Author Archives: Huzaifa Shabbir Hussain

Debate on Taxation in Pakistan: Reforms Move to the Next Level

Photo: Wikimedia Commons

Karachi Photo: Wikimedia Commons

Pakistan’s overall tax-to-GDP ratio has been hovering around 10 per cent for the past decade, which is approximately five per cent lower than the average of comparable economies. Despite a large tax base available in all provinces, they collectively contribute only seven per cent in overall revenues.

Federal revenues are low, and government coffers are emptied by debt servicing, high defense spending, and power subsidies, resulting in government institutions without adequate budgets to operate. Without tax reform, Pakistan’s civilian government and its ability to govern remains weak and ineffective. Moreover, Pakistan remains on the brink financial crisis.

Since the passage of a constitutional amendment in 2010 aimed at rolling back the excessive power the central government had built up over years of military rule, the provincial administrations have been entrusted with greater revenue mobilization responsibilities. The amendment was intended to bring education, health, and other basic government services closer to the people and help develop areas that were historically ignored by Islamabad, and was viewed as an important first step in a series of reforms to create a responsive and accountable democratic Pakistan.

However, empowering provinces without the proper mechanisms in place for implementation, and conflict resolution, and without strengthening revenue raising capability at the provincial level, has resulted in greater duplication of bureaucratic structures and processes at central and provincial levels, leading to more wasteful spending and higher budget deficits. Moreover, government services that are now to be provided by the provincial governments are often not provided at all, as provincial governments themselves appear confused or reluctant to take on service delivery and financial responsibilities.

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6th All-Pakistan Secretary Generals Conference


“Learning, networking, beginning of new friendships, exposure to cases of mutual interests – that is what this forum is to me” – Secretary General, Pakistan Afghanistan Joint Chamber of Commerce & Industry

“It was very informative conference, especially the new idea of panel discussion was excellent. In panel discussion so many legitimate issues came under discussion and the participants shared their experiences and exchange views. This idea of panel discussion provided the opport​unity for better understanding about membership development, litigation issues, and preparation of annual performance report/proposed plan activities and how to avail the facility of funding from donor organizations, which is no doubt a great assistance for the Secretary General to perform their obligations for the betterment of members as well for the organization” – Secretary General, Sargodha Chamber of Commerce & Industry

“Take away from this year conference is the conference is the discussion in person with vast experiences/contacts. This particular networking opportunity goes a long way afterwards. Moreover, compliance with Trade Organization Ordinance. 2013 and useful knowledge about funded projects by Donors are my learning/takeaways from this particular session of 2014. Gratitude to CIPE Team once again and congratulations to All Secratery Generals for availing this important opportunity. Now it’s our turn to implement the learning in our Business Association to achieve the purposes of both, the Chamber/Association as well as of CIPE” – Secretary General, Gujrat Chamber of Commerce & Industry

The annual Secretary Generals’ conference is CIPE Pakistan’s flagship event, giving the CEOs of all Pakistan’s business associations an opportunity to come together to network and learn from each other’s experiences.

This year we had 47 nominations, and per our budget had to restrict ourselves to 25 participants. We worked out a viable budget plan and were able to accommodate 40 Secretary Generals, which shows importance of this initiative.

The participants included four women, representing women’s chambers as well as male-dominated business associations. This conference was the 6th such event for Secretary Generals. The Secretary Generals traveled from four provinces of Pakistan to attend this two-day event.

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Women Entrepreneurs Mark Global Entrepreneurship Week in Pakistan

The Peshawar Women’s Chamber of Commerce and Industry (PWCCI) celebrated Global Entrepreneurship Week with an event held in partnership with CIPE and the Kauffman Foundation on November 15. More than 50 students and lecturers from various Peshawar universities gathered to discuss both the hurdles facing women entrepreneurs in Pakistan, as well as the reasons why the Peshawar region lags behind other parts of the country in producing entrepreneurs. Speaking at the event, PWCCI Vice President Shamama Arbab noted that while young people in Pakistan have no lack of potential, a challenging business climate makes it difficult for them to harness their skills and capabilities.

According to the Global Entrepreneurship Index, Pakistan lags in the number of start-ups, with less than half the rate of early-stage entrepreneurial activity than comparable countries. CIPE Pakistan Deputy Country Director Hammad Siddiqui commented that young Pakistani graduates tend to seek employment in multinationals after graduation, rather than considering the option of entrepreneurship. Furthermore, he noted, “To turn around Pakistan’s economy, women need to participate in the mainstream, including by starting their own businesses.”

During the discussion it was stressed that business development centers should be established to incubate new firms, and that chambers and associations can play a key role in mentoring students who are considering entrepreneurship, as well as new entrepreneurs. The participants emphasized that the government should promote an entrepreneurial culture, and universities should introduce entrepreneurship in the curriculum. The student also noted that the media can play a role in encouraging young people to make their careers in business.

For more information about this event, as well as another event marking Global Entrepreneurship Week in Pakistan held in conjunction with the Young Entrepreneurs’ Forum at the Islamabad Chamber of Commerce and Industry, please see more on the Business Support Organization Forum, an online resource for Pakistani chambers.

Empowering Women Entrepreneurs in Khyber Pukhtunkhwa Region

Until a few years ago, lack of proper legislation hindered the participation of Pakistani women in business. The outdated 1961 Trade Organizations Ordinance was no longer compatible with the modern business environment and did not reflect the true voice of entrepreneurs, especially women who could not effectively contribute towards growth in the country’s economy.

CIPE was instrumental in facilitating reforms that led to the enactment of 2006 Trade Organization Ordinance which for the first time in Pakistan’s history allowed for the establishment of women’s chamber of commerce. CIPE initiated the process of engaging women entrepreneurs from across Pakistan by using a two-pronged approach. It involved engaging the leadership of women’s chambers in capacity-building programs and consultative discussions on issues related to women entrepreneurs, and helping women’s chambers with basic infrastructure problems such as access to electricity, installing computers, and developing websites.

Secretary General of one of CIPE’s partners, Women Chamber of Commerce & Industry Peshawar (WCCIP) in the Khyber Pukhtunkhwa Region, highlighted that when she joined the chamber, it was an infant organization. After the chamber was registered in August 2010, the day-to-day activities and office requirements needed a lot of financial strengthening. At the beginning that is difficult for almost every organization and the newly established chamber was finding it difficult to run smoothly. Therefore, the chamber’s executive committee sought assistance from donor organizations to ensure that the organization develops and thrives.

With CIPE’s financial and technical assistance, the Peshawar Women Chamber achieved substantial changes in its performance. Before, the chamber did not have even basic office automation, and there was no proper promotion plan and resources to implement it. Because of these basic shortcomings, organizational structure was neither properly identified nor properly working. Since the chamber was new, local entrepreneurs and established business women were not aware of the chamber’s existence and its services.

CIPE’s support for WCCIP resulted in bringing many new faces to the organization, as membership drive increased day by day. The office equipment was purchased, and the chamber started publishing a newsletter and successfully launched its website. With the website in place, it has become a lot easier for current and potential members to become familiar with the chamber’s structure, services, and benefits of membership. Members’ contact information has also been uploaded to the website for women entrepreneurs to network both locally and internationally.

A significant increase in membership followed. To-date, WCCIP has 150 registered members, which means a 45% increase in the membership since the inception of the CIPE project. Currently the chamber is also in contact with a large non-governmental organization Khwendo Kor that helps women take practical steps for the betterment of themselves and their families, aiming to register more than 200 women entrepreneurs from different districts with WCCIP.

Initiatives such as this are required to boost the business environment in Pakistan and make it more conducive for women entrepreneurs. Especially in the region like Khyber Pukhtunkhwa, which has been suffering through a tough period because of security problems, support for local women through a dedicated chamber of commerce is crucial for women’s empowerment.

How to formalize the informal sector

Forum on the informal enterprise in Pakistan (Photo: CIPE)

Over the last three decades, the informal sector in Pakistan has grown faster than the formal economy. Although estimates vary, the  informal sector accounts for at least one-third of the country’s gross domestic product (GDP). It is also an important source of employment, second only to agriculture in terms of the number of jobs. Given this dynamic growth and size of the informal sector, it is important to understand the reasons why so many entrepreneurs are unable to enter the formal economy and how to address such problems.

That was the topic of last week’s discussion forum on “The informal enterprise in Pakistan: challenges for growth” organized by CIPE and the Karachi Chamber of Commerce and Industry.  The forum gathered 40 private sector stakeholders including Karachi Chamber members, representatives from the State Bank, microfinance institutions, informal businesses, and the media.

“Research has consistently shown that entry barriers such as lengthy registration requirements, licensing and inspection requirement, and complicated taxation policy are the key reasons for people remaining in the informal sector,” said CIPE Regional Director Andrew Wilson.

Other speakers noted that the policy environment leading to the prevalence of the informal sector suffers from weaknesses in three key areas: taxation, regulation, and private property rights.

When taxes are too high, business regulations too onerous, and private property rights inaccessible for many or poorly protected, businesses that would otherwise enter the formal economy cannot overcome those barriers. That is why, as Businessmen Group Chairman Siraj Kassim Teli suggested, joint advocacy efforts by the private sector are needed to improve Pakistan’s policy environment and encourage more informal businesses to formalize.  

The participants agreed on the following key recommendations:

  • CIPE and business community represented by the chambers and trade bodies should join hands in identifying the clusters where the informal enterprises are likely to be based and should encourage, facilitate, and coach them to become a part of the formal sector.
  • The debate on the informal sector should move beyond the traditional equating it with ‘black economy’ that implies criminal endeavors. Policymakers and private sector actors alike need to acknowledge that the vast majority of informal enterprises are involved in legitimate economic activities that should be classified as ‘extra legal,’ not ‘illegal.’
  • The State Bank has introduced the Credit Guarantee Scheme for commercial banks to cover the default risk of borrowing entrepreneurs – including those in the informal sector – for up to 60% of first loss. There is a need to raise awareness among the commercial banks and enterprises to utilize this scheme.
  • The State Bank prudential regulations governing collateral requirements have been relaxed to accept any documented property including their inventories, moveable property, and receivables and more entrepreneurs should take advantage of this new lending opportunity.
  • Informal enterprises operating in the manufacturing sector should be encouraged and facilitated to use the testing, standardization, and quality assurance services offered by the government to improve their product and market development capacity.
  • A dialogue with the policymakers, regulators, and other relevant government agencies is needed to apprise them of the dynamics of the informal enterprises and the barriers they face.
  • More research needs to be done to understand the profile and characteristics of the informal sector.

Informality persists and expands because of legal barriers to entry and exit and imperfect market conditions in the face of ever-increasing consumer demand. While the informal sector enterprises may offer short-term benefits to market participants, a large informal sector drains the economy in the long run. Thus it is the joint responsibility of the government and business associations to create an enabling environment to absorb the informal enterprises into the mainstream, formal sector of the economy.

CIPE marks five years in Pakistan

Image: CIPE Pakistan

In 2011, CIPE celebrates its fifth year of work in Pakistan. Since establishing its Pakistan office in January 2006, CIPE has built a strong reputation as an honest and knowledgeable broker, and a facilitator of important discussions between the business community and government. With an approach of paying close attention to local conditions and looking for openings for potential reforms, CIPE has supported the business community in a range of efforts that have led to significant achievements.

These include reforming the law governing chambers of commerce and business associations, improving access to microfinance through the State Bank of Pakistan, raising standards of corporate governance, improving the quality of economic journalism, and providing a level playing field for women entering business by helping to launch and build the capacity of women’s chambers. In carrying out these programs, CIPE has worked with a wide range of chambers and associations, think tanks, academic institutions, NGOs and government institutions across the country.

Each year, CIPE compiles a Pakistan Activities Report, highlighting the achievements, successes and exceptional nature of the work carried out by these partners. You can learn more about our work in CIPE Pakistan’s newest report, covering our activities for 2010. Read the report here.

CIPE Pakistan small grant program shows impact


In July 2010, with the support of a CIPE small grant, the Rawalpindi Chamber of Commerce and Industry (RCCI) established an Information Resource Center to provide its members with better access to reliable information about business opportunities. Since then, students and entrepreneurs have been using the Center for a wide range of services and learning opportunities.

While initially some RCCI members were reluctant to use the Center’s services due to lack of awareness of what was offered, they have recently begun to take full advantage of this resource. In addition, since the Center was launched, RCCI has been receiving more regular general inquiries, and has seen membership increase from about 2,700 to over 3,100 – approximately 15 percent increase in membership with respect to the pevious year.

Launching the Center has benefited RCCI in many ways, including:

·        Facilitating regular activities: The publications and facilities available at the Information Resource Center are also used for training programs and seminars regularly conducted in the Chamber.

·        Time savings: Thanks to the technology on offer at the Center, with a computer, scanner, fax machine, photocopier and printer, and an electronic database, RCCI is able to process requests for information 15 to 20 minutes more quickly than in the past.

·        Business processes: Members are using the facilities at the Center for their business purposes, including printing and faxing. Previously, members could scan approximately 30 documents per hour, which has now increased to 50 documents per hour.

·       Regional business activity: Members are using the Center’s library resources to increase their business literacy and increase productivity by finding the right information at the right time.

·        Personal development: Students from partner universities frequently visit the Center to read books on business topics, helping them in their professional development.

·        Increased visitation: Door count and circulation figures have increased significantly compared to last year. On average, 15 to 20 members and students visit on a daily basis, approximately 30 percent more than in the previous year.

RCCI’s Information Resource Center is thus playing a pivotal role in Rawalpindi, both by increasing the visibility of the Chamber, as well as helping members build their businesses using timely information.