Promoting Domestic Commerce
Sana Shahid
Planning Commission
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
2
Domestic Commerce Process
PRODUCTIVITY INDUCED
DOMESTIC COMMERCE
Overall Regulatory
Environment
Storage and
Warehousing
Transport
Wholesale and
Retail Trade
• Competitiveness
• Eliminating
Protectionism:
• Subsidies and
incentive
regimes
• Market
Regulation in
Pakistan
Potential of Domestic Commerce
Domestic Commerce Share in GDP
Source: Pakistan Economic Survey 2009-10
Sectoral Share in Employment
Source: Pakistan Economic Survey 2009-10
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)
 Openness and 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)
7
Current features and quality of
Domestic Commerce
Business Sophistication
Countries
Cluster
Development
Local Supplier
Quantity
Local Supplier
Quality
Pakistan
India
Indonesia
Thailand
Malaysia
China
46
29
24
34
15
17
87
7
43
26
29
19
95
60
61
43
37
54
Lower number implies higher ranking out of 139 countries
Source: Global Competitiveness Report 2010-2011
Goods Market Efficiency
Countries
Intensity of
Local
Competition
Prevalence of
Trade Barriers
Degree of
Customer
Orientation
Pakistan
India
Indonesia
Thailand
Malaysia
China
87
30
54
37
38
19
106
96
58
70
88
69
97
64
60
24
23
70
Lower number implies higher ranking out of 139 countries
Source: Global Competitiveness Report 2010-2011
Constraints to Growth of Domestic
Commerce
Constraints to Domestic Commerce
• Outmoded Urban Management and Land Utilization
• Legal Issues and Regulatory Environment
• Regulated and Inefficient Transport Sector
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.
Aabpara Market, Islamabad
 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
Blue Area, Islamabad
Source: Haque (2006), CDA (2005)
13
Islamabad Residential Scheme Planning Standards
CDA has outlined the following standards for residential
schemes being built in zones 2, 4 and 5:
Residential
Open/Green Spaces/Parks
Roads/Streets
Grave Yards
Commercial and Parking
Public buildings
55%
8%
26%
2%
5%
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
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
15
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
Reforms for Domestic Commerce
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
Domestic Commerce Model
Excess Demand for
Hotels, Restaurants,
Office Space
Excess Demand for
Retail Space
Long
Term
Short
Term
Develop City Centers
• Construction boom: employment
generation
• Real estate agents, contractors, lawyers,
technicians, architects, construction workers
• Excess office/retail demand fulfilled
• Employment generation once the city
centre is developed and businesses crop up
No Space for new
ideas and poor
entrepreneurs
Set up Retail Parks and
Bazaars
• Poor retail vendors (khokhas,
rehri walas) have space to set up
business
• Young entrepreneurs can
display new products –
promoting innovation
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)
20
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
21
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
Indicator
Avg. Amount saved
(US $)*
Starting a business
73.28
Dealing with construction
permits(better procedures)
48.84
Dealing with construction
permits (better time)
845.43
Registration of property
612.85
Total
1,580.39
*Calculated using data from the ‘Doing Business Report 2010’
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
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
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