- Long term planning required
By: Tang Tianru
Pakistan’s current fiscal and taxation policies are characterized by increasing tariffs, expanding the proportion of taxes, raising all kinds of living, production and material rates, resulting in a sharp rise in the production costs of enterprises and an increase in the burden of business operation. At the same time, the exchange rate of the Pakistani rupee against the US dollar has depreciated sharply recently. The consumption cost of the people has risen sharply in a short period of time. As a result, the market demand becomes weaker, and inflation is higher. At the time of rising production costs, enterprises have encountered the double challenge of shrinking market demand, adding to their difficulties and worrying conditions. Some enterprises have stopped production or sought to withdraw from the Pakistani market to seek overseas development, thus increasing the unemployment rate in Pakistan.
Due to the poor economic performance and deviation of fiscal and taxation policy, Pakistan has encountered some serious problems namely stagflation. The direct result of stagflation is a sharp decline in people’s income and a sharp increase in unemployment, as well as major problems in social stability. It seems that Pakistan is entering a vicious circle of economic decline in investment, production, circulation, and consumption, which in turn leads to both financial and economic crises.
It should study and compare the comprehensive factors of various aspects, so as to formulate a more attractive investment policy, more in line with the long-term development of the country to attract investment while continuing to introduce relevant policies and push them forward
At present, the response of the Pakistani government is limited to short-term solutions, lacking long-term strategic vision. The effect of the “treatment” is not as desired. I would like to make a few observations:
1) It is necessary for Pakistan to make good use of the China-Pakistan Economic Corridor (CPEC), so as to rapidly develop the Pakistani economy, benefit the Pakistani people, and improve the livelihood of the people. The smooth development of CPEC projects over the past six years has greatly changed the quality of life of the Pakistani people and led to the rapid development of the national economy. Therefore, CPEC in Pakistan is a project that has a lot of support and it has become an important factor that can change the fate of Pakistan. As CPEC has reached a critical period, Pakistan should make positive preparations for the healthy and rapid development of CPEC in a constructive direction.
2) Pakistan shall always put national interests and national development first. All government departments should have a sense of mission for the sake of national interests, cooperate with each other and coordinate efficiently, and should not attack each other and pass the buck for the sake of their own interests.
3) Development needs to be carefully arranged and carried out in an orderly manner. At present, it is necessary to seriously study which industries are in line with Pakistan’s national conditions and market needs. The situation in provinces and localities is different. We should study, identify and consider which industries are in urgent need of the local market, which industries are conducive to the development of local resources and other factors, and rationally balance regional interests. Pakistan should take a comprehensive approach, and formulate a targeted medium and long-term (5-10 years) development plan.
4) Pakistan should formulate an industrial plan in line with the development of the country’s national conditions. Pakistan also needs to seriously consider, carefully manage and cultivate the layout of the whole industrial chain. Only in this way the manufacturing sector in Pakistan can be properly cultivated. It is necessary to consider the training of talents in relevant industries, from technical skills to management, organization and arrangement, and to study what talents will be needed in these industrial chains in the future. Talents must be trained in a targeted, fixed and quantitative manner. In the early stages of talent training, Pakistan can consider seeking help from China and Germany. In the later stage, it can consider the joint training by government, schools and enterprises, so that talents can quickly enter the working force, get the stage to display their talents and create more than expected value.
5) The continuation of good policies is the cornerstone of national development. Let investors have no worries, rest assured that bold and active investment shall be made. Investment will bring advanced technology and good management experience and international markets. It will also provide a large number of jobs, promote business development, reduce dependence on imports, increase export opportunities, and increase national taxes so as to bring the country into a virtuous circle. Pakistan should study the surrounding countries that have done a good job of attracting investment. It should study and compare the comprehensive factors of various aspects, so as to formulate a more attractive investment policy, more in line with the long-term development of the country to attract investment while continuing to introduce relevant policies and push them forward.
6) Fiscal and tax policies that meet Pakistan’s long-term interests should be formulated. I believe that the current top priority is to encourage economic development, not vice versa. The interest rate of bank deposits should be lowered with appropriate macro-control policies, so as to encourage some bank deposits to actively participate in market circulation and increase the proportion of investment. In this way, more jobs can be created; enterprises can get the capital to develop the industrial chain. In terms of taxation, expanding the tax base and reducing the tax rate are the need of the hour. A step-by-step tax policy that expands the tax base both by law and reasoning should be introduced.
In addition, in the current dismal business environment, the production enterprises should be given appropriate tax reduction support, so as to help the products to enter circulation as soon as possible, promote the market recovery, increase consumption, and increase the employment rate. If the Pakistan government can attract more overseas investment, it can get more tax revenue from the increase of the scale of production, operation and transportation of enterprises. Specific measures include reducing tariffs on raw materials and spare parts to help enterprises reduce production costs, simplifying the process of administrative examination and approval of enterprises, delegating responsibilities to relevant ministries, establishing one-stop services, and so on.
The writer is a Chinese entrepreneur based in Islamabad