The purpose of scoping was to identify the most significant areas where shifting is taking place on a large scale.
Step-2: Literature Review
At this step detailed literature review of the selected areas was conducted. The related documents recent reports/publications whether printed or web-based were consulted to verify the empirical data and description of specific issues.
Step-3: Formulation of the Recommendations
In this step it was analyzed that why the issue has reached to certain level of status, what are the consequences, what are the action plans in process and then suggest measures to overcome the issue.
Organization of the paper
Part-1 describes the causes of shifting of capital and industries from Pakistan.
In Part-2 its consequences have been discussed and analyzed.
Part-3 comprises of suggested measures. In the end conclusion of the discussion and recommendations has been made to overcome this problem.
Flight of capital and industries from Pakistan is a serious issue which cannot be ignored. The government has not enough space for the economic reforms as it is using most of the resources towards fight against terrorism, meeting its defense requirements and debt servicing. The lack of economic reforms combined with other factors like uncertain political condition and energy crisis has forced massive capital flight from Pakistan.
1.2 Government’s lack of interest in the pro business and investment policies and higher interest rate, high tariffs, electricity and gas load shedding are some major factors behind the current economic crisis. The worst law and order situation, energy crisis, target killing, unchecked violence and protests has caused huge loss to business and economy of the country as a result of which large chunk of foreign investment has gone and even local industry has closed their business in Pakistan.
1.3 In Pakistan if we review the performance of industrial sector it is not doing well because of the overall situation of the national economy where the opportunities for long term businesses have been restricted. Big businessmen and industrialists are not interested in long term business activities and they have started shifting of their capital outside. On the other hand banking sector inspite of having enough liquidity do not encourage the industrialist for taking loan and credit because of risk factor of bed debt. Apart from this there is huge gap between the import of consumer goods and exports which have also affected the local production.
1.4 Dubai has become the world trade business hub. Most of the multinational companies have set up their offices in Dubai from where they interact with their counterparts around the World. There is lot of demand for housing as well as commercial centers which has generated a construction boom attracting investors from all over. Pakistani exporters after losing hope of getting any favorable support from the government for safeguarding their interest and competitiveness at the global level are winding up their business establishments in Pakistan and moving out their capital to Dubai to make easy money in real estate. The greatest advantage in investment in Dubai is the stable costs of input and un-interrupted supply of power and above all no undue interference of the government departments at local level. There is no fear about the law and order or political insatiability and the business community pays full attention to their business deals and transactions.
1.5 In Pakistan not only foreign investors are reluctant to invest but also domestic investors are shifting their businesses abroad. Some of the manufacturing units especially of the textile sectors have already been shifted to Bangladesh which offers cheap labour and attractive environment for investment. Bangladesh has been offering a lot of incentives, including uninterrupted power supply and tax-free status for the first ten years and free access to markets in the European Union. The Pakistan businessmen have already invested heavily in Bangladesh owing to these facilities. Profit margin in Bangladesh is much higher for the textile exporters than in Pakistan. The international buyers are reluctant to place orders in Pakistan because of high cost of doing business, shortage of electricity and gas and poor law and order situation.