One of the most successful and least celebrated government programmes that is currently in operation is the Pakistan Remittance Initiative (PRI), which seeks to increase the volume of money sent home by overseas Pakistanis through formal channels. The recent news that remittances touched nearly $14 billion in fiscal year 2013 is a testament to just how successful the programme has been. The PRI is based on a simple premise: overseas Pakistanis used informal channels because they offered lower transaction costs and no bureaucratic hassle. The State Bank of Pakistan decided to beat those informal channels, not by locking them all up, but by competing on price. It has offered to subsidise the cost of money transfers to formal sector players, an initiative that costs the government a negligible fraction of a percentage point of the total remittances being sent home, but has resulted in Pakistan becoming the cheapest place in the world to send money to, according to a study by the World Bank. As a result, informal money transfers — while they still exist — have been reduced to a shadow of their former sizes.
But the PRI is interesting not just for its success in raising remittances: it is a good example of the government attracting money by competing for it, and thus, raising the quality of its services. Too often, the government makes laws and puts the burden of compliance on the citizenry, rather than designing them in accordance with people’s needs.
The government would do well to take this approach to policymaking in other areas, particularly those concerning foreign investment. Many foreign companies have been eyeing Pakistan as an investment destination. Our government can either greet them with mountains of paperwork to fill out, which would drive away the majority of them, or it can simplify the rules that govern their behaviour and encourage more of them to invest their money.
Published in The Express Tribune, July 15th, 2013.
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