Energy Sector - 2

[Guest]

<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>The bad outweighs the good in our economy </b>
FT
Farrukh Saleem : <i>Our economy is freer than India's; yet, foreigners do not invest here. Why?</i>  <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->
   
<b>First, the good news:</b> according to The Heritage Foundation’s ‘Index of Economic Freedom’ Pakistan’s economy is ‘freer’ than India’s, China’s and Bangladesh’s. Pakistan’s trade policy is liberal than India’s. In India, according to the US Trade Representative, “non-tariff barriers remain extensive, including a high level of confusing bureaucracy, onerous standards and certifications on many goods, discriminatory sanitary and phytosanitary measures, and a negative import list that bans or restricts imports.”

The Indian government’s intervention in the economy is much higher than Pakistan’s. On foreign investment, according to the US Department of Commerce, “India controls foreign investment with limits on equity and voting rights, mandatory government approvals, and capital controls.” According to The Economist Intelligence Unit India is “a difficult market for foreign companies. Most economic activities are bound by restrictions, public services and infrastructure are poor, and the government continues to impede the free flow of capital across its borders.” The Government of Pakistan, on the other hand, allows foreign investors to own up to 100 percent of most businesses.

In India, according to the US Department of Commerce, “Businesses must contend with extensive federal and state regulation. Firms have identified corruption as one obstacle to investment. Indian businessmen agree that red tape and wide-ranging administrative discretion serve as a pretext to extort money.” Additionally, labour laws are rigid in India but not so stern in Pakistan. To be certain, property rights are better protected in India than they are in Pakistan.

For the record, Pakistan started opening up its economy in 1988 (the Zia-government had promulgated the first Disinvestment Ordinance on July 16, 1988). Whereas, India was a latecomer to the liberalisation game (India began opening up in 1991 when Manmohan Singh was appointed finance minister on June 21, 1991).

Our trade policy is liberal, government intervention is low, corporate taxes are competitive and we allow 100 percent ownership to foreigners. So far so good. Musharraf zindabad. Why aren’t foreigners then queuing up to invest in Pakistan?

<b>Reasons:</b> internal security is the first followed by political instability. The third is a lack of economic depth. We continue to be a 2-commodity, 1-port economy.

Four, the market size, particularly Pakistani purchasing power, is not at a level whereby it can attract serious dollars. Shaukat Aziz has done what he could and 9/11 has done what it could. <span style='color:red'><b>Pakistan can attract serious-investment dollars only if multinationals can be assured access to the Indian market (to be sure, the Iran pipeline is feasible only if India is a buyer).</b></span> <!--emo&--><img src='style_emoticons/<#EMO_DIR#>/biggrin.gif' border='0' style='vertical-align:middle' alt='biggrin.gif' /><!--endemo-->

<b>Five, and most importantly, it makes little sense to talk about attracting foreign investment when national security is the priority and economics a mere subsidiary. When ‘strategic depth’ is the priority, education takes a backstage and Pakistan, as a consequence, now lacks the human capital that would be needed to produce anything worth producing.</b>
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