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Tackling unemployment

Speaking at Sino-Pak Tire Manufacturing Joint Venture Ceremony, Prime Minister Imran Khan said that economy is now fast moving on the path of stabilisation and the government is now focusing on tackling the chronic issue of massive unemployment by creating more jobs. He expressed optimism about substantial increase in foreign direct investment after the 28 points improvement in the ease of doing business index which will lead to creating job opportunities for the unemployed youth. The Prime Minister appreciated the efforts of Board of Investment for creating business friendly environment and Ministry of Commerce for putting the exports on upward trajectory.
The simplification of regulatory procedures has improved the economic environment but that alone will not boost foreign and domestic investment for creating jobs to a provide employment to more than 10 million unemployed workforce. The current rate of unemployment is 14 percent and every year 1 million educated people enter the job market. The investment climate is still not largely friendly because of credit squeeze as result of high interest rate, escalated cost of import of raw material, machinery, parts and components and above all the unaffordable tariffs of energy inputs. The production in large scale and medium scale manufacturing has shown declining trend in the first quarter of current fiscal year. The sale of locally manufactured cars and trucks has dropped by more than 50 percent due fall in purchasing power of people and 49 percent devaluation of local currency, which made very expensive the import of completely knockdown and semi-knockdown auto kits. About 40000 daily wage workers have lost their jobs in one vendor industry that provides parts to automobile sector. Foreign direct investment is so far confined to the purchase of short term Treasury Bills worth $ 675 million. Foreign investors are shy of investment in industry because of highest in the world electricity and gas tariffs, stagnant technological base and non-availability of skilled manpower. It were the low electricity and gas prices, modern technological base and availability of skilled manpower that enabled India, Bangladesh and some other countries of South Asia to reap the benefits of outsourcing of a number of industries from the developed countries to the developing countries in late 80s and early 90s. Such an investment conducive environment is yet to be created in the country. Chairman State Engineering Corporation had urged the business leaders in his address at Islamabad Chambers of Commerce and Industry last year to induct fourth and fifth generation technologies if they are keen on entering in joint ventures with Chinese Companies which will relocate their industries to the planned 9 special economic zones under the umbrella of China-Pakistan Economic Corridor.
The second phase of free trade agreement with China will become operational from December 1, which provides tax free access to 313 value added products from Pakistan. But past experience tells that exports to European Union countries could not be increased due their bad quality and lack of product innovation despite the zero duty facility under the Generalized Scheme of Preferences Plus that remained enforced for 10 years. It remains to be seen how the value added products of Pakistan compete against the high quality and innovative identical products from Bangladesh, Indonesia and Vietnam that enter the Chinese market under preferential trade agreements. Foreign direct investment can be attracted in jobs creating industrial and business enterprises only when overall economic environment is significantly improved, streamlining of regulatory framework will have little impact.

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