JCA consultancy and IMF: Two sides of the same coin | The Express Tribune

KARACHI:

In August 2024, a certain Scott Jacobs met with Pakistan’s Finance Minister Muhammad Aurangzeb in Islamabad. Also present were senior officials from the Board of Investment (BOI). Jacobs is a co-founder of the Washington DC-based consultancy firm Jacobs, Cordova & Associates (JCA), which specialises in advising governments on regulatory reform.

He was in Islamabad that day to present a comprehensive proposal for regulatory reform to the Government of Pakistan. The discussions focused on streamlining Pakistan’s regulatory environment to foster entrepreneurship, innovation, and investment. Jacobs proposed a structured overhaul using the “Regulatory Guillotine,” a tool developed by his firm.

It seems Jacobs succeeded in convincing his audience that he could deliver results. JCA was engaged by the Government of Pakistan to provide technical consulting services focused on regulatory reform. The scope of work is broad and comprehensive. It includes regulatory diagnostics, design of reform tools such as customising the “Regulatory Guillotine” to Pakistan’s needs, capacity building, digital enablement, assistance with drafting of policies and legal structures, and monitoring and evaluation of enacted reforms.

Interestingly, the financial terms of the contract with JCA have not been publicly disclosed. Nor is there information about the process through which the contract was awarded, or whether Public Procurement Regulatory Authority (PPRA) rules were followed.

This is not to cast aspersion on JCA. It is a reputed firm with a respected track record, having helped several countries with regulatory reform, including Vietnam, Egypt, and Iraq.

But there is a need for transparency on the part of the GOP. Were PPRA rules followed? If so, why are the financial terms of the contract not in the public domain? And if not, why not?

There is no doubt Pakistan is in dire need of regulatory reform. In this sense, a firm like JCA can be invaluable. The imprint of JCA’s philosophy is manifested in some of the policies the GOP is now unveiling. One of these is the National Tariff Policy 2025-30 (NTF).

While JCA does not appear to have played a direct role in drafting the NTF, they are closely involved in shaping the broader regulatory reform ecosystem that enabled the policy’s development.

It is useful to take a closer look at the NTF and its implications for Pakistan’s economic development. The NTF was officially unveiled by the GOP on 18 June 2025 during the National Regulatory Reforms Conference organised by the BOI in Islamabad. Scott Jacobs was among the speakers. The event marked the formal presentation of the draft NTF, outlining strategic goals for export-led growth, tariff simplification, and industrial competitiveness.

The policy is a welcome and much-needed structural reform compared to the arbitrary, ramshackle structure that passes for tariff policy today. This is how the current system works: Tariffs, or customs duties on all products, are specified in the appendices of the Customs Act 1969. These, called “schedules,” are numbered from one to five.

The first schedule — Pakistan Customs Tariff (PCT) — lists all goods classified by HS codes (Harmonised System) along with their applicable duty rates. It is organised by chapters, eg, Chapter 84 for machinery, Chapter 39 for plastics. It specifies standard duty rates, preferential rates under free trade agreements, and units of measurement.

This schedule is the primary reference for importers, customs officers, and trade analysts to determine duty liabilities. Think of it as the “master tariff book” that governs all standard imports.

Schedules 2 through 4 deal respectively with export duties, absolute exemptions, and conditional exemptions. These schedules are rarely used and have limited impact on trade.

It is the fifth schedule that is the source of much controversy and, some say, distortion and inequity in the tariff system. This schedule lists concessionary imports for industrial development. These concessions are normally granted through Statuary Regulatory Orders (SROs). An SRO is a formal notification issued by government authorities — most commonly the Federal Board of Revenue (FBR) or the Ministry of Commerce — to implement, amend, suspend, or clarify laws, rules, or procedures. It is thought that powerful parties use their influence to have SROs issued to benefit their interests.

The newly revealed NTF 2025-30 lays out a roadmap to transform the tariff regime from a revenue-centric tool to one that facilitates trade and industrial growth. There are two main prongs to its strategy. One is the general lowering of tariffs across the board over the next five years. The second is to move what is now in the fifth schedule into the first schedule, thus reducing the use of political or other influence to gain favourable trade terms.

While there can be no dispute about the usefulness of the second prong. It is the first prong — the lowering of tariffs across the board, in some cases to zero — that merits deeper consideration. This aligns with the ideology (some would say religion) of the Washington Consensus and its principal acolyte — the International Monetary Fund (IMF). It is no coincidence that both JCA and the IMF are based in Washington DC.

Historically, all countries that transitioned from undeveloped to developed economies did so by maintaining high tariff barriers. These included, and some of the names may surprise you: the United States (19th to early 20th century), Germany (late 19th century), Japan (Meiji Era, 1868-1912 and again after WWII), South Korea (1960s-1980s), Brazil (1950s-1980s), and India (1950s-1991).

Today, as the greatest economy in the world sharply raises its tariffs to protect industries, poor Pakistan is being asked to drastically lower ours. Strange that the irony of this is lost on the Washington proxies of that greatest economy.

THE WRITER IS CHAIRMAN OF MUSTAQBIL PAKISTAN AND HOLDS AN MBA FROM HARVARD BUSINESS SCHOOL