Pakistan needs to shun bureaucratic red tape to attract investments

May 23, 2024

Ayesha Saba

Pakistan needs to eradicate bureaucratic red tape to ensure the establishment of an efficient business environment conducive to facilitating a significant influx of investments. This was stressed by Majid Shabbir, general secretary of Islamabad Chamber of Commerce and Industry (ICCI). Talking to WealthPK, he said cumbersome bureaucratic processes posed significant challenges for investors and new business owners, hindering the growth of Pakistan's economy. He further said that Pakistan's industrial sector was reeling from a severe setback following a sharp rise in interest rates stemming from the International Monetary Fund's loan programme. "This has led to a wave of closures and downsizing across sectors, exacerbating unemployment and economic instability." "With industries already struggling to navigate bureaucratic red tape, infrastructure challenges, and regulatory complexities, the spike in interest rates has further compounded these issues. For businesses, especially small and medium-sized enterprises, access to affordable credit is crucial for sustaining operations and fueling growth.

However, the high interest rates have deterred investment and hampered business expansion plans, thereby hindering the overall ease of doing business." In light of these considerations, he urged the Special Investment Facilitation Council to prioritize regulatory reforms aimed at simplifying the business landscape for foreign companies. "By doing so, Pakistan can enhance its attractiveness as a destination for foreign investment and promote sustainable economic growth," he suggested. Majid maintained that efforts to revitalize the industrial sector must be accompanied by a comprehensive long-term strategy, focusing on enhancing competitiveness, fostering innovation, and promoting export-oriented growth. "Targeted assistance programs like refinancing schemes, tax incentives and subsidy packages should be devised to provide relief to struggling industries." An official of the Board of Investment told WealthPK on condition of anonymity that BOI was currently engaged in a proactive initiative to simplify the business registration process through the development of the Pakistan Business Portal.

"This online platform is designed to function as a comprehensive solution, consolidating all necessary registrations, licenses, certificates, and permits essential for different business types. He added that Pakistan's economy needed both short as well as long-term measures for proactively tackling the current economic impediments. "Some of the major areas in which policy interventions are required include structural reforms and improving the investment climate both for foreign and local investors." According to the monthly economic update and outlook for April, foreign direct investment inflows witnessed an increase of 89.4% to $258 million as against $136.3 million in the earlier month. The improvement in FDI inflows is attributed to improvements in the investment environment and a reduction in political uncertainty. Furthermore, the SBP has maintained the policy rate at 22% since July 2023. During FY24, the money supply (M2) showed growth of 5.9% (Rs846.2 billion) compared to 4.4% (Rs1,211.5 billion) in FY23.

Credit: INP-WealthPk