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Promoting Domestic Commerce

Promoting Domestic Commerce

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Promoting Domestic Commerce

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  1. Promoting Domestic Commerce Sana Shahid Planning Commission

  2. Outline • Flow Chart • Potential of domestic commerce • Current features and quality of domestic commerce • Constraints to growth of domestic commerce • Reforms for domestic commerce • Conclusion

  3. Domestic Commerce Process PRODUCTIVITY INDUCED DOMESTIC COMMERCE Overall Regulatory Environment • Competitiveness • Eliminating Protectionism: • Subsidies and incentive regimes • Market Regulation in Pakistan Storage and Warehousing Transport Wholesale and Retail Trade

  4. Potential of Domestic Commerce

  5. Domestic Commerce Share in GDP Source: Pakistan Economic Survey 2009-10

  6. Sectoral Share in Employment Source: Pakistan Economic Survey 2009-10

  7. Potential of Domestic Commerce cont’d.. • Retail is the front end of the market and will allow many upstream industries to be developed (e.g. Chen One) • Brand names will be developed and innovation in products and services is brought to the consumer through retail networks (e.g. Nirala, Masoom’s café) • Opennessand competition will bring international quality at competitive price to consumers (e.g. telecom sector) • Jobs and skills will be created in modern retailing and supply chain networks and develops credentials of suppliers of goods etc. (e.g. Metro) Source: Haque and Waqar (2006)

  8. Current features and quality of Domestic Commerce

  9. Business Sophistication Lower number implies higher ranking out of 139 countries Source: Global Competitiveness Report 2010-2011

  10. Goods Market Efficiency Lower number implies higher ranking out of 139 countries Source: Global Competitiveness Report 2010-2011

  11. Constraints to Growth of Domestic Commerce

  12. Constraints to Domestic Commerce Outmoded Urban Management and Land Utilization Legal Issues and Regulatory Environment Regulated and Inefficient Transport Sector

  13. Urban Management and Land Utilization • Outmoded urban zoning and building regulations do not facilitate commercial development • Commercial plots are as small as 100sq yards and seldom over 600 sq yards • High commercialization fees discourage commercial development. • No zoning for warehousing and distribution – result: warehousing is mostly in dilapidated old housing • Urban Management responsibilities not well-defined: too many regulatory bodies with non-uniform building bye-laws Aabpara Market, Islamabad Blue Area, Islamabad Source: Haque (2006), CDA (2005)

  14. IslamabadResidential Scheme Planning Standards CDA has outlined the following standards for residential schemes being built in zones 2, 4 and 5: Residential 55% Open/Green Spaces/Parks 8% Roads/Streets 26% Grave Yards 2% Commercial and Parking 5% Public buildings 4% Source: CDA Modalities & Procedures, (1993) Emphasis is on residential housing with only 5% allocated to commercial areas and parking – result: small and cramped shopping areas

  15. Legal Issues and Regulatory Environment • Weak contract enforcement hinders supply chain development • Lack of intellectual property right protection • Acquiring land very difficult, uncertain and time consuming - Issues of titles and consolidation • Taxes like stamp duties and property tax, and outdated rental laws also discourage commercial development • Govt. locates industry in industrial zones, no commercial or retail parks Source: PIDE (2006), Global Competitiveness Report 2010

  16. Regulated and Inefficient Transport Sector • Truck fleet is aging, truck sizes are small and transport efficiency is very low • Rail System handles only 4% of domestic cargo (a decline from 14% in 1990) Source: Economic Survey of Pakistan 2007-2008

  17. Reforms for Domestic Commerce

  18. Reforms for Domestic Commerce • Commerce-friendly urban management and zoning • Making Farm to Market Supply Channels Efficient • Demand-Driven Approach for Domestic Commerce • Improving Quantity and Quality of Retail Outlets • Competition in Value Chain Development

  19. Domestic Commerce Model Excess Demand for Hotels, Restaurants, Office Space Excess Demand for Retail Space No Space for new ideas and poor entrepreneurs Develop City Centers Set up Retail Parks and Bazaars • Construction boom: employment generation • Real estate agents, contractors, lawyers, • technicians, architects, construction workers • Poor retail vendors (khokhas, rehri walas) have space to set up business • Young entrepreneurs can display new products – promoting innovation Short Term • Excess office/retail demand fulfilled • Employment generation once the city centre is developed and businesses crop up Long Term

  20. Urban Management and Land Use Reforms Commerce-friendly urban management and zoning • Urban management that encourages mixed use areas, city centers and commercial development • Taxes, legislation and zoning and building regulations should not penalize commercial development • Provide clarity in zoning and building regulations to allow for more and bigger warehouses and cold chain services • City center government land should be privatized and those large tracts be made available for mega commercial projects Source: Haque and Waqar (2006)

  21. Demand-Driven Approach for Domestic Commerce The proposed policy strategy starts with consumers and works back to link into supply systems with the producer • Improving Quantity and Quality of Retail Outlets • Weekly bazaars and other public markets should be expanded to more locations and should cover more or all days of the week • Competition in Value Chain Development • Free entry and exit of participants in the market (without special privileges or licenses) promoting healthy competition • Liberalizing policy allowing for mobility with greater fairness and competition for Wholesalers • Private investment encouraged Source: USAID Report 2010

  22. Adapting best practices Following the example of the ‘best city’ in each of the indicators, an average business can save on average, US $ 1,580 *Calculated using data from the ‘Doing Business Report 2010’

  23. How to do this? • Merge steps and offices: • In Pakistani cities currently, five offices have to be visited before one can start up a business. • In Jordan and Egypt, tax registration was given to the registrars, which considerably reduced time for businesses • Simplification of the system: • Average time taken to file taxes in hours per year is 560 in Pakistan compared with the South Asian average of 284.5 hours. • Pakistan can help firms by reducing the procedures and making the system less complicated through fewer administrative procedures. • Strengthen Alternative Dispute Resolution (ADR) System: • ADR systems have proved successful in Pakistan. • The Karachi Centre for Dispute Resolution (KCDR) was set up to settle disputes through ADR system and has proved successful Source: Doing business in Pakistan 2010

  24. Conclusion • Deregulation of cities to allow growth of domestic commerce • Openness and competition to bring international quality goods to the market and promote innovation • Legal framework must be made supportive of the complex needs of diverse domestic commerce development