Extracts from the Karachi Business Declaration

Feb 22, 2002 01:00 AM

The ICC Regional Foreign Direct Investment Conference has stressed that "the absence of political conflict is a precondition for local entrepreneurship to flourish and for foreign business to invest." The Karachi Business Declaration, issued after a two-day conference, said the participants were "convinced that the maintenance of peaceful conditions between and within sovereign states is crucial to enable the region to realize the benefits of an out-ward looking market economy."
About 350-400 local and foreign businessmen attended the conference held on February 17-18. The participants included UN officials, US diplomats and American officials representing ExImBank, OPIC and TDA who are looking at investment proposals within Pakistan and joint ventures and synergies that would benefit the region. The US official agencies intend to fund companies primarily in the private sector. Multinationals operating in Pakistan were also well represented.

The Karachi declaration reiterated that world business, as represented by ICC and ICC Pakistan, believes strongly that a liberalized economy open to the world is a powerful force for raising living standards in Pakistan. It added: "Legitimate private enterprise is an incalculably value asset for all nations through its contribution towards development, living standards and government revenues." With reference to Pakistan, the declaration pointed out that "it is essential that companies are able to operate on an even level field."

The participants voiced the concern of the local business and observed: "It is of fundamental importance that the governments ensure consistency and continuity of the reforms process. Policy towards business should be free from excessive regulation and market distortions that harm open and fair competition. Laws designed to promote trade and local and foreign investment must be faithfully implemented. More important of all, governments must suppress corruption at every level."
The FDI conference warned that "Rhetoric is not enough" and emphasised that "there must be action to achieve these aims so that economic progress can provide key to poverty alleviation, improved education and health service and social welfare.

First part of the extracts from "the Karachi Business Declaration" are reproduced below:

Legitimate private enterprise is an incalculably valuable asset for all nations through its contribution towards development, living standards and government revenues. It is essential that companies are able to operate on a level playing field.

ICC Pakistan in particular emphasizes the following:
1. Privatisation, deregulation and liberalization
-- The government not only has to get out of business but must stop telling business how, when and where to do business. The government must concentrate on developing rules for business, which are correct in their approach, governance and conducive to growth. The government has no business being in business. This means not only industry, banking, commerce and agriculture but also agencies, authorities and trusts, which affects the smooth flow of commerce and investment by land, sea, air and even, if necessary, by space.
-- A balance between freedom and rules needs to be achieved for the smooth functioning of the market economy. Increased reliance on free enterprise, open markets and competition implies less detailed governmental regulation. The pace of privatisation and its consequent benefits can only increase in relation to the pace of deregulation and liberalization.
-- Bilateral and multilateral incentives to initiate investment by foreign and local companies must be rapidly implemented and success ensured in order to jump start a natural, spontaneous and continuous flow of foreign and local direct investment. This can be for new initiatives and joint or independent initiatives in the privatisation of all government-owned business institutions.
-- The reduction of corporate income tax to 16 % and the absolute minimization, if not the elimination, of the presumptive tax regime.

-- Multilateral and bilateral laws and agreements must be examined and implemented to facilitate the establishment of eastward-bound pipelines through Pakistan. The Iran to Pakistan pipeline should be given the utmost priority because the possibility of onward supply to India will earn transit fees and help develop regional cooperation between three countries. Similarly, the Gulf South Asia (GUSA) project must be given the same priority, as it will change the future of not only the entire region but a continent. Pakistan is obviously an energy crossroad for north, south, east and west for demand and supply, which are the fundamentals of a market economy.
-- Coal as a major source of energy has to be developed. In so far as ratio of oil, gas and coal is concerned as a source of energy, this should be a purely market decision of the investors. The government should refrain from protecting any one sector or state-owned enterprise, the latter being in the processof being privatised regardless. Once the government is out of this sector and develops conducive regulation creating the right environment, availability of capital will never and can never be an issue.
-- Consistency in energy policy is the bedrock for all successful energy projects because of its capital-intensive nature and lengthy payback periods. Any deviation, any indecision, any short-term views have no room. Energy is not in the interest of any one nation; it is in the interest of the world. An investor in this sector must be spared any uncertainty in terms of consistency of policy to reduce the risk and encourage foreign and local investment. Sanctity of agreements must be maintained at all times.

3. IT, e-commerce and telecommunication
-- Pakistan must comply with all international laws pertaining to IT, e-commerce and telecommunications in order to have any position in the world IT market. The protection of intellectual property rights is fundamental in the development of the IT, e-commerce sector and a legal system for IPR must be put in place. Although Pakistan has all the fundamentals necessary for this sector to develop exponentially and get its due share in the global arena, the delays in compliance with international regulations and laws are preventing the entry of Pakistan in the global IT, e-commerce markets in any meaningful way.
-- Legal structures for financing of IT and e-commerce projects have to be adopted and implemented. Government must withdraw banking regulations that prevent the availability of funds to IT and e-commerce companies.
-- A special section within the law enforcement agencies be created on commercial cyber crimes for which ICC will be able to provide guidelines as well as information by virtue of its ongoing work with Interpol.
-- The development of electronic documentation in banking is a reality and training in this regard should be made compulsory for all banks.

Source: The DAWN Group of Newspapers
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