Finally, the first Industrial Policy of the country is ready for rollout – but the consent of the IMF regarding incentives offered in the new policy as well as the Provinces for it’s effective implementation is required.
Special Assistant to the Prime Minister on Industries and Production, Haroon Akhtar Khan, has finalised the policy withing the six months deadline given by the Prime minister to the ministry of industries and production.
Meanwhile the meeting between the IMF and the ministry of industries led by Mr Khan is expected later this month to discuss the amount of incentives to be offered for various industrial sectors.
The National Industrial Policy (NIP) has set the export target of $60 billion by 2030, GDP growth reaching 6 percent per year by 2030 and manufacturing growth of 8 pc per year by 2030.
The ‘Key Constraints’ for the growth of industry and exports of industrial products from the country are Costly Industrial Land and Policy Uncertainty.Other issues faced by the industries are Macroeconomic instability, Excessive Regulation, Expensive & Unreliable Power, Limited Access to Credit, as long term borrowing was costly in Pakistan and other venues like capital markets have restricted entry for industries.
Pakistan has Weak investor protection and insolvency framework as a result the current recovery framework gives few options for banks to restructure loans raising the overall investment risk.The other constraints are Uneven sectoral tax burden, as the industry face heavier taxes than sectors such as real-estate, construction, wholesale and retail which lowers the return of industrial investment relative to other sectors.
Foreign Exchange Bottlenecks are faced by the manufacturing firms who are at times unable to access foreign exchange for imported inputs and the Foreign direct investment (FDI) cannot always repatriate profits.
The Weak Standards Compliance is one of the key reason for Pakistani products to fall behind in the export markets.NIP highlights that limited opportunities for inclusion was a serious issue as industrial structure of Pakistan has not facilitated the entry of women entrepreneurs.
‘Women remain at the periphery and suffer from a sense of not belonging, this needs to change, and more women industrialists need to be promoted,” the policy has highlighted. Meanwhile, the NIP has suggested the tax regime should be improved to create a clear, predictable and transparent business taxation regime that is consistent with IMF reform plans.
To combat the uneven sectoral share of corporate taxation that falls on industry, tax policy and revenue collection should be reformed to ensure that revenue across all sectors is proportional to their value-added contribution to GDP.
The NIP has called for widening of the tax net and increasing the tax burden on under taxed sectors such as real-estate, construction, wholesale and retail.
The finance ministry and the FBR has been asked to review of corporate taxation such as the Super-Tax which is levied on top of corporate income tax (CIT) on corporate taxable income.
The CIT was 29 percent that is above the regional average of 26 pc undermining the competitiveness of export firms. NIP has also called for simplification of CIT.During the policy formulation stage, the Ministry of Industries surveyed firms, business associations and stakeholders across 18 industrial sectors to determine the constraints to investment and growth.
The policy suggests establishment of a National Industrial Revival Commission (NIRC) to oversee the policy on firm revival, to tailor revival plans and coordinate for regulatory support.
There is a need to strengthen intellectual property rights protection in country to protect the quality standard producers and innovative products from cheaper versions of copyright violation.
To combat counterfeiting in the country, improving the responsiveness of Intellectual Property Organisation of Pakistan (IPO) was essential.Reducing port charges was also essential for industrial growth mainly for the exports as the charges levied by Karachi Port Trust (KPT) and Port Qasim Authority (PQA) are reportedly amongst the highest in the world.
