Economic Contribution of Trade Organizations Limited in Pakistan: SBP Study

The economic contribution of various trade organizations including different associations representing various sectors, chambers of commerce, and businessmen forums is not being adequately fulfilled in Pakistan

In the second quarterly report, the SBP special section titled “Role of Trade Organizations in Economic Growth and Development: Understanding the Dynamics in Pakistan,” highlighted the importance of effective public-private dialogue in planning and implementation of economic reforms, especially as government planning around the world has become participatory, collaborative and market-oriented in nature.

Trade Organizations (TOs) offer important market supporting and market complementing services that directly and indirectly benefit the public and private sectors. Under Pakistan Vision 2025, the government also identifies Trade Organizations (TOs) as a catalyst of change with an important role in guiding government policy and economic programs.

Trade Organizations (TOs) in Pakistan

According to the latest data, 227 trade organizations are members of FPCCI, including 21 women chambers and 12 chambers for small traders.

The primary reason for the existence of TOs is to create a collective platform to steer policy by advocating the agenda of the private sector. However, the ambit of activities they perform has widened. Now, in an effort to ensure financial sustainability and retain their membership, these bodies perform the function of research and development, take active steps in facilitating technological adoption, and contribute to improving the overall business environment by providing ADR mechanisms and protecting intellectual property rights.

These chambers and associations offer a host of services to their members. Whereas, advocacy and research are expenditure items on TOs’ financial statements, the services they offer are revenue sources. Accordingly, TOs in Pakistan offer different services to their members. Some organize international trips for members, while almost all offer visa facilitation by issuing referral letters against service fees. TOs have also set up helpdesks to answer members’ queries and accommodate new members, while some provide certificates of origin (COOs).

Business associations must have professionally trained staff to strengthen their organization and successfully execute their functions. In the case of TOs in Pakistan, the administrative head is the general secretary, a paid employee. In addition, a research department and, in some cases, separate training and B2B departments also exist.

However, anecdotal evidence suggests that these departments are inadequately staffed both in terms of the number of employees as well as their skill and experience.

In addition to weak in-house research functions, TOs in Pakistan also do not create a demand for research from universities, even though business leaders in Pakistan acknowledge the lack of market research. Being privy to their needs, businesses are better placed to drive the industry-academia linkage from the demand side.

Even though some TOs in Pakistan have signed MoUs with universities, they generally do not translate into a regular publication feature or materialize into tangible results. Instead, most TOs in Pakistan are focused on networking and lobbying without providing evidence, thus creating little research demand. TOs in Pakistan are also not active producers of market surveys and benchmarking data.

Sialkot Chamber an Exception

One of the noticeable exceptions to this trend is the Sialkot Chamber of Commerce and Industry (SCCI). From 1997 onwards, the SCCI contributed both financially and administratively to monitoring and eliminating child labour from Sialkot’s football industry in collaboration with international agencies.

In 1999, the SCCI in collaboration with other private and public sector stakeholders led the Sialkot City Package Programme to improve the city’s infrastructure. Similarly, it played a lead role in building Pakistan’s first private airport in Sialkot and the setting up of AirSial.

SBP’s Recommendation for TOs

SBP offers seven recommendations intended as broad policy suggestions and brings to the fore some points for deliberations between public and private sector stakeholders on how to build strong, effective, and sustainable TOs that can contribute to the economic growth and development of Pakistan.

First, from the perspective of the public sector, the government needs to set up institutional mechanisms for public-private dialogue where bureaucracy can effectively engage the private sector on matters relating to both short- and long-term economic/ business policymaking and its implementation.

Second, an equally important step is to move towards evidence-based policymaking helped in part by demanding the evidence behind policy advocacy by TOs. To this end, the legal framework of TOs may be reassessed with the objective of nudging TOs to improve their research capacities needed for effective Public-Private Developments.

Third, the legal framework also needs be to looked at from the aspect of improvement in organizational affairs of TOs.

Fourth, as discussed in earlier sections, the government’s relationship with the private sector needs to be legitimized through mechanisms of accountability and transparency. The objective is to identify opportunities for coordination and public deliberation while reducing rent-seeking.

Fifth, while compulsory membership of TOs may also help towards improving representation, the subject of advocacy forums by large businesses also requires attention.

Sixth, the private sector also needs to make TOs effective. The level of competition in Pakistan has been low, with little incentive for research, innovation, and efficiency. As a result, the private sector has not faced pressure to improve productivity or search for new markets and products.

Lastly, academia and think tanks may be encouraged to conduct periodic impact assessments and case studies on the nature and extent of the contribution of various TOs to Pakistan’s economy.