SHIFTING OF CAPITAL AND INDUSTRIES FROM PAKISTAN

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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.

2.5       It is also noticed that Pakistani investors are investing huge amount in real estate business in Dubai by entering into joint venture agreement with their local partners which is one of the major factor for flight of capital from the country. There was a boom in the construction industry in the Gulf States in the recent years which have attracted the Pakistani businessmen to avail this golden opportunity at a time when the local economic conditions are not favourable and the industrial sector is passing through economic crisis.

2.6       There is no positive indication for improvement in the power generation and the gap between demand and supply of electricity is increasing day by day. However the Government is not bothered to resolve the energy crisis especially for the unannounced load shedding for long hours which has damaged the industrial sector. The Government has to take corrective measures to correct the situation failing which the position will further deteriorate as more industries will be closed and the people will force to shift their investment to those countries which offer better opportunity for profit earning and return on investment.

2.7       As per article “Aftermath of Energy Crisis” published in Pak Observer, Estimated cost to industry due to energy shortage comes to PKR 230 billion annually besides causing unemployment for 0.4 million people[9]. As per article ‘Poor Governance Deepens Energy Crisis’ published in the daily Dawn, April 16, 2012, estimated annual cost to industry is PKR 240 billion. So in Pakistan the industrial sector is facing an average annual loss of PKR 235 billion per annum.[10]

2.8       The need of the time is that the government should immediately constitute Economic Reforms Committee with active participation from all the stake holders including chambers of commerce, other trade bodies and political parties and formulate short term, medium term and long term strategies to tackle the issues and challenges which are hampering the economic growth.

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