There is no question that the withdrawal of the GIDC Ordinance that would cherry-pick favourites was the right thing to do. An unintended consequence, however, is another blow to the already depressed state of business confidence. It also comes in the wake of the finance adviser and the SBP governor signalling an economic turn for the better. There was also a meeting of the PM with a select group of businessmen to boost the latter’s confidence. Legislation is being considered to protect businessmen (and bureaucrats) from being NAB-bed injudiciously. Prior to that, a series of business-government concourses were held to agree to measures to improve the rating on the World Bank’s index of Ease of Doing Business. The hasty announcement and withdrawal of the GIDC throw a spanner in these works. Already, the total private investment has decreased from 10.3% of GDP in 2017-18 to 9.8% in 2018-19. The target for the current year is also carefully set at 10.1% of GDP. Growth of private investment in large-scale manufacturing was at negative 2.2% in the same period. The annualised data for July showed a decline of 36% in the inflow of foreign direct investment and an increase of 11% in the outflow. In absolute terms, the net inflow was a mere $73.4 million.
A wait-and-see sentiment is being created by the escalation of the conflict in Kashmir. The investor confidence built over years is shattered by war in days. Today is 6th September, a day in the remembrance of those laying down their lives in the line of duty. We should also remember that the private investment in the year before the September war was 11.3% of GDP. It crashed to 9.7% in the war year of 1965-66. It continued to fall until the day and the year we don’t remember. In 1971-72, private investment nose-dived to 6.5% of GDP. When Mr Bhutto urged the nation “to pick up the pieces” to “make a new Pakistan”, private investment had rock-bottomed to 5.5% of GDP. It took 37 years to return to the level of 11.3% of GDP.
Now in the Urdu version of new Pakistan — the Naya Pakistan — war has sensibly been declared as the last option. But other policies also have to avoid the one step forward; two steps back disaster to scare the private sector. Let it be understood that businesses across the world hardly care about transparency or good governance. Whatever they may say about business ethics or social responsibility, the driving force is profit — declared or undeclared. The keyword for them is: consistency. They work equally well under consistently misgoverned and non-transparent regimes and consistently well-governed and transparent regimes. A government must never be in haste to make a policy. Before announcement, it should take its time to consider the pros and cons by picking on the best brains in the government and outside of it. The overriding consideration should be that the policy will stay once it is announced. So think, rethink, and trial-run before legal enactment and public pronouncement. Policy should not degenerate into the old saying that “it was bad enough that the old man married, but it was worse when he divorced”. This is particularly important to attract and retain the “Chinese flying geese” of investment in the special economic zones being established under CPEC. Finally, as GIDC lands in courts, need we be reminded that courts may dispense justice, but the outcome could be a Reko Diq or Pakistan Steel Mill?
Published in The Express Tribune, September 6th, 2019.