SDPI meeting on improving business prospects for Khyber Pakhtunkhwa’s Services Sector

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ISLAMABAD, OCT 14 /DNA/ – Azzah Attique, Entrepreneur and tourism sector expert said that tourism has been badly hit given the ongoing challenges. All sub-sectors including hospitality, transport, entertainment, have been affected and require a customized response.

All sub-sectors need to be digitally integrated. Khyber Pakhtunkhwa has 35 million population and majority is youth – many have stakes in local tourism. Not giving attention to this sector could give rise to unemployment. The government is not investing in hospitality education and skills.

Covid-19 now provides re-skilling opportunities. Singapore is favouring stay-cations to revive the local hotel industry. We are bringing chefs from Pakistan to Singapore to introduce Pakistani food in Singapore. Need to teach our chefs international ways of working.

Mr. Bilal Farooq Khan, National Incubation Center, Peshawar said we have signed MOU with SECP which helps in registration of start-ups. However the process of physical registration is still there and this needs to be brought online.

The e-payment gateways are still not efficient. The start-ups do not qualify for government projects due to stringent eligibility requirements. Start-ups are in the process of pivoting but need help to become exporters of goods and services.

Our start-ups are struggling to get certifications for exports. For example in electro surgical device start ups – DRAP certificate is required by this start up since long. The government should undertake an assessment of what are the certification and registration needs of businesses to become exporters.

Mr. Fazal Amin Shah from Khyber Pakhtunkhwa Revenue Authority (KPRA) said we have never resorted to any harassment in enforcement of our measures. Our attitude is always very cooperative with tax payers. Our collection has increased by 65% in the last year.

No coercive measures were taken. This is result of only voluntary compliance. We are focusing to expand tax payer education. This has improved compliance of tax payers in the province. We are regularly looking to improve the tax policy aspects too. In Covid-19 times we have drastically reduced the sales tax rate.

Rates have even been reduced for the informal sector as well. Despite this we understand that some sub-sectors are still under stress e.g. we are not seeing growth in hospitality industry. Marriage halls have not seen their business open fully.

But IT sector and telecom has seen a boost in Covid times. Banks, insurance, and construction sector also show increased tax collection. New automation system for hospitality sector will be introduced to reduce tax compliance costs.

Enterprises who will install KPRA point of sale system will be facilitated further. KPRA wants motivated workforce and has allowed performance based incentives. These incentives are subject to independent assessments by third-party.

Ms. Misbah Faiz, Founder Khawateen Rozgar Services said that despite Covid-19 notices from tax authorities have not stopped rather increased. KPRA’s online system is still not tax payer friendly. The micro and small businesses have very less knowledge regarding fulfilling their tax liability – they need help to understand the online systems.

The grants announced by the government in March 2020 to help SMEs have still not been disbursed. The loan applicants who have large collateral are being favoured. Women-led enterprises need tailored support and special grants. Firms in Khyber Pakhtunkhwa are facing dearth of human resource. Firms have to bring labour from Punjab to scale up operations.

Ahad Nazir, Head, SDPI’s Center for Private Sector Engagement said the recovery from Covid-19 could take longer than expected. This implies that enterprises in the services sector will need policy and regulatory support of various kinds in the medium-term. The cities in the Khyber Pakhtunkhaw province rank low in the doing business rank which needs improvement to attract investment. A focus on development of newly merged districts is required.

Dr. Vaqar Ahmed, Joint Executive Director, SDPI while moderating the discussion said that the provincial governments have reduced tax rates for certain services sectors however it still remains to be seen if this has improved chances of enterprise survival in the short term. It is encouraging to see that tax departments are undertaking perception surveys to assess the difficulties faced by genuine tax payers. However more efficient online compliant registration and follow-up mechanisms are need of the hour. Many tax payers do not hear back from the tax departments regarding the complaint filed.

The government of Khyber Pakhtunkhwa should conduct a detailed assessment on why new exporting enterprises from the province are not emerging. Developing potential to export is important for integration of Khyber Pakhtunkhwa-based enterprises in global value chains.

Such a study should also highlight how firms in the province can benefit from national-level reform of customs duties, export exemptions schemes, e-commerce, and export development fund.  Many of the certification requirements faced by exporters have changed as a result of Covid-19 – an area where government support will be required.