Interview with Khalid Tawab – Senior Vice President, FPCCI
Khalid Tawab, a prominent business leader and top ranking businessman, has said in an interview that Karachi is a gift of nature and need to have a world class infrastructure to take advantage of strategically located port city of Pakistan. He said it is unfortunate that infrastructure development is totally neglected, which is a setback to our GDP growth as well as reason behind declining exports and foreign investment.
Talking about the United Business Group (UBG), which has come to power with a purpose to improve the image of the apex body called Federation of Pakistan Chambers of Commerce and Industry (FPCCI) which had become a non-entity prior to taking over the charge two years back said actually there was a yawning gap between FPCCI and the government, which had almost neglected this important body, which represents the entire business community of Pakistan.
We focused on bridging the gap between government and the business community succeeded in resolving over 70 percent issues of the trade and industry as from Prime Minister, Finance Minister and all important ministries started visiting FPCCI and most of the issues were settled, however, the remaining 30 percent unresolved issues are because difference of opinion and policy of the government. The business community generally have issues with the Federal Board of Revenue (FBR), however, with the improvement of links with the government at the highest level the FBR is fully on board with FPCCI and generally speaking most of the issues with FBR are resolved even on phone, which is a great achievement of our leadership by resolving the issues of the business community with FBR.
PAGE: There is an eye catching infrastructure development in Punjab especially in Lahore and Islamabad, motor ways and training services have altogether changed the get up of Punjab, which is attracting foreign investment as compared to Karachi, which is said to be the commercial and financial hub of the country why this city is being neglected?
KHALID TAWAB: Actually the development in Punjab is the initiative of the provincial government of Punjab, which has set an example for rest of the provinces of the country, in case of Sindh the provincial government was almost sleeping towards development activity, However, with the arrival of new Chief Minister Murad Ali Shah who is comparatively young and energetic as compared to former Chief Minister would hopefully take initiative for improvement of infrastructure development in Karachi, which is currently confronted with dilapidated roads, poor distribution of electricity and gas etc.
PAGE: The achievements by your group during last two years must have paved the way for a landslide victory in the forthcoming elections of FPCCI or you think that it would be hardly contested elections because the opposite group has also pitched a strong candidate for the presidential candidate this year?
KHALID TAWAB: By the grace of God we have carved a respectable place among the business community of Pakistan and we think that the elections of the FPCCI are going to be much easier to win for our group because of our hard work for the cause of business community during last two years.
PAGE: It is good to know that the relationship between the FPCCI and the government have improved and many of the problems were resolved under the leadership of your group, but how you would justify the drastic cut in exports and overall economic performance of the country?
KHALID TAWAB: You are right that exports from Pakistan are declining but one should not look it in isolation because we are not an exception, the exports of almost all the countries in this region even of China and India are on decline because of global economic slowdown and drastic cut in commodity prices the world over.
However, our exports were not declined in terms of volume but value because of the trend of low commodity prices all over the world.
At the home front the exporters were in a fix because of a huge number of refund claims worth over Rs300 billion were held up with the government, which created a critical situation for the exporters due to financial crunch and due to lack of working capital. However, we took up the matter with the high ups and now the government has started releasing the refund claims and in the last two installments Rs25 billion and in another installment claims of Rs33 billion have already been released to the claimants, hopefully the remaining amount may also be refunded in near terms. The availability of liquidity with the exporters hopefully helps in improving the textile earnings.
PAGE: What would you suggest to overcome the problem of declining exports? Because lower export receipts, visible dip in home remittances due to oil crisis in the middle east and Saudi Arabia who are currently looking for a cost cut, besides scrapping various big projects because of oil crisis. And all these factors including rising import bill will affect our balance of payment position as well as foreign exchange reserves of the country.
Khalid Tawab: It is unfortunate that the golden period of low oil prices was not exploited fully by developing on energy sector on cheap alternative energy resources like wind power, solar power, hydel power and of course the nuclear power to get rid of dependence on expensive fuel oil import for power generation.
Although the present government has done well to cope with the power shortage in the country as new projects are in the pipeline, yet a great amount of power still generated through oil-fired system, which may not be sustainable by the smaller economies and the per capita income.
Actually to answer your question how to improve exports we need to effectively reduce the cost of doing business in Pakistan especially in energy prices and other taxes, which can be described as discouraging factor for investment either domestic for foreign resources.
PAGE: Being a senior business leader would you like to elaborate how to reduce the cost of doing business?
KHALID TAWAB: It is the time for the government to revisit its policies relating to taxation, cost of doing business and improve the poor infrastructure particularly in Karachi, which has the potential to take out the economy from hot waters by attracting domestic and international investment if the available resources and potential are fully utilized.
In fact, investment is the key to promote economy in general and export in particular. It is unfortunate that new investors are not coming into the economic system due various reasons, which is one of the reasons for growing number of unemployment and poverty level.
We need to offer incentives to the new entrants specially into export oriented industry as being done elsewhere in the world, reduced electricity charges is a must for export oriented industries enabling them to be competitive in the export market besides to that simplification of government policies and taxation system can play a positive role in increasing exports from Pakistan.
PAGE: Would you like to comment on the rising oil prices and its impact on our economy?
KHALID TAWAB: It’s a good question; we should keep in mind that our exports are around $21 billion while imports are exceeding to $40 billion.
The increase in oil prices may add to our import bill, which is a serious matter for balancing the trade deficit, which is being met through home remittances. There was a golden period of low oil prices, which we failed to exploit for the benefit of our economy by reducing the trade deficit and we should have come into surplus. The improvement in our GDP growth is only because of low oil price while we are lacking in our own efforts to improvement growth rate. Although the government claims that we will be self-sufficient in power sector by 2018 hopefully this target will be achievement, however, there are some alarming signs such as declining exports and home remittances, which may have a serious impact on our foreign exchange reserves and balance of payment if remedial steps are not taken well in time.
PAGE: What would you suggest for precautionary measures to avoid possible impact of increasing oil prices?
KHALID TAWAB: We need to revisit our policies to encourage investment. You see that our industrial output was not in a good shape while agriculture, which is our mainstay, is also facing difficulties because of a drastic cut in our cotton yield which reduced from 15 million bales last year to 9.8 million bales this year creating a 30 percent shortfall in cotton production. These are serious challenges, which need to be addressed by revisiting our policies, by allowing duty free import of machinery irrespective of the industries, tax holidays and other incentives to increase the rate of investment in Pakistan, which is only way for creating jobs and economic growth rate.