Services sector growth faces hurdles

Experts stress need for steps to tap true potential of sector, especially in Punjab

LAHORE:

Experts have agreed that the services sector has critical importance for any vibrant economy, however, several steps are needed to tap true potential of the sector in Pakistan, especially in Punjab.

In a dialogue titled “Better Business Regulation for Services Sector in Punjab,” Sustainable Development Policy Institute (SDPI) Joint Executive Director Dr Vaqar Ahmed shared findings of an institute’s survey and said the services sector of Punjab was facing hurdles to growth due to difficult access to business premises.

Besides rental spaces, the fragmented tax regime demanding compliance with over three dozen taxes coupled with hurdles related to access to running finance and fixed investment sources, particularly in Covid-19 times, was adding to the woes, he added.

“Some other challenges are affecting sustainability of services sector firms including weak access to public procurement opportunities, inadequacy of e-commerce, and online and digital payments infrastructure and weak linkages with regional and global value chains,” he said.

Vaqar added that the arbitrary imposition of labour, municipal and environmental laws posed further challenges.

He voiced hope that the government would soon agree on a trade-in-services agreement with China to curb costs for Pakistani firms interested in integrating with the Chinese services sector, and work on services sector-focused economic zones under the China-Pakistan Economic Corridor (CPEC) would be expedited.

Punjab Board of Investment and Trade Director (Policy) Sohail Qadri cited a few examples of Chinese enterprises willing to relocate due to high labour costs.

“Information technology parks can help promote IT-enabled businesses, which are much desired by the Chinese companies,” he said. “We need to channel our new graduates towards understanding needs of the Chinese services sector and how to integrate into Chinese value chains.”

On the occasion, The Bank of Punjab Group Head Khawar Ansari told the dialogue participants that banking services were undergoing innovation to respond to Covid-19-related needs of businesses.

However, he added, businesses would need to develop a decent history of using banking channels.

“We would like to see businesses, applying for loan, secure their future cash flows,” Ansari said, adding that Pakistan needed to be more receptive to venture and angel investors. Lahore Garrison University Director (Innovation) Imran Jattala was of the view that the knowledge of building services sector businesses and scaling them up was limited to select family groups in Pakistan.

“National Incubation Centres help immensely in this regard but we need more such entities in second-tier cities of Pakistan,” he said.

Punjab Economic Research Institute (PERI) Senior Research Fellow Dr Shehzada Naeem said the provincial government was making efforts to improve engagement with business associations to better understand needs of the private sector in the wake of Covid-19.

To boost productivity in the services sector, he emphasised the importance of improving Pakistan’s ranking in information and communication technology (ICT) adoption and logistics indicators, which were closely observed by foreign investors.

Mahnoor Arshad, a researcher on issues faced by women-led enterprises, was of the opinion that women-run businesses were hit the hardest during Covid-19.

“Learning needs of women-led businesses should be explored in the post-Covid-19 scenario including orientation to online ways of doing business, overcoming constraints to mobility and attracting investors during the pandemic,” she said.

SDPI Head of Centre for Private Sector Engagement Ahad Nazir shared his insights into the impact of Covid-19 on businesses including the services sector.

He stressed that the federal government should streamline the regulatory environment whereas e-commerce and cluster-based services sector development should be promoted in Punjab.

Published in The Express Tribune, July 17^th, 2020.

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