Another dimension of constraints faced by investors is the archaic and complex regulatory framework. Regulations pertain to different tiers of the government, influencing business activity. Poor regulatory quality and arbitrary enforcement of regulations hurt small businesses disproportionately. Most of the sectoral regulatory agencies are under the federal government. However, it is struggling with the institutional structure instead of designing business friendly regulations.
A number of regulations are being administered by provincial and local governments particularly in the areas of labour, environment, quality, price controls and safety inspections among others. These create real hurdles for businesses through unpredictable and non-transparent inspections and arm twisting tactics for rent seeking.
Multiple public sector regulatory agencies continue to deter local and foreign investors. Dr Ishrat Husain highlighted in an article that there are 40 public sector organisations that a business has to deal with. This indeed, accentuates the problem of excessive, ineffective and unnecessary regulatory oversight and control.
Another outcome is the ever escalating property prices due to speculative and non-productive investments. This has also made cost of doing business very high in terms of acquiring premises for a factory or office.
It is interesting to note the response of the public sector in Pakistan when pushed to enhance private sector development. Most favoured option is to establish a government organisation headed by a civil servant for providing trainings, capacity building, technological, marketing or other such business solution services to the private sector without realising that private sector has surpassed public sector in terms of exposure and knowledge.
A cogent message that needs to be conveyed to policymakers is that in order to allow business to thrive and attract investment, they need an enabling environment. Irrelevant trainings, useless feasibility reports and so-called technology up-gradation support are mostly futile efforts. A basic question that needs to be addressed here is: how can a public servant train or guide a business organisation?
Furthermore, there is a need to address regulatory bottlenecks and other complexities of the public-private interface.
The writer is a Doctoral Student in Public Policy at the University of Delaware and formerly served as Governance Specialist at the Ministry of Finance
Published in The Express Tribune, November 2nd, 2015.