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Business environment risk problem in Pakistan

Pakistan’s economy has been on a free fall for the last few months, most of economic indicators such as currency value, current account deficit, trade deficit etc. points towards a worsening economy and business environment.

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Several factors have been highlighted as the cause of the economic downfall of the country, looming political uncertainty is at the core of all these factors. One of the factors discouraging foreign direct investments and local business is the business environment risk problem. The problem has been recently highlighted and explained by an entrepreneur and investor who goes by the name Bacchus on twitter.

He explained the problem in a thread stating that Pakistan has a business environment risk problem which is further worsened by poor productivity which in turn is a result of low quality of education and trainings.

 

He went on to say that higher business environment risk leads to heightened requirement of return by business to invest and work. At some point this requirement becomes unattainable and impedes normal business activity. He warned that Pakistan may become “uninvestable” due to this problem. “There a very few examples or greenfield business set up over the last 10 years being successful”, he pointed out.

 

Furthermore, he listed nine factors contributing to the business environment risk problem;

Firstly, deficient or defective information and data about the business environment contributes to business environment risk problem. Unclear and incomplete communication of data about business environment trouble the business community.

Secondly, poor information about the rules and regulations governing the business atmosphere and the frequent and non-transparent changes in them worsens the business environment. The uncertainty revolving the business environment is a major issue for the business community. A stable economic and business policy is pre-requisite for successful business.

Unfair and inequitable regulations and taxes, where compliance minded businesses are regulated while others are free of any consequences is another factor. The non-compliant business entities unlevel the playing field in their favor, discouraging compliance.

 

Money laundering businesses, indifferent to economic returns suppress their fair and regulations-compliant competitors. Black money laundering is a major issue hindering Pakistan’s economic prosperity, the issue particularly affects the fair and compliant businesses.

Hidden hand of influential entities whose interests undermine the market rules and regulations for personal gains is a major issue in the Pakistani business environment.

Discrimination against successful profitable businesses through increased taxation and regulation, adds to the problem. When any business attains the level where it creates an upper ceiling on growth in Pakistan, there is inherent tendency in the business rules and regulations to punish that business instead of further encouraging it, hence impeding its growth potential.

Unevaluable human resource due to the low quality of academic credentials and untrustworthy experience further adds to the troubles of business community. Due to different examination boards in each province, the standards of education and examination varies and there is no standard to compare. Similarly, high level of fraud makes it very difficult to trust any person’s previous job performance and experience, even fake certificates and experience letters can be obtained.

Moreover, erratic judicial decision-making has been highlighted by Bacchus as the top issue of almost every businessman. Business related matters are dealt with insensitively; one decision can freeze or seize anyone’s property or business. There is no consensus among the higher judiciary on how to treat business related cases and the lower judiciary often takes years to decide on business related matters causing huge losses to the business entities and lack of trust among the business community with regards to the judiciary.

Lastly, at the base of most of these problems is the political uncertainty that has engulfed the whole nation and has particularly affected the business environment. Businesses and investors are usually attracted to politically stable environment.

Read More: Pakistan becomes first South Asian state to launches NAP on business, HRs

These issues need to be resolved to help the country get off the track of worsening economy. Bacchus highlighted that currently no political party is pro-business or anti-regulation. Despite a dire need, resolving these issues seems to be not on the agenda of any political party of Pakistan.

It is believed that these issues need to be resolved by Islamabad (central government), meanwhile any matter that Islamabad takes note of worsens.

Bacchus also pointed out that solving many of these problems will require constitutional amendments, hence the legislature has a key role to play in the resolution of these issues.

The twitter thread goes on to present some recommendations by Bacchus;

  • Changes in policy should be followed by consultations and notice.
  • Contract and property rights need due process.
  • Restriction should be imposed on Suo Moto.
  • Discriminatory application of rules and regulations must end.
  • To increase the credibility of skill levels assessments, a standardized testing scheme should be run by NADRA at the national level.

  • Freedom of information must be ensured.
  • FBR must not pursue compliant businesses only, in order to increase the tax net, FBR should go after non-compliant businesses and tax evaders.
  • Low level business fails to comprehend the current compliance system (the rules and regulations), hence it must be simplified to increase compliance.
  • Political parties must compete on economic issues, the issues face by the business community need to be brought to the attention of political parties so that they include it in their agenda, it will have positive implications for both; the business community and the political parties.

Read More: PM Khan to hold monthly meetings with businessmen to facilitate exports

“Our evolution as country will be stunted by such an agreement. But business people must have some rights and assurances. The poor need them to increase the wealth and employment in the country. No business opposes tax as long as it’s even and everyone pays.”, Bacchus closes the thread.

 

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