Tuesday, October 28, 2014

Daily Times Editorial Oct 29, 2014

Politics and investment In line with his oft-repeated message since coming to power last year, Prime Minister (PM) Nawaz Sharif, while addressing the International Investment Conference in Islamabad on Monday, reiterated his message of economic development. Dismissing the ‘threat’ posed by the Imran Khan/Tahirul Qadri sit-ins, the PM told the media that the latter’s sit-in had ended and the former’s too would eventually meet the same fate. He argued that the country needed peace (on the domestic political front) and stability to fulfil the government’s agenda of pulling the country out of the economic doldrums it was labouring in. He promised a massive infusion of capital into the country’s economy to set the stage for overcoming poverty, unemployment and terrorism. Earlier, addressing the conference, he pointed to the success of Pakistan’s Eurobond of $ 2 billion, the strengthening of the rupee (which has since seen some slippage, not the least because of the uncertainty produced by the political stand-off with the authors of the sit-ins), and promoted Pakistan as an investment destination of choice. In particular he mentioned the scope for investment in the power sector, whose distribution network the government intended to privatise to make the sector even more attractive to investors. He said Pakistan had fallen behind the changing global economic development trends but his government was now catching up to align Pakistan with the current global economic climate. Pakistan offered projects based on co-production, joint ventures and joint marketing arrangements with local partners. The country’s taxation regime was the lowest in the region, he emphasised, and tax concessions and exemptions were available for specific businesses. In addition, the government offered exclusive economic zones, infrastructure subsidies and research and development support. Pakistan was open to 100 percent foreign equity and imposed no limit on repatriation of profits. The Board of Investment operated a one-window system to facilitate investors. The PM also touched on the losses incurred by the country because of the disruption caused by the sit-ins, including the regrettable cancellation of Chinese President Xi Jinping’s visit. The potential loss of the $ 32 billion investment the Chinese president was coming armed with will however be made up during PM Nawaz Sharif ‘s scheduled visit to China next month. There is little doubt that the high tide of the sit-ins has passed and the government has survived what had begun to look like a perfect storm. However, it would be a mistake to sink back into complacency and the government’s lacklustre performance before these events. On the political front, the government needs to embark on some initiatives to regain the ground lost during the prolonged standoff. Even if Imran Khan is adamant to stay in his ‘tent’ until the PM resigns (of which there are no signs), Qadri having scooted off to foreign shores, the government should utilise the hiatus to itself implement its declared intent to set in motion the electoral reforms needed, whose importance and shape has been thrown up in sharp relief by the sit-ins, even if they did not succeed in their maximalist demands. The electoral process has to be rendered transparent and credible to avoid this kind of controversy in future elections. Only a credible electoral process can help the still shaky democratic system to consolidate itself and set Pakistan on the path of development and modernisation. Since these objectives chime with the PM’s own and oft repeated vision of where he wants to take the country, let him provide the means to settle the political furore of recent days and clear the decks thereby for Pakistan being in a stronger position to become the investment destination of choice and trading partner to the world that Nawaz Sharif would dearly love. Of course after sorting out the political front, the government must focus on the problems of the energy sector and other bottlenecks that make doing business in Pakistan difficult. Investors will only be drawn to the country if they see political stability (and therefore policy consistency and continuity) and are sure of the provision of energy and other infrastructural and input needs. Meanwhile Imran Khan may feel that a little ‘derangement’ (madness) may be necessary to bring about change, but objective observers will be compelled to wonder whether the ‘little derangement’ he advocates has not by now taken a turn for the worse towards political insanity.

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