Written by: Saima Batool
Economic liberalization means abolition of controls in industry and commerce by delicensing, reduction in custom duties and opening the doors for foreign investment to the country. Dismantling of controls is expected to boost industrial production and revive the economy. The past few governments in Pakistan have been considering linearization favorably in view of the dragging performance of some Asian countries who established their economies during the last two decades. Some of our neighboring countries like Indonesia, Malaysia, Thailand and China have registered substantial economic growth due to liberalization and marketization of their economies.
For Pakistan to catch up with them, we should aim to unshackle our economy from debilitating controls and allow a free interplay of market forces to give incentive to the entrepreneurs. This will result in attracting foreign capital.
First three decades after independence witnessed increasing investment in public sector enterprises engaged in production of various sectors such as oil, steel, coal, power, cloth, fertilizer, electrical and electronic goods. However they operated under an artificial price control regime and very few of them , having administered prices , have performed well and earned profits. The overall return from the public sector units involving a huge portion of plan investments has been either extra ordinary low or unprofitable. They are also not run on sound commercial lines and are overstaffed. It is felt that a number of measures can be initiated to revamp the public sector undertakings by making them compete with private sector units and overhauling their management system. They can perform much better under a liberalized economic regime.
Disinvestment in oil and telecom sector has already been made although fund received are not as per the expectations. Disinvestment in public sector unit will be further increased in coming years reducing government share and increasing private sector over a period of time.
By allowing private sector investors to participate in power, mining and telecom sector, a very substantial and fast up gradation of economic infrastructure can be brought about in a few years, moreover the public sector units will learn to contain their expenditure, to increase their competitive skills and enter into healthy competition with private entrepreneurs. This level playing field for all of the players both private and public sector organizations will encourage healthy competition increasing the performance of both and adding to the country’s pool to good and service administration prices will be slowly phased out in favor of market prices. The quality of goods and services will improve and consumer will have greater choice and buy at competitive price.
The opponents of economic liberalization allege the small Pakistani entrepreneurs will not be able to compete with big multinational companies if the letter stool setting up industries which had so long been reserved for small scale industries, the small units have to acquire sophisticated equipment and expert specialist engineers and managers. It is doubtful if they will be able to mobilize recourses for such equipment and employees. Economic liberalization also means unrestricted entry and marketing of patented entry of multinational corporations in the country. The government of Pakistan has to sign the relevant agreement of world trade organizations to facilitate protection of patent rights of foreign companies. Acceptance of W.T.O terms will lead to higher cast of many agricultural inputs but also considerable enhancement in productivity and production.
The most visible aspect of liberalization in the country’s economy will be much larger presence of multinational companies in the field not only of infrastructure, power or telecom but also consumer industry including potato chips, cold drinks, toys etc. There is a very large range /variety of consumer goods. The opponents of liberalization fear that by the entry of M.N.C in market , the local industrialists may not be able to compete with them. Although this apprehension is not entirely ill founded, a long term in this view in this matter will should the benefits of this policy. Foreign companies bring along with them the largest and better technology which will be adapted by Pakistani manufactures. We have sufficient technical manpower in the country capable of adapting the very latest and the most advanced techniques and technologies. Advanced technology coming in M.N.C s will be learnt and adopted by Pakistani companies. Economics liberalization aims a free convertibility of rupees and dollars this will bring stability in market. Nonresident Pakistanis are greatly encouraged by economic liberalization and are increasingly making investments in Pakistani products and companies with the lifting of ban on repatriation of profits, their investment have registered a sharp upward trend. The resources of government being very limited, the necessary capital and investment for reviving Pakistani economy are sought to be obtained from non- resident Pakistanis it is a long term strategy to unleash the production capacity of Pakistan Industry and trade competitive not only inside Pakistan but also as compared to many foreign countries.
Standardization of production process and products are prerequisite for competitive exports. Rationalization of tax structure and simplification of procedure also firm part of economic liberalization. Not only the government has to sharply reduce import duties on all things thus facilitating imports and exports to build up a substantial balance at foreign exchange reserve. The government has also reduced the number of different rates of central excise to facilitate computation and collection of taxes.
This article is published in March 2018 edition of Monthly Engineering Cap Magazine. This article can also be read online in the animated version of magazine at http://engineeringcap.com/engineering-cap-magazine/