Shifting of Capital & Industries from Pakistan : A Critical Analysis

1.13     The high tariff for the manufacturing sector has substantially increased the cost of production and thus reduced the profit margins to compete in the international market. The unscheduled load shedding has forced the closure of large number of industrial units. There are also gas load shedding problem in the country which is another major constraint for the industrial sector. Without solving these problems the industry will not flourish.

1.14     Another factor which counts lack of interest in investing in Pakistan is our education system which has no uniformity. Children of the big businessmen and the industrialists study in the expensive English medium schools and most of them after completing  their O and A level  go abroad for higher studies and majority of them do not come back as they settle abroad. In Pakistan the public sector investment in education is negligible. Every government has failed to pay proper attention to this important sector because most of the funds are utilized to cater for the requirement of defense and debt management rather than investment in the social sector like education and health.

1.15     Apart from the above macroeconomic instability  lack of proper infrastructure have also contributed a lot towards the increase in  the cost of doing business due to which businessmen are not ready  to make more investment. For investors, macro economic instability and uncertainty about future economic outcomes are always played an important role to decide about the level of investment. In case of stable macroeconomic environment the rate of investment increases which allows more allocation of resources, increase in productivity level and growth of the manufacturing sector. Some key macroeconomic policy instruments are fiscal and monetary policy, debt management, and exchange rate which are determining factors for investment level and growth.

1.16     Our banking sector offers higher interest rate which also raises the cost of doing business and resultantly affected the investment in the country. Due to high cost of borrowing the businessmen normally do not prefer to get loan from the banks for investment due to which industrial growth remains low. In other countries their banks offer business loan on easy terms and conditions, lower interest rates and easy installments for repayment, therefore people get better opportunities for investment due to low cost of doing business.

CONSEQUENCES

Economic growth of the country is badly affected by the continuous power shortage. Estimates of Planning Commission reveal that losses from power and gas shortage held GDP growth by 3-4 percentage points in the year 2011-12 with a concentrated impact on the manufacturing sector.[7]

2.2       Due to high inflation rate and other economic constraints the country has led to a state of balance of payment and crisis. Inland security concerns and the war on terror have created greater instability in the country which has led to decline in foreign direct investment. From the flight of capital it is evident that the investors have lost their faith in economic policies of the government which has resulted huge outflow of capital and industries from Pakistan to the neighboring countries.

2.3       According to a report published in the Business Recorder on 18th June, 2011,        Mr. Khalid Abdul Razzak Malaysian Consul General in Karachi revealed that Pakistanis had transferred 180 billion rupees (about 2.1 billion US Dollars) to Malaysia under “Malaysia My Second Home Program[8]

2.4       The above situation is alarming because it shows a fast trend of transfer of wealth from Pakistan to other countries as the wealthy class of our country including businessmen and industrialists intend to settle abroad as they are looking for multiple options due the prevailing law and order situation in the country. The government has to look it more seriously and to take some immediate steps to control the situation.

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