Interview with Mr Zafar Iqbal Ahmed – Founder President, Small & Medium Enterprises Alliance (SAMEA)
PAGE: What kind of impact could rupee devaluation have on SMEs?
Zafar Iqbal Ahmed: Pakistan has been importing raw material from almost all over the world which is one of the causes for the ever-increasing trade deficit. It is in the knowledge of everyone that burden of the import of raw material is being endured by the industry comprising SMEs and large scale manufacturers. Since Pakistan’s import bill was over $50 billion and this could be over $55 billion during the current fiscal year as well, rupee devaluation would leave drastic adverse effects on SMEs due to expensive raw materials. It is a myth that devaluation of currency would help in curbing imports. Devaluation of rupee would help the inflationary pressure skyrocket.
PAGE: What are your suggestions for current state of rupee?
Zafar Iqbal Ahmed: Our currency is under pressure at present. It is due to myriad factors such as borrowing in the shape of issuance of Sukuk and Eurobond worth $2.5 billion, bad governance for the promotion of the economy, lavish expenditures, stigma of corruption, smuggling, political instability etc. Localisation is the solution of all ills in Pakistan. It is high time that prudent decisions are taken to induct earnest individuals for economy and business affairs. The people at the helm of affairs need to show circumspect approach in critical decisions. Austerity measures are the need of the hour and lavish approach is to be set aside by the individuals having say in the government affairs.
PAGE: Do you think devaluation of rupee would attract foreign investors?
Zafar Iqbal Ahmed: No, not at all. Two countries in the same region cannot be alike in attracting foreign investment. Only depreciation of currency is not sufficient in terms of having a good inflow of FDI. Foreign investors look at policy consistency, business environment, business sentiment, local consumption, prospects for export, purchasing power of the citizens, demography etc. Let me be honest by telling you that Pakistan can be one of the most favorite destinations for the foreign investors provided sincerity is exposed by those who are decision makers. Lackadaisical and rudderless approach would lead us nowhere. India and China have been attracting over $70 billion in FDI every year. We have fallen flat in this regard. Only depreciation of currency does not convince the investors to invest in any country.
PAGE: Your views about historic performance of rupee:
Zafar Iqbal Ahmed: Historically, rupee depreciation has never helped in enhancement of exports. Let’s look at last one decade. Ten years ago dollar was traded below 60 rupees and exports were around $18 to $20 billion per annum. However, dollar has almost doubled its value and our exports more or less same. Pakistan is not an export-oriented economy, which is one of the reasons for the perennial economic problems. We have to rise above our fears and compete with the international players in terms of cost of doing business, quality products and timely delivery. Shoddy products bring disrepute, however, quality products help the incessant growth. The recent depreciation of around 5% may give some help to the otherwise beleaguered exporters, however, it is not the prudent economic decision in the economy where local and foreign borrowing by the incumbent government is on, current account deficit is more than $12 billion, trade deficit is over $32 billion and imports are not being curtailed through localization as done in our neighboring countries.