Last year, a conference titled “Doing Business in Pakistan” was held in London, which was organised by the UK Trade and Investment Board and the Pakistan High Commission. Its main aim was to chalk out plans to attract more British businessmen to invest in Pakistan. Over 80 business representatives from the UK and Pakistan attended the conference.

Lord Green, after the launch of the UK government’s Trade and Investment White Paper, said: “Pakistan will be one of the world drivers of growth in years to come, notwithstanding some of the challenges faced by the country at present.” He also maintained: “Political stability and law and order situation has a role to play in foreign investments and the UK is keen to help in all the areas when and where it is needed.” Likewise, Saleem Mandviwalla, Pakistani Minister of State for Investment, admitted that “investors were shy of going to Pakistan due to its engagement in the ongoing war on terror.” He acknowledged that corruption was also a major hindrance to economic progress. “Despite these challenges, Pakistan’s economy has been able to sustain an acceptable growth rate of 4.1 percent in 2009-10,” he maintained.

The first recommendation was that on immediate war footing, the government needs to address the severe energy crisis by taking critical reform decisions that tackle pricing distortions, production and distribution inefficiencies, remove bottlenecks for urgently needed imports and develop the indigenous energy resources.

Pakistan has the most liberal investment policy in the South Asian region and before the global recession, businessmen showed keen interest to invest in the country. But now the situation has changed! Instability and the rising cost of doing business have deterred both local and foreign investors. In addition, the recent increase in electricity and gas prices, as well as rampant corruption in these sectors, has made the marginally profitable industries non-viable. Also, new industrial units are not being set up, while the old ones are closing down. This will lead to rise in unemployment and suicides.

The State Bank of Pakistan’s high policy rate has not only added to the rising business costs, but also enlarged the size of non-performing loans (NPS) to almost Rs13,448 million (as recorded on October 30, 2009). The effect of the high interest rates resulted in losses for a number of industrial units.

Terrorism is yet another reason causing huge losses to the industrial and trading sectors. The army is attacking the north-western strongholds of the militants, who have responded with suicide bombings in towns and cities. The marble industry in Khyber Pakhtunkhwa and the tribal areas is severely hit by the ongoing militancy. The All Pakistan Marble Mining Processing Industry and Exporters Association (APMMPIEA) revealed in 2010 that 300 marble units have closed down and 250 more are on the verge of closure. The industry is said to have shed over 50,000 jobs already.

The rising political obstacles in the country are also having a negative impact on the economy and stock business. President Asif Ali Zardari is under severe criticism from the opposition parties after the Supreme Court struck down a reprieve that had protected the increasingly unpopular leader and several of his political allies from corruption charges. The ambiguity about corruption cases against some sitting ministers, advisors and members of Parliament has created uncertainty among businessmen.

For the last 10 years or more, Pakistan’s economy is being handled by bankers with supreme authority and they take measures that are only beneficial to the banking industry. The banking spread in the country (highest in the world) is 7.8 percent and needs to be cut down by 2 percent at least. This will save us from the control of financial institutions like the IMF, World Bank and the Asian Development Bank (ADB). The interest rate should be brought down to a single digit. The gross domestic product (GDP) growth has declined due to an economic slowdown following the tight monetary policy.

The high interest rate is the main reason behind the fall in the country’s industrial output. The decline in the auto, textile, electronic, petroleum and other key sectors has adversely affected the performance of large-scale manufacturing (LSM) in Pakistan. We have no competitive edge, as our exporters are facing a lot of difficulties due to high cost of production.

Cutting interest rates to a single digit will produce multiple benefits for the economy, as it will lower the cost of doing business, give a strong boost to business and industrial activities, provide easy credit and loaning facilities to trade and industry, promote better investment and exports, and generate more tax revenue for the government. Sadly, studies highlighting the major problems and suggesting corrective measures have been falling on deaf ears.

There is a long list of examples that adversely reflect on Pakistan’s inefficient and inhospitable business environment. Despite repeated claims of the government of ‘one-window’ operation for setting up new businesses, it takes at least six months to start-up an industrial unit against less than seven days in most countries. It usually takes over six months to secure electricity, gas and telephone connections. The supply of skilled and technically trained manpower is inadequate. There are no national institutions for the acquisition and dissemination of modern technology. Thus, institutional changes must take place for the removal of these inadequacies and bottlenecks, if any headway is to be made in promoting employment, alleviating poverty and raising the country’s GDP.

n    The writer is a retired secretary of the Government of Pakistan.