Pakistan needs to embrace deregulation for productivity gains, global competitiveness

June 13, 2024

Ayesha Saba

Pakistan needs to adopt deregulation strategies to boost productivity and enhance its global competitiveness. Deregulation, which involves reducing government controls and regulations on businesses, is a critical step towards creating a more dynamic and open economy. Sajid Amin Javed, an eminent macroeconomist and Deputy Executive Director Sustainable Development Policy Institute (SDPI), said that Pakistan's economic landscape is marked by extensive government involvement across various sectors, including agriculture, manufacturing, retail, transport, trading, and construction. “This high degree of government intervention, while aims at ensuring stability and fairness, has inadvertently stifled competition and hindered the full potential of businesses.” He further said that adopting a free-market mechanism has the potential to improve Pakistan's economy by promoting competition, innovation, investment, and resource allocation.

“However, the transition should be well-planned, with measures in place to address challenges and ensure that the benefits are distributed equitably among the population,” he emphasised. In an interview with WealthPK, Kamran Ahmed, Policy Adviser at All Pakistan Business Forum, said Pakistan's consistent low ranking on the World Bank’s Doing Business Index is attributed to the significant delays, bureaucratic hurdles and obstacles imposed by various government departments and agencies, hindering the establishment and operation of businesses. “Consequently, the economy is witnessing a rise in informality, with the majority of enterprises stuck in a cycle of low productivity. In a globalised economy, competitiveness is crucial for attracting investment and ensuring sustainable growth,” he said. Kamran added that by removing excessive regulatory barriers, Pakistan can encourage the entry of new firms, which would drive incumbents to innovate and improve efficiency to maintain their market positions. “This competitive environment is crucial for productivity growth.”

“Deregulation is seen as a key driver for unlocking productivity gains and improving competitiveness in the global economy,” he said, adding that countries that have liberalised their economies have witnessed increased innovation, higher productivity and greater economic dynamism. Dr Muhammad Afzal, an economic adviser at the Ministry of Planning, Development and Special Initiatives, told WealthPK Pakistan needs to transform its economy into an export-led growth trajectory through market reforms. “In addition to improving the economy’s competitiveness and productivity with a vibrant private sector, it is critical to attract domestic and foreign investments to support it.” “The government needs to address complexities and the distortions in market policies that currently benefit a few entities at the expense of broader productivity growth. Many public enterprises in Pakistan are operating at a loss due to inefficiencies, lack of innovation and excessive bureaucratic control. Cutting subsidies and privatising loss-making enterprises can reduce the fiscal deficit, making public finances more sustainable,” he suggested.

Credit: INP-WealthPk