Govt to create firewall to protect corporate sector from agencies’ harassment

April 12, 2025 (MLN): The government is set to create a firewall requiring any investigation into corporate entities first to be vetted by relevant bodies such as the Securities and Exchange Commission of Pakistan (SECP), State Bank of Pakistan (SBP), Federation of Pakistan Chambers of Commerce & Industry (FPCCI), or Karachi Chamber of Commerce and Industry (KCCI).

This step is being taken to ensure that the corporate sector is protected from undue harassment by investigative agencies such as the National Accountability Bureau (NAB), Federal Investigation Agency (FIA), and Federal Board of Revenue (FBR), said Special Assistant to the Prime Minister (SAPM) for Industries and Production Division, Haroon Akhtar Khan.

"We want to prevent arbitrary action against legitimate businesses”, he stated during his visit to the Karachi Chamber of Commerce & Industry (KCCI) on Saturday.

“This firewall is not meant to protect wrongdoers but to ensure that honest entrepreneurs are not subjected to harassment”, he further added.

Haroon Akhtar underscored the need for a clear, robust industrial policy that fosters export-led industrialization, reduces import dependence, and builds foreign exchange reserves, as per the press release issued.

“We must prioritize domestic investors before looking outward. Our policies should focus on strengthening local manufacturing capacity,” he said.

He acknowledged the concerns raised by KCCI members, noting, “Most of your issues are valid and well-known”.

“The Prime Minister is deeply committed to leaving behind a legacy of a prosperous Pakistan, aiming to transform the country into the next Asian Tiger through industrialization", Haroon Akhtar noted.

"This vision inspired me to leave my business and join public service”, he added.

Haroon Akhtar opined that poor policies and misguided decisions in the previous eras led to the closure of major industries such as steel, paperboard, and textile mills.

However, he emphasized that the government is now on a path to recovery, citing the 10 percent reduction in the policy rate as a key step toward economic revival.

"We are confident that with declining inflation, interest rates will fall further”, he noted.

He also pointed out the reduction in electricity tariffs for both domestic and industrial consumers and reiterated the importance of rationalizing corporate tax rates to ensure regional competitiveness.

SAPM announced that a new bankruptcy law will soon be introduced to provide struggling businesses with legal avenues for restructuring and continuity.

Additionally, committees are also being formed for the revival of sick industrial units and other issues that are the top priority of the government.

He revealed that for the first time since the country’s independence, Pakistan will have a comprehensive industrial policy.

An internationally reputed consultant has been hired to assist in formulating this policy, ensuring it meets global standards and is tailored to Pakistan’s economic context.

In addition, the Small and Medium Enterprises Development Authority (SMEDA) will undergo complete restructuring.

Under the new vision set by the Prime Minister, SMEDA will be transformed into a dynamic and results-driven institution, supported by world-class consultants to make it truly effective in supporting SMEs.

He also mentioned that the Ministry of Industries will be restructured and its scope expanded to serve as the central hub for all industrial and manufacturing affairs in Pakistan.

This is part of the government’s broader strategy to place industry at the heart of economic planning.

On the issue of access to finance, he said that a committee will ensure that credit facilities are not limited to blue-chip companies but are extended to SMEs and the agricultural sector as well.

Equal opportunities for funding are essential for inclusive growth and nationwide industrial expansion.

Speaking on the ease of doing business, SAPM criticized the current system, which requires as many as 350 possible certifications to start a new business, of which most of the NOCs are provincial subjects.

Addressing the issue of capital flight, he said a high-powered committee would be formed to investigate why Pakistanis are reluctant to retain or bring back their wealth.  

The committee will propose mechanisms to encourage investment in brownfield and greenfield projects across the country.

Akhtar acknowledged that tax rationalization remains a major challenge due to constraints from international lending agencies such as the IMF.

However, he stressed that meaningful steps can still be taken within the next two years to reduce unnecessary burdens and promote economic activity.

He suggested that savings from reduced electricity tariffs could be redirected to further cut power costs and lower corporate tax rates.

On international trade issues, particularly U.S. tariffs, SAPM said Pakistan is ready to engage in dialogue. A delegation may be sent to Washington to negotiate mutually beneficial trade terms.

“We understand how the U.S. administration operates”, Haroon Akhtar said.

“We will not retaliate but rather seek a constructive negotiation that minimizes the impact on our exports", he further noted.

Every crisis brings an opportunity, and we are prepared to turn this challenge into an advantage.”

Chairman BMG Zubair Motiwala, while expressing serious concerns over the ambitious revenue target, pointed out that despite such a high target, the size of the industrial sector remains unchanged.

He further noted that private sector borrowing has stagnated, and no significant new industrial ventures have been established.

“This implies that the entire tax burden is being shifted to the existing industries, making it increasingly difficult for them to sustain operations”, he said.

“By imposing super tax and other harsh taxation measures, we are, in effect, crippling our industries,” he warned.

While highlighting the contradictory approach towards exporters, Motiwala stated that while the government claims to support exporters to enhance the country’s export potential, it has shifted them from the Final Tax Regime (FTR) to the Normal Tax Regime.

This shift, along with a dramatic rise in the number of tax notices issued in the last two years, reportedly exceeding the total issued in the previous ten years, has created a climate of fear and uncertainty.

He also criticized the practice of seizing bank accounts without due process, especially when the individuals are traceable and their business details are known.

Such actions, he said, severely disrupt operations and further erode business confidence.

Drawing comparisons with global practices, Motiwala stressed the need to facilitate businesses in line with international standards.

He cited examples from the Gulf region, where long-term commitments such as fixed utility rates and tax breaks for up to 25 years are successfully attracting industrial investment in Special Economic Zones.

He emphasized that unless Pakistan adopts a similarly business-friendly approach, it will continue to fall behind.

He also pointed out that Pakistan is in direct competition with countries like Bangladesh, India, Sri Lanka, Cambodia, Thailand, and Vietnam.

To compete effectively, he suggested that the government hire international agencies to evaluate Pakistan’s cost of doing business and compare it with these regional competitors to make meaningful adjustments in policies.

Earlier, President KCCI Muhammad Jawed Bilwani, while welcoming the SAPM, highlighted the grave challenges faced by the business and industrial sectors due to the exorbitantly high cost of doing business, particularly the excessive taxation.

He pointed out that as a result, many businessmen and industrialists have relocated their operations to other countries, including those in the Gulf region, Europe, Canada, Mexico, and Bangladesh.

This ongoing exodus has led to the outflow of millions of dollars from the country.

“Many individuals are also transferring substantial funds abroad to acquire foreign citizenships, which is one of the core reasons behind the economic instability we are facing today,” he remarked.

“In such a scenario, the government’s pursuit of Foreign Direct Investment (FDI) appears contradictory, especially when local investors themselves are being driven away due to unfavourable business conditions”, he added.

Bilwani stressed that the government must urgently create a pro-business environment to prevent further capital flight and brain drain.

“Without immediate reforms, the country will continue to suffer economic deterioration”, he said.

“When other countries offer stable 10-year energy tariffs and predictable tax regimes, which help effectively devise business plans for a decade, it becomes increasingly difficult for Pakistani businesses to justify staying here”, he further noted.

Bilwani emphasized the importance of regular dialogue and consultations between the government and industry stakeholders to effectively address the mounting issues of the business community.

“Industries will neither sustain operations nor pursue expansion if profitability continues to erode,” he cautioned.

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