During the past few weeks, protests against US drone attacks and suspension of NATO supplies to Afghanistan from Pakistan’s northwestern routes have hogged much of the limelight.
With media attention focused on these political events, there is a good chance one may have easily missed out on some of the positive developments taking place on Pakistan’s economic front. These events provide an opportunity to put the country’s economy on the right track and enable it to overcome stiff challenges of persistent energy shortages, massive unemployment, and lagging industrial and agricultural output.
In the political arena, the US and Pakistan are certainly not enjoying the best of times. The mercurial relationship was once again put to test by Imran Khan’s provincial government in the Khyber Pakhtunkhwa province as it stopped NATO supplies to Afghanistan from the land routes. The decision to suspend supplies was made to protest the drone attacks, which have targeted key militant leaders but violate Pakistan’s sovereignty. Meanwhile, the US hosted a three-day energy conference in Houston, Texas, to promote investments in Pakistan’s energy sectors. The energy conference highlighted the tremendous potential offered by Pakistan in the power sector and provided a unique opportunity for the investors to interact with key government officials. The country is struggling to bridge the yawning gap between supply and demand, which has resulted in long spells of darkness and dampened industrial growth. Some American companies have expressed their willingness to invest in the country’s energy sector and reap huge rewards.
Pakistan’s economic performance may also be boosted by the decision of EU Parliament’s International Trade Committee’s to grant duty-free market access to its exports. The status approval underscores the success of the government in lobbying with friendly countries to gain support for a politically and economically stable Pakistan. As textiles account for about 56 percent of the country’s total exports, the sector is expected to benefit immensely from the EU move. To take maximum advantage of GSP Plus status, the government needs to facilitate local manufacturers by overcoming severe gas and electricity shortages, providing relief in ever-surging power tariffs, and improving law and order situation across the country. By promoting an environment conducive to business, the government will be able to tap the potential offered by GSP Plus status and generate more jobs, higher tax revenues and revitalize the sluggish economy.
Lastly, Pakistan’s Prime Minister Nawaz Sharif has announced an incentive scheme for the business community in an attempt to bolster tax revenues and attract investment in different sectors of the economy. Under the announced package, applicable from January 2014, no questions would be asked about the source of investment if investors show willingness to participate in the government’s green field projects or expansion projects in certain sectors. While critics believe that the move will again encourage whitening of black money and annoy regular taxpayers, others are of the view that it would help document the underground economy. It is estimated that Pakistan’s underground economy is about 30 percent to 50 percent of the official GDP. The government’s latest move is in line with its goal of broadening the tax net and formalizing the various undocumented sectors of the economy.
