Honesty on trade deal

Pakistan can do a lot to improve the competitiveness of Pakistani businesses seeking to compete in global market share

Given the now-chronic legislative logjam in Washington, it was perhaps inevitable that the Obama Administration admitted publicly that it no longer has the ability to pass a trade deal with Pakistan. What is disappointing, however, is that this reality has been evident for quite some time and yet US officials continued to try to persuade Islamabad that a trade deal was possible. We are glad that US Commerce Secretary Penny Pritzker had the courage to speak the truth on her recent visit to Islamabad, even as we find the US government’s inability to conduct an effective foreign policy disconcerting. Ms Pritzker tried to deflect attention from Washington’s inability to deliver on a promised trade deal with Pakistan by asking Islamabad to fix its tax system and bureaucracy. Even though she was clearly trying to change the subject, we do find her comments useful and we agree especially with her assertion that the tax code in Pakistan is far too arbitrary and the red tape far too onerous on honest businesses trying to invest in the country.



In theory, the Nawaz Administration makes all the right noises, pledging to cut back on red tape and ending the damaging practice of bypassing parliament to change the tax code through Statutory Regulatory Orders (SRO), but the reality is almost the opposite. There has been virtually no move on trying to improve Pakistan’s business regulatory environment. Indeed, according to the World Bank’s Doing Business reports, Pakistan’s global rank in ease of doing business appears to be getting worse every year. Meanwhile, this government has issued three mini-budgets through SROs, flagrantly violating the constitutional prerogative of the National Assembly to set tax policy. With such an attitude towards long-term governance and institution-building, no wonder foreign direct investment (FDI) into Pakistan has been anaemic. The recent growth figures for FDI only look impressive because last year was even worse than before and thus set a low base from which to compare this year’s performance. In short, as disappointing as it is that the US will not be offering trade concessions to Pakistan, it is true that there is a lot that Islamabad can do entirely on its own to improve the competitiveness of Pakistani businesses seeking to compete for global market share.

Published in The Express Tribune, March  13^th,  2015.

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