Swat, a valley and administrative district of Khyber Pakhtunkhwa province, is renowned for its natural beauty and hospitality. It is centred upon various portions of the Swat River.Until 1969, it was part of the Yusafzai State of Swat, a self-governing princely state which ran the concept of welfare and prosperity for the people.It was governed by King Waali and had administrative dominance of Khans and other classes controlling various parts of the economy. During that period prior to the merger, Swat’s economy was dependent on power looms i.e. cloth manufacturing, followed by cosmetic industry.In a recent study by Sustainable Development Policy Institute (SDPI), different narratives about the economy, particularly in the form of incentives (tax free administrative area) were found. It was narrated that there was an agreement that the Malakand division, of which Swat is a part, will be tax free for an indefinite period. The key reasons for this relaxation varied for each period.At first it was to allow for growth of business and economy, and then it was because of the War on Terror, and finally it was because of the floods and devastations caused by climate change. When one looks at the economy of Swat prior to its formal merger in 1969, two major ingredients of its development of cloth production and the cosmetic Industry were linked to the facilitation of businesses.There were forty to fifty thousand employees engaged in the silk industry during that period. The majority of employees were from the rest of Pakistan because of local unskilled labour. Besides the silk industry, there were seventy to eighty cosmetic manufacturers/units, alongside the honey industry, growing at a significant rate, with the potential to pay tax as well. Similarly, people from other parts of Pakistan were also enjoying concessions for investment purposes prior to a formal merger. Income and revenue were mostly from Usher, Forestry and Zamurd alongside land given to investors with the purpose of strengthening the state and generating revenue.With the passage of time, Swat’s economy diverted to the hoteling industry in order to facilitate tourists coming from the rest of Pakistan, and other countries. This industry thus became a key industry and is now contributing to the economy of Swat. The decline in the silk industry was primarily due to the high cost of inputs, including import of resources and materials from other parts of the country, and countries such as Japan. Moreover, the returns were also low because the retailers and businesses were purchasing cloth on credit.There was also high lag period involved in sales and purchases, which resulted in low return. The labour involved in this industry flew out of the country to the EU, Dubai, Middle East and USA to earn a livelihood.Similarly, when the cosmetic industry was at boom it was being taxed by the revenue authorities at the boundaries of division, which resulted in its eventual decline. At present, only three or four units are functional.Furthermore, with the current boom in hoteling industry, inflow of tourists is restricted to a season and festivals. This can thus result in the conclusion that the number of tourists is not as large as the number of increasing rooms. This higher growth of the hoteling Industry was also due to remittances which people were sending from countries such as Dubai, Middle East and USA.So why did the industry take a nosedive? First, there is no industrial estate present in Swat, and one was not mandated by legislatures elected from the region. Second, industries are facing a severe crisis. Third, currently hoteling industry is suffering due to weak infrastructure and connectivity.Due to the current scenario in the Middle East, majority of the people employed there are being made to return resulting in high unemployment rate.Furthermore, laws are extended without any public-private dialogue, this leads to uncertainty in the business community. Uncertainties are mostly linked to tax structure to which people are not agreeing because of agreements either verbal or documented.Thus to remove these uncertainties and providing business friendly upcoming federal and provincial governments have to take number of steps.With the passage of time, Swat’s economy diverted to the hoteling industry in order to facilitate tourists coming from the rest of Pakistan, and other countries. This industry thus became a key industry and is now contributing to the economy of SwatFirst, there is a need to introduce the concept of public-private dialogue at the local level. This introduction should be in order to discuss and promote dialogue to improve businesses, extending new laws and ensuring implementation of laws with monitoring and evaluation framework.Second, to promote the local industry of Swat, the industrial estate should be on the agenda of upcoming governments. It should be equipped with technologies and industrial ingredients required.Further concessions and relaxations should be extended to the proposed industrial estate. Industries which should be made part of this include silk, honey, fruit processing and all related value additions.Furthermore, to promote hotel industry and improve on number of tourists’ provision of infrastructure and road connectivity should be improved. Network of roads is also mandatory while looking at the number of vehicles on the road.Similarly, Swat is located at a prime location, and its river is flowing across the many main areas, therefore alternate energy measures in the form of hydel power should be prioritised.Project committees which were once effective in cost saving measures should be restored with more representation from the local community, but with broader framework based on the demands of the local people.In order to extend tax system in Swat, people should be made tax filer but with incentivized framework as it will be the key to success in longer periods. Further incentives from this framework should be applied across the system.These set of recommendations should help in building a framework for management information system (MIS) at the district level which will help in understanding the demand and supply balance in the region. This MIS will further help in policy decisions which will strengthen economy of the region thus leading to higher contribution towards national income.The author is associated with the Sustainable Development Policy Institute.Published in Daily Times, July 14th 2018.