The CEO and Secretary General OICCI said this is a positive indicator for future FDI inflow which can further improve with proactive settlement of issues of the foreign investors. The OICCI is concerned over the downward trend in the business confidence, considering the current improved and relatively stable economic parameters, government''s ongoing focus on improving the energy and security situation, and the feel-good factor being created by the expected CPEC investment and the ever improving stock market performance, notwithstanding the ongoing pressure on balance of trade and balance of payments and low level of FDI inflow in the country.
He presented key highlights of its biannual Business Confidence Survey - Wave 14, which has indicated a downward trend with Business Confidence Score (BCS) of 13 percent against 17 percent in November 2016 and 36% in April 2016. The business confidence of OICCI members participating in the said wave 14 was also down by 9% as compared to last November 2016 survey, but with a BCS of 37%, in the April 2017 survey, OICCI members continue to maintain significantly more positive sentiments than the remaining respondents.
The last year''s perception and Investment Survey of OICCI members were also discussed, highlighting the opportunities and impediments to FDI inflow in the country. Commenting on the low level of FDI, OICCI President Khalid Mansoor showed extreme concern and said that though the inflow of Foreign Direct Investment (FDI) to Pakistan has increased by 12.4 per cent to $ 1.6 billion during the first nine months of the current fiscal year 2016-17 against $ 1.425 billion in the corresponding period of the last fiscal year, the FDI remains very low and not even one per cent of the GDP of the country.
He, however, was of the view that this level of FDI is well below Pakistan''s capability and FDI inflows recorded in the past. Pakistan needs significantly higher FDI, at least three per cent of GDP, to generate the desired level of economic growth and employment opportunities. Economists estimate that there is a need for 2 million new jobs every year to cater to the young population and fast growth in number of educated youth.
Answering to a question, he said that the government would be able to generate sufficient electricity but there is a need to invest on transmission and distribution system.
The OICCI president reiterated the need for a more focused approach to introduce growth-oriented economic policies, more aggressive and result-oriented taxation and trade policies to boost documentation of the economy, encourage longer term investment by both local and foreign investors, including setting up of export-oriented industries, developing an effective private public partnership forum to help harness the significant potential of the country which has so far remained a dream rather than reality. Elaborating the reasons for low level of FDI, CEO and Secretary General OICCI M Abdul Aleem highlighted the key reasons which included negative perception over riding positive facts about Pakistan, poor rating in the World Bank "Ease of doing business" (EODB) Survey (144/189), taxation system focused on organised sector only with ad hoc levies like 3-4 percent super tax, gap in Investment incentives and policy implementation, insufficient interaction between government policymakers and investors, non-settlement of issues like tax refunds and circular debt, less than satisfactory implementation of Intellectual Property Rights legislation and absence of stable and forward looking pharma pricing and regulatory regime, to serve public health goals and exports. Moreover, there is a growing feeling of over regulations in certain segments of business and trade.
In reply to a question, he, however, said that the chamber has not received any complaint of kickbacks during the incumbent government. The OICCI also shared its key taxation proposals for 2017-18 budget, covering both specific legislative measures and structural reforms which are as follows: (i) super tax be abolished; (ii) rates of corporate and sales tax be reduced and aligned to regional countries; (iii) revamping of withholding tax regime from current 55 rates to just 5 rates; (iv) incentives for new investments to be made part of every budget; (v) timely co-ordination on inter-provincial issues like the Workers Welfare Fund (WWF) & Workers Profit Participation Fund (WPPF) - jurisdiction and tax deductibility be clarified; (vi) rationalise Minimum Tax Regime (MTR) for large value but low margin businesses like oil marketing companies (OMCs); (vii) tax policies should ensure a 10-year phasing out period so that local and foreign investors could base their plans on policies which are predictable and consistent over a reasonable time and feedback of the largest tax contributors should be taken before finalisation of the Finance Act; (viii) growth in tax collections over and above the projected growth from the organised sector should be based on broadening the tax base and bringing new tax payers into the tax net; (ix) Tax Reform Commission 2016 report be judicially and transparently implemented with periodical monitoring and; (iii) faster processing of pending income/sales tax refunds. The OICCI members are some of the largest tax payers in the country, contributing over 30% of the total tax collection throughout the country, who invest over $ 1.5 billion annually in expanding their footprint in Pakistan.
Copyright Business Recorder, 2017