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EAB focuses on implementation of govt plans for economic revival

RECORDER REPORT

ISLAMABAD: The Economic Advisory Board on Saturday focused on implementation of government's plans for poverty reduction, industrial development, privatisation of government owned units and tax reforms.

Chaired by Finance Minister Shaukat Aziz, the Board discussed the main elements of the multi-dimensional economic revival programme, proposing strategy and priorities for each area of reforms.

For poverty reduction, the Rs 15 billion small schemes for income generation and employment of the poor, food support for families earning less than Rs 2000 per month, and micro-finance bank were discussed. Active participation of the stakeholders is to be ensured in development programmes.

In industrial sector, a new industrial policy incorporating policy on labour laws is to be announced by April, while four sub-sectors have been chosen for urgent support, namely fisheries, textiles, farm-based industry and marble.

The focus of government action would be on small and medium enterprises in the private sector. It is also planned to have joint ventures between PIDC units and private sector, the latter playing the managerial role, leading to eventual disinvestment.

For privatisation, a three-stage programme, each of Eight months, would be undertaken. Units where expression of interest has been invited and no regulatory or valuation problems are involved, would be the first to be privatised. Disinvestment through stock exchanges has also been proposed.

Besides, oil and gas sector would be the major focus of privatisation, and major gas fields are to be offered first.

In tax reforms, the plans are to broaden tax base, lower the tax rate, reduce number of taxes and to simplify procedures.

Addressing the members of the Board, the finance minister said that the government is committed to redirect economic policy towards poverty reduction. For this purpose growth is as necessary as direct support to the poor. As such, the focus of the government was to promote pro-poor growth and design programmes that would directly affect the level of poverty.

He said for growth revival, those sectors were selected where employment generation could be highest and which would also lead to significant export expansion and boost agriculture.

Also, by focussing on gas development the country would reduce is dependence on imported fuel etc.

HANDOUT

The government handout states: The third meeting of the Economic Advisory Board was resumed today (Saturday) under the chairmanship of the Finance Minister, Shaukat Aziz. The Board reviewed implementation of plans relating to Industry, Investment, Privatisation, Tax Reforms and Poverty Reduction.

The Board was informed that in the industrial sector, the focus of government efforts would be on the small and medium enterprises in the private sector. This sector will be encouraged through the removal of major regulatory distortions, technological deficiencies and by bridging the information gap.

It was noted that this sector represented vast potential for employment generation and exports expansion. But, at present, small & medium enterprises were suffering on account of low technological base, poor credit allocation, weak infrastructure support, poor marketing conditions and low value addition. For a concentrated support to the sector, it was planned that in the beginning four sub-sectors, namely fisheries, textiles, farm-based industry and marble, were be selected for a targeted intervention. Based on detailed analysis, these sectors will be provided support, through credit availability, technological information, establishment of institutional of stakeholders that bridge information gaps about markets and cost effective methods of value-addition.

The Board was further informed that there were still certain areas where public sector had a role to play in industrial development. For instance, many of the processing facilities to enhance non-traditional exports were require4d to be developed in the vicinity of areas where private sector would not easily set-up industry. For this purpose, Pakistan Industrial Development Corporation (PIDC) will act as a catalyst, through joint venture arrangements with the private sector. It will be prepared from the outset to let the private sector be managers and, within a short term, to disinvest. All other public sector corporations will gradually dissolve as soon as their units were privatised.

The government will be announcing an industrial policy in April which will cover all industries and issues related to their development, including a policy on labour laws.

The privatisation plan of the government was then placed before the Board. It was pointed out that a three-stage programme was formulated which categorised prospective assets into three categories, each phased over an eight months period. Immediately, those units will be taken in hand where valuation and regulatory problems were minimal. Many of these units will be offered through auction, for which invitation for expression of interest had already been invited.

In this stage, also assets that can be off-loaded through the stock exchange will also be offered to the general public.

Oil & gas sector would be a major focus of privatisation efforts where initially minority interests in some gas fields will be offered and subsequently major assets such as gas transmission companies will also be privatised.

The Board was also informed that the privatisation process would proceed under a well-defined law, which is in the final stages of preparation before its placement before the Cabinet. The process will be totally transparent and the proceeds will be used largely for the retirement of debt.

The Board was also informed of the performance of revenue collection in the first seven months of the year. It was noted that net tax collections during this period increased by 20 percent, compared to the same period last year.

The Board was then briefed on plans related to tax reforms. It was informed that the government was following the plan that was announced by the Chief Executive in his address to the nation. The principles building the tax reforms process were reduction in number of taxes, lower their rates, broadening of bases, simplification of assessment procedures and efficient system of dispute resolution and specific measures in each of these areas were contemplated by the government.

The Board was briefed on the poverty reduction programme of the government and various measures it has planned in this area. The integrated small public works programme was given Rs 15 billion in the first year for small scheme that will improve the income opportunities for the poor and also give immediate employment.

The food support programme was designed to cover 1.2 million households and target those, whose income is equal to or less than Rs.2000 . This will be administered at the local level with community's involvement in identification of the poor. The micro finance bank will also be programme aimed at improving the access of the poor to credit.

Expressing general satisfaction on the direction of the implementation plan, the Board members were of the view that there was a need to accelerate the speed of implementation. It was emphasised that special attention was needed to improve the working attitude at the operating level where even the best of policies were neutralised through mis-interpretation or lack of proper motivation and understanding for the success of the policy.

Regarding investment prospects, it said that it were local investor as well as the foreigner investor already operating in the country that had to display a significant improvement in confidence before the new foreign investment can flow in the country. Thus, in the short run, efforts must be devoted to remove the difficulties faced by existing investors so that they begun to invest.

Another view that was repeatedly emphasised was the focus on people behind development. It was said that all development was done in the name of people's welfare but their participation was not fully ensured. It was, therefore, suggested that people's participation in every programme must be ensured so that they developed a stake in the process.