ALI H. SHIRAZI Mutual funds are a force of good: product of the masses, for the masses. They have admirably withstood the pressures of the financial crisis and global assets under management have now started rising again. Long just a peripheral player in the world of capital markets, the mutual fund industry has become one of the most successful investment schemes, and now commands the stage with $23 trillion in assets under management. Yet, the incredible muscle of mutual funds is still not appreciated by our policymakers. They at best consider mutual funds to be obscure products designed for wealthy individuals and large corporations. Much deeper analysis is required to appreciate how mutual funds have quietly revolutionised capital markets the world over and how they can serve Pakistans economy as an important component of growth. For individual investors mutual funds provide numerous benefits: access to professional investment management, diversification of funds in various asset classes, tax credit of up to Rs 300,000, ability to invest for as little as Rs 5000, and liquidity offered by open end funds and transparency due to the role of regulator and trustee. More significantly, through individual investors, mutual funds have the ability to change the workings of the marketplace itself. For one thing, investors in equity funds, as they become financially more sophisticated, will grow more patient and hold their investment in hope of high capital gains in the long-term. As a number of retail investors grow, depth of our capital market will increase, and in time individuals and not a handful of corporations will influence the marketplace. It is axiomatic that savings are essential to the well being of individuals, as well as Pakistans ailing, debt ridden economy. Pakistans savings to GDP ratio, 10 percent, is the lowest in the region. Indias savings rate has now touched 30 percent. It is no wonder then that we have a weak capital market and are entirely reliant on foreign debt to shore up our economy. Foreign aid and IMF loans are no substitute for domestic savings and investment. An essential condition for financial savings is a capital market that can provide accessible and economical instruments, such as mutual and pension funds, to enhance savings. Only savings will ensure sustainable, long-term growth. So what needs to be done? Here are six proposals:  Public Sector Enterprises and Corporations should be allowed to invest in open-ended mutual funds.  Individual Investors should be liable to pay capital gains tax rate at a reduced rate for investment in equity schemes.  Amendment in KSE (and other Stock Exchanges) Listing Regulations to incorporate provision for debt securities.  Encourage Debt Securities Trading through BATS.  Credit line from banks for mutual funds.  SECP driven public awareness campaigns in partnership with MUFAP for promoting saving/investing through mutual funds. Moreover, a major structural reform that the policymakers must undertake is to overhaul the archaic and outdated laws governing the post employment benefits schemes managed by employers. Other than registration with Commissioner Income Tax, the retirement schemes are not regulated. Uniformity in taxations is required to ensure a level playing field with the Voluntary Pension Scheme regulated by SECP under the Voluntary Pension System Rules, 2005. Post employment benefits schemes should also be regulated through separately formulated rules and brought under the supervision of SECP. None of the Mutual Fund Association of Pakistans (MUFAP) taxation proposals to encourage growth of mutual and pension funds, which in fact would have enhanced revenue for the exchequer, were considered in the federal budget. The objective of every developing economy is to develop depth of the capital market to meet the needs of the real economy. Encouraging the growth and promotion of pension, insurance and mutual funds will go a long way in creating depth of our capital market and providing a source of credit for government and private enterprises alike. It is the capital market which must finance economic development and it is the capital market which should channelise peoples savings into such investments. The writer is a freelance columnist.