OCTOBER 19, 2017

• LECTURE 1
The role of public
policies in governing
business
Public policy definitions
1. “Course of action of a person, group, or a government to reach a
goal or realize an object or a purpose” (Friedrich, 1963)
2. “Set of interrelated decisions taken by a political actor or group of
actors concerning the selection of goals and the means of achieving
them” (Jenkins, 1978)
3. “The actions of government and the intentions that determine those
actions” (Cochran et al.)
4. “The outcome of the struggle in government over who get what”
(Cochran et al.)
5. What government chooses to do or not to do (Dye, 2002)
6. A statement by government of what it intends to do such as a law,
regulation, ruling, decision, order or a combination of these.
What is public policy
1. Daniel McCool (Professor, Political Science
Department, University of Utah) argues that modern
policy studies began in 1922 when Charles Merriam
(Charles Edward Merriam, Jr. was a professor of
political science at the University of Chicago,-1874-
1953)sought to connect the theory and practice of
politics to understanding the actual activities of
government.
2. “Discipline” of public policy did not sprung into existence
in 1950s and 1960s.
3. Contemporary discipline – debate remains over whether
there is one coherent set of principles that can govern
the study and understanding of what we call the public
policy process
 TYPES OF PUBLIC POLICIES

• Constituent.
• Distributive
• Regulatory
• Redistributive
• Material
• Symbolic
• Capitalization Public Policy
• Technical Public Policy
1. Constituent Public Policy: Policies for Govt Structures, with the
establishment of rules/procedures for the conduct of rules that distribute or
divert power and jurisdictions through which present and future polices
might be made-regarded as state building (e.g. creating of SECP).

2. Distributive Public Policy: Using public funds to assist particular

groups/communities/industries and this seek benefits of funds (Export
Development Funds, TDRO).
3. Regulatory Public Policy: Imposes restriction or limitations on the
behaviors of individuals or groups (banks, business regulations, competitive
regulatory polices etc).
4. Redistributed Public Policy: Deliberate efforts of Govt to shift the
allocation of wealth, income, property or rights among broad classes or
groups of the population, such as haves and have not and bourgeoisie
(higher tax to low income group).
5. Material Policy: Provide tangible resources or substantive power to their
beneficiaries or impose real disadvantages on this that are adversely
affected. (minimum wage etc)
6. Symbolic Policy: In contrast to material for advantage/disadvantages to
people, Symbolic refer to Cherished value such as patriotism, social justice,
UN do lot of things, OECD Anti-Bribery Convention etc
7. Capitalization Public Policy: These policies are related to financial
subsidies given by the Centre to state and local governments and central and
state business undertakings, etc and is not directly linked to public welfare as
the others listed above. it does contribute but indirectly. It is basically
infrastructural and development policies for govt. business organizations to
keep functioning properly, like Dry Ports, Logistic Services, indoor logistic
services for precious commodities etc.

8. Technical Public Policy: It relates to the policies framed for arrangement of

procedures, rules and framework which a system shall provide for discharge of
action by various agencies on the field, S&TI, Business Incubation to facilitate
Start-Up Companies.
 LEVELS OF PUBLIC POLICY

National level

State level

Regional Level

International Level
NEED FOR PUBLIC POLICY IN BUSINESS
GOVERNMENT GOVERNANCE HIGH LEVEL MODEL
PUBIC POLICIES RELATIONSHIP WITH SME’S
 EXPLANATION OF QUANTITATIVE METHODS
FOR CREDIT CONTROL
• BANK RATE POLICY: IT IS DEFINED AS THE OFFICIAL MINIMUM RATE AT WHICH CENTRAL
BANK REDISCOUNTS BILLS OF EXCHANGE. THE BANK RATE IS THE RATE AT WHICH CENTRAL
BANK IS READY TO BUY OR REDISCOUNT ELIGIBLE BILLS OF EXCHANGE AND OTHER
COMMERCIAL PAPERS.
• OPEN MARKET OPERATIONS: IT REFERS TO THE PURCHASE AND SALE OF GOVERNMENT
SECURITIES AND OTHER APPROVED SECURITIES BY THE CENTRAL BANK. AN OPEN MARKET
SALE DECREASES THE MONEY SUPPLY AND A PURCHASE INCREASES THE MONEY SUPPLY.
• STATUTORY LIQUIDITY RATIO: THE MAIN ROLE OF STATUTORY LIQUIDITY RATIO IS TO
ALLOCATE BANK CREDIT BETWEEN GOVERNMENT AND COMMERCIAL SECTORS (RESERVE
REQUIREMENT OF THE BANKS TO MAINTAIN). APART FROM CASH RESERVE RATIO (CRR),
BANKS HAVE TO MAINTAIN A STIPULATED PROPORTION OF THEIR NET DEMAND AND TIME
LIABILITIES IN THE FORM OF LIQUID ASSETS LIKE CASH, GOLD AND UNENCUMBERED
SECURITIES.
• SELECTIVE CREDIT CONTROLS: THE SELECTIVE CREDIT CONTROLS ARE USED TO REGULATE
CREDIT FOR SPECIFIC PURPOSES. THESE CONTROLS OPERATE ON THE DISTRIBUTION OF
TOTAL CREDIT BY ENCOURAGING THE FLOW OF CREDIT INTO CERTAIN SECTORS AND
DISCOURAGING ITS FLOW INTO CERTAIN OTHER SECTORS OF ECONOMY. THE IMPORTANT
SELECTIVE CREDIT CONTROLS INCLUDE CREDIT RATIONING, DIRECT AGAINST THE ERRING
BANKS, CHANGES ITS MARGIN REQUIREMENTS, DIFFERENTIAL RATE OF INTEREST AND
MORAL SUASION.
 EXPLANATION OF QUALITATIVE METHODS
FOR CREDIT CONTROL
• CREDIT RATIONING: IT REFERS TO THE SITUATION WHERE LENDERS LIMIT THE SUPPLY
OF ADDITIONAL CREDIT TO BORROWERS WHO DEMAND FUNDS, EVEN IF THE LATTER
ARE WILLING TO PAY HIGHER INTEREST RATES. IT IS AN EXAMPLE OF MARKET
IMPERFECTION, OR MARKET FAILURE, AS THE PRICE MECHANISM FAILS TO BRING ABOUT
EQUILIBRIUM IN THE MARKET.
• A SECURITY IS MARGINABLE IF IT CAN BE TRADED ON MARGIN THROUGH
A BROKERAGE OR OTHER FINANCIAL INSTITUTION. SECURITIES WITH
HIGH LIQUIDITY AND MARKET CAPITALIZATION ARE MORE LIKELY TO BE MARGINABLE.
OTHER SECURITIES, SUCH AS STOCKS PRICED BELOW $5/SHARE, ARE
NOT MARGINABLE.
ALTERING MARGINAL REQUIREMENTS: IT IS THE PERCENTAGE OF MARGINABLE
SECURITIES THAT AN INVESTOR MUST PAY FOR WITH HIS/HER OWN CASH.
• DIFFERENTIAL RATE OF INTERESTS: IT CAN BE ANY SCHEME OF DIFFERENTIAL RATE OF
INTERESTS, NATIONALIZED BANKS ADVANCE TO THE WEAKER SECTIONS OF SOCIETY
LOANS AT A CONCESSIONAL RATE OF INTEREST.
• MORAL SUASION IS A PERSUASION TACTIC USED BY AN AUTHORITY TO INFLUENCE
AND PRESSURE, BUT NOT FORCE, BANKS INTO ADHERING TO POLICY. TACTICS USED
ARE CLOSED-DOOR MEETINGS WITH BANK DIRECTORS, INCREASED SEVERITY OF
INSPECTIONS, APPEALS TO COMMUNITY SPIRIT, OR VAGUE THREATS.
 PHYSICAL CONTROLS

• PHYSICAL CONTROLS REFERS TO VARIOUS FINANCIAL AND

COMMERCIAL INITIATIVES OF THE GOVERNMENT TO SUPPLEMENT
MONITORY AND FISCAL POLICIES TO ACHIEVE CERTAIN SOCIO-
ECONOMIC OBJECTIVES. E.G LIKE PRIVATIZATION OR P-P, LAUNCHING
ECONOMIC ORIENTED PUBLIC SECTOR PROGRAM.
• DURING THE PERIOD OF LOW ECONOMIC GROWTH OR WHEN THE
COUNTRY HAS LAUNCHED PLANNED ECONOMIC DEVELOPMENT
THESE CONTROLS ON PRODUCTION, CONSUMPTION, TRADE AND
FOREIGN EXCHANGE BECOME NECESSARY TO CONSERVE SCARCE
RESOURCES IN ORDER TO DIRECT THEIR USES TO THE MOST
APPROPRIATE SECTOR OF ECONOMIC DEVELOPMENT.
 CORPORATION AND PUBLIC POLICY
1- LIMITS TO POWER OF DEMOCRATIC GOVERNMENT: IN MATTERS OF
PUBLIC POLICY OR ITS IMPLEMENTATION, GOVERNMENTS DO NOT
HAVE UNFETTERED POWERS. THEIR POWERS ARE RESTRICTED UNDER
• CONSTITUTIONAL LAW: DEFINES THE LIMITS OF GOVERNMENT TO ACT,
THE POWERS IN EACH LEVEL OF GOVERNMENT, AND THE RIGHTS OF
CITIZENS.
• COMMON LAW: ESTABLISHED, ADJUDICATED PRECEDENTS GIVING THE
GOVERNMENT THE RIGHT TO ACT IN THE INTEREST OF JUSTICE AND
FAIRNESS. THE COMMON LAW IS REGULATED BY THE JUDICIARY.

2- LIMITS TO POWERS OF NON-DEMOCRATIC MONARCHY,

DICTATORSHIP, RELIGIOUS RULERS, SOCIALIST STATE: NO LIMITS ON
THE POWER OF GOVERNMENT EXCEPT THE TOLERANCE OF THE PUBLIC.
 INVOLVEMENT OF BUSINESS IN PUBLIC
POLICY DECISION MAKING
• THERE ARE 2 SCHOOL OF THOUGHTS ABOUT BUSINESS PARTICIPATING IN
PUBLIC POLICY DECISION MAKING.

BUSINESS SHOULD BE INVOLVED

• PLURALISTIC/DIVERSED SYSTEM INVITES MANY PARTICIPANTS AND
BUSINESS BEING AN IMPORTANT CONSTITUENT SHOULD NOT BE LEFT
OUT.
• ECONOMIC STAKES ARE HIGH FOR FIRMS AND INDUSTRIES AND PUBLIC
POLICY DECISIONS MIGHT PROMOTE OR MAR THEIR INTERESTS.
• BUSINESS COUNTERBALANCES OTHER SOCIAL INTERESTS LIKE
PRODUCTION AND DISTRIBUTION OF GOODS, INCOME GENERATION
AND EMPLOYMENT.
• BUSINESS IS VITAL STAKEHOLDER OF GOVERNMENT, BEING A PROVIDER
OF A REVENUE AND THE CONDUIT FOR EXECUTING GOVERNMENT
POLICIES.
•Business should not be involved
• EXECUTIVES ARE NOT FIT TO ENGAGE IN POLITICAL DEBATES, THEY
ARE NOT EQUIPPED TO DO SO, BY TRAINING OR BY INCLINATION
• BUSINESS IS NAÏVE ABOUT POLITICS, AS POLITICIANS CAN OUTSMART
THEM BOTH BY RHETORIC AND TALL PROMISES WHICH BUSINESSMEN
TRUST IMPLICITLY
• BUSINESS IS TOO BIG AND TOO POWERFUL, WHILE POLITICS IS
FRAGMENTED BY ITS VERY NATURE AND MAKES GAINS BY DIVIDE
AND RULE POLICY
• BUSINESS RISKS ITS CREDIBILITY BY ENGAGING IN PARTISAN POLITICS,
AS HAS BEEN DEMONSTRATED TIME AND AGAIN BY NAÏVE
BUSINESSMEN LOSING BOTH THEIR WEALTH AND CREDIBILITY BY
ENTERING INTO POLITICS.
 BUSINESS AND POLITICS LEVEL OF
INVOLVEMENT
THERE ARE THERE LEVELS OF BUSINESS INVOLVEMENT IN POLITICAL
ACTIVITIES AND DISTRIBUTION OF GOODS AND SERVICES, INCOME
GENERATION AND EMPLOYMENT.
• LEVEL 1 FINANCIAL INVOLVEMENT
• LEVEL 2 ORGANIZATION INVOLVEMENT
• LEVEL 3 STRATEGIC PUBLIC POLICY INVOLVEMENT
 PUBLIC POLICY AND BUSINESS NEXUS
• GOVERNMENTS EVERYWHERE SIGNIFICANTLY INFLUENCE BUSINESS
ACTIVITIES. FEDERAL OR CENTRAL GOVERNMENTS TRY TO PROMOTE
ECONOMIC DEVELOPMENT OF THEIR COUNTRIES BY USING APPROPRIATE
ECONOMIC POLICIES WHOSE CONSTITUENTS ARE MONETARY, FISCAL
AND COMMERCIAL POLICIES.
• STATE GOVERNMENTS SHAPE THE BUSINESS ENVIRONMENT THROUGH A
SLEW/SWING OF THE STATE-SPECIFIC ECONOMIC POLICIES. LOCAL SELF
GOVERNMENTS, ON THE OTHER HAND, IMPACT BUSINESS THROUGH
POLICIES THAT INVOLVE PERMITS, LICENSES, AND VARIOUS CLEARANCES.
• PUBLIC POLICY OF THE THREE LAYERS OF GOVERNMENT, THE EXECUTIVE,
JUDICIARY AND LEGISLATURE HAS BOTH DIRECT AND INDIRECT IMPACTS
ON BUSINESS BY CREATING ENVIRONMENT IN WHICH COMPANIES DO
BUSINESS IN THE NATION ACROSS THE WORLD.
Business-government-society-media relationship
 GOVERNMENT REGULATIONS IN BUSINESS
• GOVERNMENT REGULATION OF BUSINESS IS A MECHANISM FOR
IMPLEMENTING SOCIAL CHOICES AND HELPS IN CREATING THE BASIC
CONDITIONS THAT LEAD TO ECONOMIC PROSPERITY.
JUSTIFICATION OF GOVERNMENT REGULATION
1. MARKET FAILURE
2. ETHICAL FAILURE
3. STAKEHOLDERS DEMANDS
4. PUBLIC REACTION
5. POLITICAL ADVOCACY
TYPES OF GOVERNMENT REGULATIONS

• INDUSTRY SPECIFIC
• INDUSTRY WIDE
• FUNCTIONAL
• MEDIA ATTENTION
 PUBLIC POLICIES AND GOVERNMENT
REGULATIONS IN PAKISTAN
• BANKING AND CREDIT LAWS
• BANKING COMPANIES ORDINANCE, 1962 AND BANKING COMPANIES RULES, 1963
• STATE BANK OF PAKISTAN ACT, 1956
• DRAFT BANKING ACT, 2006
• FINANCIAL INSTITUTIONS (RECOVERY OF FINANCES) ORDINANCE, 2001
• FOREIGN EXCHANGE MANUAL, 2002
• MICRO-FINANCE BANKING ORDINANCE, 2000
• MICROFINANCE INSTITUTIONS ORDINANCE, 2001

• BANKRUPTCY AND COLLATERAL LAWS

• PROVINCIAL INSOLVENCY (WEST PAKISTAN AMENDMENT) ORDINANCE, 1959
• COMPANIES ORDINANCE, 1984

• CIVIL PROCEDURE CODES

• LAW AND JUSTICE COMMISSION OF PAKISTAN (PROCEDURE) RULES, 1980
• LAW AND JUSTICE COMMISSION OF PAKISTAN ORDINANCE, 1979
• CODE OF CIVIL PROCEDURE (WEST PAKISTAN AMENDMENT) ACT, 1964
 CONTD
COMMERCIAL AND COMPANY LAWS
• CODE OF CORPORATE GOVERNANCE
• COMPANIES (AMENDMENT) ORDINANCE, 2002
• COMPANIES (APPOINTMENT OF LEGAL ADVISORS) ACT 1974
• COMPANIES (APPOINTMENT OF LEGAL ADVISORS) RULES 1975
• COMPANIES (BUY BACK OF SHARES) RULES, 1999
• COMPANIES (GENERAL PROVISION AND FORM) RULES, 1985
• COMPANIES ORDINANCE, 1984
• ELECTRONIC TRANSACTIONS ORDINANCE, 2002
• COMPANIES ORDINANCE, 1984 INSOFAR AS IT RELATES TO PRIVATE
COMPANIES, NON-LISTED PUBLIC COMPANIES AND FOREIGN
COMPANIES
• CHARTERED ACCOUNTANTS ORDINANCE, 1961
• COMPANIES (INVITATION AND ACCEPTANCE OF DEPOSIT) RULES,
1987
• COMPANIES (ISSUE OF CAPITAL) RULES, 1996 (FOR NON-LISTED
COMPANIES)
• COMPANIES (REGISTRATION OFFICES REGULATIONS), 2003
• COMPANIES (SECOND AMENDMENT) ORDINANCE, 2002
• PRUDENTIAL REGULATIONS FOR NBFCS
• LAW OF CONTRACT
• SINGLE MEMBER COMPANIES RULES, 2003
• CONSTITUTIONS
• CONSTITUTION OF PAKISTAN
LABOR LAWS
CONTD
• FACTORIES ACT, 1934
• WEST PAKISTAN MINIMUM WAGES FOR UNSKILLED WORKERS ORDINANCE, 1969
• FACTORIES ACT, 1934
• INDUSTRIAL AND COMMERCIAL EMPLOYMENT (STANDING ORDERS) ORDINANCE, 1968
• MINIMUM WAGES ORDINANCE, 1961
• MINIMUM WAGES (WEST PAKISTAN AMENDMENT) ORDINANCE, 1970
• MINIMUM WAGES ORDINANCE, 1961
• PAYMENT OF WAGES ACT, 1936
• LABOR POLICY 2010 COVERS WORKPLACE SAFETY AND HEALTH
AND AND BUILDING LAWS
• LAND ACQUISITION ACT 1894
• THE LAHORE DEVELOPMENT AUTHORITY ACT, 1975
• THE PUNJAB DEVELOPMENT OF CITIES ACT, 1976
• THE PUNJAB HOUSING AND TOWN-PLANNING AGENCY ORDINANCE, 2002
• PUNJAB GOVERNMENT LANDS AND BUILDINGS (RECOVERY OF POSSESSION) ORDINANCE, 1966
• LAND REFORMS REGULATION, 1972
SECURITIES LAWS
• BROKERS AND AGENTS REGISTRATION RULES, 2001
• CENTRAL DEPOSITORIES (AMENDMENT) ACT, 1997
• CENTRAL DEPOSITORIES ACT, 1997
• COMPANIES (GENERAL PROVISIONS AND FORMS) RULES, 1985
• COMPANIES ORDINANCE, 1984
• CLEARING HOUSE (REGISTRATION AND REGULATIONS) RULES 2005
• VOLUNTARY PENSION SYSTEM RULES, 2005
• BALLOTERS, TRANSFER AGENTS AND UNDERWRITERS RULES, 2001
• LISTED COMPANIES (SUBSTANTIAL ACQUISITION OF VOTING SHARES AND
TAKE-OVERS) ORDINANCE, 2002
• MARGIN TRADING RULES, 2004
• SECURITIES AND EXCHANGE ORDINANCE, 1969
 CONTD..
TAX LAWS
• STAMP ACT
• INCOME TAX ORDINANCE, 2001
• TAX LAW (AMENDMENTS) ORDINANCE, 1999
TRADE LAWS
• SAFEGUARD MEASURES ORDINANCE, 2002
• SAFEGUARD MEASURES RULES, 2003
• ANTI-DUMPING DUTIES ORDINANCE, 2000
• ANTI-DUMPING DUTIES RULES, 2001
• COUNTERVAILING DUTIES ORDINANCE, 2000
• COUNTERVAILING DUTIES RULES, 2002
OTHERS:
• ENVIRONMENTAL PROTECTION ACT 1997.
• PAKISTAN WILDLIFE ORDINANCE 1971
• CONSUMER PROTECTION ACT 2005
• EMPLOYEES PROVIDENT FUND ACT 1996