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Exploring new markets, entry costs business and other reforms can help Pakistan meet growing trade deficit

Exploring new markets, entry costs business and other reforms can help Pakistan meet growing trade deficit

Interview with Mian Zahid Hussain, (Sitara-e-Imtiaz) – President, Pakistan Businessmen and Intellectuals Forum

PROFILE:

Mian Zahid Hussain belongs to Chiniot Shaikh family. He is a graduate and earned his degree from Karachi. He was born in Punjab in 1955. His factory is located in Korangi Industrial area, Karachi. He deals in the manufacturing of industrial and automotive lubricants. He came into business when he was just 10 years of age while completing his education simultaneously. He took charge of his business when he was about to complete his matriculation. This early age involvement into his business gave him a chance to earn experience of meeting different people and understanding different aspects of trade and business as well as society. President of Pakistan awarded him with civil award of ‘Sitara-e-Imtiaz’ on August 14, 2007, in the field of social, cultural, religious, educational, philanthropic, economic sectors including community services and maintenance of law and order. The Indus University, Karachi conferred him with the Honorary Ph.D degree in 2009, which was duly approved by the Honorable Governor of Sindh. Due to his close association with the business community and fair knowledge in the field of Information Technology, he was also appointed as the caretaker Minister and Advisor to Chief Minister Sindh for Information Technology Department, for the period March 30, 2013 till May 30, 2013. In 2014, he was appointed as Justice of Peace for Karachi Division by the Government of Sindh for the term 2014-16. Due to his services to community, he was also appointed as Member Advisory Board for Citizen Police Liaison Committee (CPLC) for 2012-15. In addition to that he is a Member Managing Committee of Pakistan Red Crescent Society.

PAGE: HOW WOULD YOU COMMENT ON THE ECONOMIC PROGRESS OF PAKISTAN?

MIAN ZAHID HUSSAIN: The economy of Pakistan has progressed well despite fighting against extremism and terrorism. Pakistan’s economy grew 5.3 percent in fiscal 2017, but investors remain wary of systemic weaknesses and State Bank of Pakistan (SBP) has urged the government to adopt clearer, more consistent policies on industry and trade. Pakistan’s economy is expected to grow at more than 6 percent in the current fiscal year due to some bold economic reforms, faster than a 4.2 percent growth in the previous years. Although, the growth was below the 6.5 percent target for the last year, but still better than the 4.2 percent achieved in 2014. Pakistan benefited from lower global prices of oil and commodities, which helped bring inflation down but sharp decline of exports, tremendous increase of imports and a lack of investment are the factors that had deterred greater growth.

PAGE: WHAT ARE YOUR VIEWS ON EXPORTS, IMPORTS AND BUSINESS SENTIMENT?

MIAN ZAHID HUSSAIN: Pakistan’s external account and international reserves came under stress at the end of FY-2017 because of a high and widening current account deficit. The current account deficit for FY-2017 has swollen to 4 percent of GDP ($12.1 billion), compared to 1.7 percent of GDP in FY-2016. The reason for very large trade deficit, which swelled to $32 billion includes declining of exports and high import growth. Imports have grown partly because of China-Pakistan Economic Corridor (CPEC) related projects. The external account pressure has persisted in FY-2018, but despite this pressure, the rupee has remained stable against dollar. The current external situation can become unsustainable in the absence of adequate policy response.

PAGE: DO YOU THINK PAKISTAN ECONOMY WOULD PERFORM BETTER IN 2018 AS COMPARED TO LAST FIVE YEARS?

MIAN ZAHID HUSSAIN: The world economy is poised to do somewhat better in 2018 and thereafter. This would improve the prospects of export growth of Pakistan. Also, there is the expectation that CPEC investments, both in infrastructure and in power generation, will gather momentum and favorably impact the economy down the road. In addition, Pakistan is experiencing inflationary pressures as a result of exchange rate depreciations, the removal of subsidies and increases in taxes, due to which unemployment ratio is projected to increase to 6.1 percent in 2018 against 6 percent in 2017.

PAGE: WHAT IS YOUR TAKE ON EMPLOYMENT OPPORTUNITIES IN PAKISTAN CURRENTLY AND IN NEXT COUPLE OF YEARS?

MIAN ZAHID HUSSAIN: The Foreign Direct Investment (FDI) into Pakistan has witnessed an increase of 154 percent during the first two months of current financial year 2017-18 as compared to the corresponding period of last financial year. This is clear indication of investors’ confidence. In addition, Special Economic Zones (SEZs) are being developed around the country under CPEC that would lead to create additional employment opportunities and encourage development all across the country.

PAGE: WHAT ARE YOUR SUGGESTIONS FOR THE GOVERNMENT FOR BETTER ECONOMIC PERFORMANCE?

MIAN ZAHID HUSSAIN: Imbalance between exports and imports has given birth to the historic trade deficit, which has now widened to US$ 6.29 billion during first two months of the ongoing financial year as compared to the deficit of US$4.71 billion in the same period of last year. This growing trade deficit is the result of sharp decline in exports and posing a key challenge to the macroeconomic stability of the country. I believe, government should explore new markets for Pakistani merchandise and it should reduce the cost of doing business, address water scarcity issues and create a strong liaison with private sector to address their issues on priority.

Pakistani missions deployed abroad can also be given a task to explore new markets and new buyers for Pakistani goods. Branding and marketing can also help Pakistani products to show their existence in the international market.

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