which currently account for over 50% of the GDP, as re­vealed by PIDE’s Sludge Audits. 

Nadeem ul Haque further stated that this budget season demands immediate attention towards streamlining taxes in a revenue-neutral manner and ensuring stability for a decade, with a commitment to refrain from introducing new taxes in each budget cycle. In the realm of tax exemptions and adminis­trative reforms, it’s imperative to halt all forms of concession­ary financing and discrimina­tory fiscal incentives among businesses. Streamlining tax administration through au­tomation to minimize hu­man interaction is essential, coupled with the abolition of the arbitrary ‘filer’ and ‘non-filer’ distinction, as well as the elimination of ‘FBR Rates’ for property valuations. Tax administration must evolve towards automation, with a focus on accountability and responsibility within a techno­logically adept framework. An independent and tech-savvy entity should spearhead rev­enue collection, leveraging modern auditing techniques. In line with this, suspending tax return audits for first-time filers over the next five years is crucial. Tax simplification de­mands administrative changes, particularly digitization, and market-driven documenta­tion practices, ensuring policy consistency over a decade. The FBR’s attention should be di­rected towards administrative efficiency, while ensuring zero harassment in tax matters. 

In fostering economic growth, it’s imperative to em­brace openness by revitalizing our import-export dynamics. Currently, import substitu­tion strategies have rendered all KSE-100 firms inward-looking, a trend that urgently requires reversal. Facilitating this transition necessitates the promotion of trading houses as intermediaries in trade, po­tentially offering performance-based incentives such as tax rebates. Streamlining incorpo­ration processes with no fees and facilitating easy listing are vital steps. Key decisions in­clude the removal of additional customs and regulatory duties, phasing out SRO-based exemp­tions within three years, and eliminating tariff cascading. 

The power sector crisis in Pakistan extends beyond mere electricity theft or ‘kunda’ con­nections; it reflects systemic issues rooted in inadequate management, planning, and centralized decision-making. Vice Chancellor PIDE further stated that real estate stands as a focal point of discussion, yet its current state reveals a fragmented market marred by insider trading practices like ‘qabza’. Reorganizing the market could yield substantial benefits, potentially unlocking a revenue gain of up to Rs. 300 billion. Key decisions entail the abolition of FBR valuation and DC rates, regulatory oversight of file trading by SECP to treat files as securities, and the sepa­ration of regulation from real estate business operations. Ad­ditionally, organizing the real estate brokerage sector, revis­ing rental laws, and relaxing zoning regulations for vertical and mixed-use development across cities are imperative steps forward. State-captured real estate represents an unde­rutilized but immensely valu­able resource, hindering down­town growth and contributing to urban sprawl nationwide. 

With thousands of govern­ment houses occupying vast swathes of prime land in Islam­abad alone, the unrealized, par­ticularly evident in Islamabad where thousands of govern­ment-owned properties occu­py prime land, amounting to a staggering PKR 2,278.6 billion in unrealized value. Unlocking this potential through rezoning and market-based high-rise de­velopments could attract over $ 58.8 billion in investment, cre­ate 351,000 job opportunities, add 44.4 million sq. ft of com­mercial space, and generate an annual rental income exceed­ing Rs. 446.8 billion. 

He further said that in the agriculture sector, bureaucrat­ic approval processes hamper the seed industry, fostering the proliferation of low-quality seeds and imposing unneces­sary costs on farmers. Despite the private sector’s readiness to lead, inefficiencies in seed testing and approval proce­dures persist, resulting in limited access to high-quality seeds for small farmers. Ad­dressing these challenges, estimated to yield a poten­tial gain of Rs 1,722 billion, requires discontinuing com­modity operations like wheat interventions, implementing market-driven solutions, and stimulating private invest­ment through tax incentives.