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More influence of domestic manufacturing biggest draw in attracting foreign investment, adding reserves

More influence of domestic manufacturing biggest draw in attracting foreign investment, adding reserves

Interview with Mr Muffasar Atta Malik – President, Karachi Chamber of Commerce & Industry

PAGE: Tell me something about yourself please:

Muffasar Atta Malik: I started my student life from an Army-run school in Sialkot and after graduating from Murray College, Sialkot got admitted in Nishtar Medical College, Multan in 1982 to fulfill the desire of my parents. But Allah SWT had some other role carved for me and in a surprise move I had to leave my professional studies and joined my family business in Karachi, as per my father’s wish. So I started my business career in 1982 at the age of 19 years and in 1988, I started my very own personal business. During the last 36 years, I have been involved in several fields including Photographic, Textiles, Pipe Mills, Leasing, Real Estate Development, Private Security Services, Trading and Solar Technology.

In 2008, I joined Businessmen Group (BMG) and became Managing Committee Member in 2012. I was chosen to head Law & Order Sub-committee in my first year and was tasked to perform as Senior Vice President in 2013.

I became President of the premier and largest chamber of the country, Karachi Chamber of Commerce & Industry (KCCI) as I was elected unopposed last year in the month of October to lead the esteemed Chamber for a period of one-year, which is a challenging task but if you’ll take a good look at my life, I always love to take challenges and am ready to take more.

PAGE: Your views on the trade outlook of Pakistan in 2018:

Muffasar Atta Malik: Pakistan’s long term economic stability is contingent with achieving sustainable economic growth; which is largely associated with increasing exports and containing deficits. Although, economy has performed relatively better in the past two years owing to the low international oil prices and makeshift arrangements in different cadres; the country recorded highest-ever trade deficit of $33 billion in fiscal year 2017. This precarious economic condition is a serious concern for the government and policy makers. The current account deficit has been worsening with each passing month, reaching $7.41 billion in 1HFY18, increase of 59 percent as compared to $4.66 billion in 1HFY17, and against a deficit of $12.44 billion for full year FY17. The trade deficit, the primary reason behind the high current account deficit, has climbed up to $17.96 billion (with exports at $11.01 billion and imports at $28.97 billion) in 1HFY18. Also last year in FY17, the country recorded its worst-ever trade deficit of $32.58 billion, and if the current half yearly figure is to be taken as an indicator, Pakistan could well be in the run to touch a deficit mark of $36 billion in FY18.

PAGE: What is your take on the import and export duties and their impact on the traders?

Muffasar Atta Malik: The import duties are one of the ways of protecting local industry from foreign competition which helps in developing domestic industry. Most of the goods imported in Pakistan face less than 10% of the duties however there are also numerous imported goods having tax rates in between 15 to 25%. In 2017, government reduced general tariff rate from 25 to 20% while simplifying the number of duty brackets from 7 to 6%. In order to encourage textile sector, which is the backbone of the country, textile machinery imports have been made duty free. The government has also recently abolished 4% customs duty and 5% sales tax on cotton imports for facilitating value-added textile exports. Similarly, there are five zero rated sectors i.e. textiles, leather, carpets, pharmaceuticals and sport goods where government charges zero sales tax in order to promote domestic industry. On the other hand, the government has imposed high import tariffs on both finished goods and raw materials in certain industries like that of beverages, tobacco and transport sectors.

PAGE: Your views about the import of essential goods during current year:

Muffasar Atta Malik: The increase in international prices of oil has raised Pakistan’s total import bill by 19% to $28.9 billion in 1HFY18 compared with $24.3 billion in the same period last year. During 5MFY18, Pakistan’s major import items have been petroleum products (23%), machinery (17%), agricultural & other chemicals (15%), food (11%), metals (9%) and transport (7%). Since development of CPEC (China-Pakistan Economic Corridor) is in full swing, import of machinery has sharply rose in the recent years, coming closer to that of petroleum group. During 1HFY18, value of machinery imports stood at $5.5 billion in contrast to petroleum imports which stood at $6.3 billion.

 

PAGE: What should Pakistan do to be self-sufficient to avoid heavy imports of essential goods?

Muffasar Atta Malik: This is unfortunate that the policies in Pakistan have remained in favor of imports more rather than being business and investment-friendly due to which it has become a dumping ground of a wide range of imported products. Imports are encouraged in the country either when the goods are not locally produced, local manufacturing is of inferior quality or goods locally produced are much more expensive than the imported substitutes. Therefore, the heavy dependence on imported goods can only be curtailed by incorporating a mult-ipronged strategy of reducing cost of doing business to make local manufacturing more competitive, encouraging investments to improve availability of locally manufactured products and introducing attractive schemes for technology transfers, branding and quality upgrades.

As the policy loopholes will be plugged, the business environment for local manufacturing will become conducive which will in turn discourage heavy imports and attract investors. It will also create exportable surplus which could be exported for earning the much needed foreign exchange reserves.

Business-friendly strategies should include improving on the World Bank’s rankings of Ease of Doing Business by bringing all-encompassing reforms.

In 2018, Pakistan’s position in World Bank’s rankings of Ease of Doing Business dropped by three ranks to the rank of 147 out of 190 countries, which shows a very poor performance of the country. The role of Trade Development Authority of Pakistan (TDAP) and Board of Investment (BoI) needs to improve to a much greater extent while Chambers of Commerce & Industry should be taken on board in matters of policy formulation in order to have more business-friendly policies in place.

PAGE: How would you comment on the purchasing power of the Pakistanis during last five years?

Muffasar Atta Malik: The purchasing power of Pakistanis has largely improved as Per Capita GDP has surged from $ 1,320 in FY12 to $ 1,628 in FY17 showing 23% increase in the past five years. This surge is reflected in the increased consumption trend of the Pakistani consumers, which is directly linked with the growing presence of world renowned retail brands in the country. The international brands in clothing, food, cosmetics, shoes and other accessories in Karachi and rest of the country is an example of how this developing economy has fast became great attraction for the world’s leading brands.

With the rapid pace of emerging middle class, the demand for Fast Moving Consumer Goods (FMCG) is indicative of Pakistan’s budding economy. The changes in exchange rate greatly impact the purchasing power of the people living in any country. However, in the past five years, rupee has depreciated 12% from PKR 99 in 2013 to PKR 111 in 2018, which fueled up inflation due to higher dependence on imported goods which did erode some of the purchasing power of the people in Pakistan.

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