Prime Minister Shehbaz Sharif has recently intensified efforts to implement long-awaited reforms aimed at reducing the cost of doing business and encouraging investment.
Addressing the challenges of simplifying and rationalizing regulations to cut bureaucratic red tape and compliance costs, a former president of the South Asian Association for Regional Cooperation acknowledged that while substantial, these challenges can be overcome with strategic actions.
He emphasized that addressing the cost of doing business requires a coordinated effort from both public and private sectors, warning that sustained high costs could lead to economic stagnation.
Despite this, critics, burdened by previous failures, remain skeptical about the government’s new initiatives to lower business costs. Former State Bank of Pakistan governor Shahid Kardar points out that excessive, outdated regulations imposed by the state distort markets and raise business costs.
The government’s plan involves compiling and digitizing all relevant laws and regulations related to investment and eliminating those that hinder business activities. However, there is skepticism about whether these measures will effectively encourage rapid progress in the private sector. Critics also highlight that the external financing required for the project has not yet been secured.
According to the Prime Minister’s directive, the first phase of the project involves prioritizing and compiling important laws and rules by December 2024.
There is a belief that Pakistan’s intertwined challenges require a comprehensive and coordinated policy response. An editorial in Dawn argues that no single initiative, regardless of its intent or scope, can transform the business environment in isolation. The current business climate has seen even major multinationals either exit the market or scale down their operations.
The Dubai Chamber of Commerce reported that nearly 4,000 Pakistani companies joined in the first half of 2024, a 17% increase from the same period in 2023. Analysts suggest that investors seek political and economic stability and predictability.
To improve the business and investment environment, wide-ranging reforms across economic, financial, judicial, policy, and civil service sectors are necessary. A holistic, government-wide approach is essential, as emphasized by Iftikhar Malik, who believes thoughtful policies and a conducive business environment are key to fostering economic vitality and improving living standards.
Majyd Aziz, former President of the Karachi Chamber of Commerce and Industry, stresses that businesses need to update the outdated economic model. He advocates for addressing wealth distribution imbalances urgently and ensuring workers receive their fair share of profits, which includes better wages, housing, skills training, healthcare, and education for their children.
For businesses to thrive, there must also be investments in physical and social infrastructure. An analyst notes that the size and efficiency of the government play a critical role in economic growth and prosperity. In Pakistan’s case, these factors are currently lacking.
Shahid Kardar, in a Dawn opinion piece, argues that Pakistan is on the brink of financial insolvency due to the burden of a bloated and predatory state apparatus. On August 9, Minister for Planning and Development Ahsan Iqbal indicated a potential reduction of Rs200-400 billion in development allocations for the current fiscal year due to the International Monetary Fund’s refusal to relax its conditions. He mentioned that no funds have been released in the first quarter and is awaiting guidance from the finance ministry on available public sector development program funds.
The debate over the “right size” of government remains critical, and while the official agenda now includes this consideration, past experiences cast doubt on whether these reforms will produce the desired positive outcomes.
