Safeguarding the interests of government and telecom sector
Policies shape economic performance because they define and enforce economic rules. The policy measures of government regulatory bodies not only regulate the private sector, but also shape and drive individual sectors in their quest for perfection and market share and then synergise together to cater national interests and the development of national economy as a whole.
Transcending all other issues, the biggest victim of poor law and order situation has been the country’s economy. Despite tremendous potential, huge natural resources, talented human capital and zealous entrepreneurs, Pakistan’s economy has not been able to take-off and perform as it should have.
The economic survey of 2013-14 reveals that proceeds from the telecom sector have been a major contributor to the economy with revenues reaching Rs345.5 billion while the total investment to the sector stood at US $556 million.
The sector also contributed Rs67 billion in taxes to the national exchequer during the first six months of FY2014, and yielded US$ 0.53 billion investment in terms of telecom infrastructure and new technologies.
In the year 2013-14, major investment in the telecom industry came from the cellular sector, which stood at US $ 507 million, while the one time revenues from 3G/4G proceeds stood at US$ 1224.1 million.
Other major revenue generator remained the International Clearing House (ICH) with US$ 550 million in proceeds. Coincidently, the revenue generating regime is also at the centre of controversy for being held responsible for reduction in international incoming calls. Annulling ICH due to decrease in international minutes may be plausible, but does that decrease cost anything to the national exchequer?
The decrease in incoming minutes is an international phenomenon, and has more to do with the availability of Over the Top (OTT) services like Skype and Viber. If the calls made through OTT applications can be accounted for, the real decline in international incoming will be far less.
With telecom proceeds being the key driver for economic growth, each subsector needs to fire at full cylinders. The key here is to protect the local industry interests. Despite tough economic situation and deficit balance of payments, ICH has contributed US$ 44 million every month, lending hand in reducing the rupee dollar parity and positively impacting the balance of payments.
Estimate suggests that ICH can generate US$ 2.75 billion in the next 5 years, while revenues can reach whopping US$ 7.9 billion dollars in the next 15 years. Excluding the onetime license fee of 3G/4G auction, the revenues from ICH exceeds the amount of US$ 74 million, which 3G/4G is estimated to bring in the next 15 years. With the ICH revenues taken out, country’s budget deficit will certainly increase further, as national kitty will be deprived of US$ 550m annually which ICH generated.
Pakistan’s growth rate in FY13-14 stood at 4.1 percent, and despite being less than the targeted figure of 4.4 percent, it’s still higher than previous year’s figure of 3.7 percent. To maintain this momentum, policy imperatives which safeguard the interests of all segments of telecom sector, and protect local operators, needs to be ensured for steady economic progress.
From a time, Pakistani subscriber calling to international destinations are obliged to pay huge charges per minute and with implementation of ICH, balance was counteract, enabling Pakistani operators claim their equal share from international operators as well as opening a new stream of forex inflow for the government.
In regard of ICH, Ministry of IT and Telecom and Government of Pakistan need to see the situation long-term and shall enable steps which can result in growth of the role played by this industry and its contribution towards national exchequer instead of causing a loss by termination of ICH mechanism.
Positively impacting balance of payments and stabilizing Pak Rupee against US dollar, ICH mechanism has contributed well as has equalized revenues of 184 million dollars for the government during the period and the average yearly foreign inflows contributed by ICH stands at USD 550 million that’s a good sign for economical scale.
Since inception of ICH, it has contributed $1 billion in cash to the national pooled money, which is equal to revenues of 184 million dollars for the government during the period. The standard yearly foreign inflows contributed by ICH stands at USD 550 million, and if the movement continues, the anticipated revenues for next 5 years stand close to 2.75 billion dollars. But in case of termination of the mechanism, it will cause a loss thoroughly.
Instead of diminishing the mechanism that is all successive to bring multi million dollars into the country every year, a rational approach is needed to tackle with the issue. The economic situation requires involvement from every possible revenue stream to shrink fiscal shortfall and the contribution of ICH in terms of foreign exchange relics a big prop up to the economy.
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