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Budget 2018-19 is balanced with many pro-business measures

Stability, consistency and favorable business environment will help Pakistan meet economic challenges

Prime ways of enhancing exports are to support new entrepreneurs, diversifying export from traditional items to non-traditional items plus value addition
Interview with Mr Shamim A. Firpo — former President, Karachi Chamber of Commerce & Industry

PAGE: Tell me something about yourself and your organization, please:

Shamim Firpo: I started struggle at a very young age. When I was six-year-old, my father died then my mother played a vital role in building my personality and my future. My mother motivated and encouraged me in every walk of life. I am determined and optimist kind of a person and always believe in Allah SubhanahuTa’alah that He always has good for everyone. As a person, I am very simple and result-oriented. I am also very much interested in social welfare work.

In my whole life, I worked hard and made my life as I dreamed. I am a self-made person and I feel pleasure whenever I share my success story with students and young entrepreneurs in mentoring sessions while visiting universities and educational institutes to motivate them.

At very young age I started my business journey. That was 1968 when I established my food business with the name of ‘Firpo Restaurant’ at Tariq Road in Karachi. With the blessings of Allah SubhanahuTa’ala and my mother’s prayers, my business got success and popularity. The name ‘Firpo’ was so popular that it has become part of my name. I am proud to say that there may be thousands of Shamims but there is only one Firpo, so whenever the ‘Firpo’ name is taken anywhere across Pakistan, people come to know that it is only Shamim A. Firpo. After food business, I diversified my business and started trading, import and export business with the name of ‘Sohail Enterprises’ in 1975. I constantly worked, with the flow of time my sons joined me in business and Alhamdulillah our business has now converted into Firpo Group of Companies. In 2018 we are celebrating 50 years Golden Jubilee of our business. If I talk about my business, we mainly deal in auto lamps and auto parts. We are well-known amongst automobile industry in Pakistan. All the top auto manufacturing companies use our bulbs and parts in their vehicles.

‘Firpo’ is our registered brand name which is known as a name of trust and a symbol of quality in market.

We are doing our business globally and have established offices in China, Sri Lanka, and Romania. Our working partners are China/Hong Kong, Taiwan, Vietnam, Thailand, Japan, USA, Germany, Hungary, UAE, Romania, Ukraine, Sri Lanka, Iran, Afghanistan.

I am also holding different public and private portfolios and also have interest in business politics and have served the business community of Karachi as President of Karachi Chamber of Commerce & Industry for the year 2016-17. I am very much satisfied with my life and thankful to Allah SubhanahuTa’ala for giving me this respect and success.

PAGE: How would you comment on the key economic challenges being faced by Pakistan?

Shamim Firpo: I always say that Pakistan is among those few countries where political instability, inconsistent and non-favorable policies have badly damaged the prospects of growth of country despite the fact that our beloved country is rich in natural resources, all weathers, mountains, forests, deserts, agriculture land, ports, fresh water and has excellent geographical position.

In my opinion everything is doable just we only need sincerity in our every action and policy. If I talk about key economic challenges I must say that our businessman is facing high cost of doing business and due to this high input cost of production we are not even able to compete in our regional markets. In Pakistan, the cost of doing business is not high for any particular reason comparing to regional markets utility rates are too much high in Pakistan which is the main cause of high cost of production. Secondly our government is totally sitting on their seats having no interest in taking actions or decisions in time for business until and unless there is some pressure on them. Federal government, provincial government and local government work for their own sake and no one is interested in growth of business and economy. There is lack of coordination between government departments. A businessman is given a run around if he decides to invest in Pakistan. Our taxation system also needs to be revised with consultation of all stakeholders. At present in our current tax system, a taxpayer who is already paying tax is burdened with more taxes instead of bringing non-taxpayer individual into tax net.

We are also facing poor governance and lack of implementation on policies. We need to fix these issues otherwise the economy is not going to take off at the speed which is required to get targeted growth. Another factor is that as a nation, we consume more and save less. Our expenditure is more than our savings. We import more and export less causing negative impact on trade balance. As a nation, we have to change our mindset. Our mind is full of negative thoughts as our media presents sensational stories and invite so-called experts who contribute in projecting negative thinking and negative national psyche. Unless we have a positive ‘can do’ and ‘everything is doable’ mentality, it is not difficult to progress.

PAGE: What is your take on the current account deficit and trade deficit?

Shamim Firpo: According to balance of payment data released by the State Bank of Pakistan (SBP), the current account deficit has widened by 52 percent to $10.82 percent during Jul-Feb 2017-18 as compared with the deficit of $7.21 billion in the corresponding period of the last fiscal year. The widening gap is mainly attributed to rise in imports and lower growth in remittances and exports. Pakistan’s current account deficit is sharply increasing due to massive growth in imports against exports and remittances. The exports during the first eight months were at $14.85 billion showing 11.62 percent growth compared with $13.3 billion. On the other hand imports grew by 17 percent to $39.09 billion during Jul-Feb 2017-18 when compared with $33.39 billion in the corresponding period of the last fiscal year the trade deficit widened by 20.7 percent to $24.25 billion as against the deficit of $20.08 billion. It seems that the deficit may increase more in coming months due to uptrend in international oil prices, as Pakistan remains a net oil and gas importing country.

Oil price in international markets recovered 43% to $64.5 per barrel from around $45 per barrel in June 2017. In my opinion we need to increase foreign exchange receipts by stimulating exports, and there is a need to contain import of unnecessary and luxury items, meant for consumption, in order to reduce trade deficit and narrow the current account deficit. Furthermore, the government should recognize that export growth is essential not only for the sustainability of external debt but also to raise the economy’s growth rate. At this moment structural transformation and a long-term growth of the export sector is unavoidable to plug the unsustainable trade deficit.

PAGE: Your views on the business activities in Pakistan:

Shamim Firpo: Regarding business activities in Pakistan, I would like to share that the government of Pakistan has set the target of a GDP growth of six percent with the agricultural growth at 3.5 percent, industry 7.3 percent and services at 6.4 percent. According to resources after a slump in 2017, the construction and real-estate industry is projected to pick up in 2018 driven by developers and needy buyers. The retail and service industry is projected to continue on its growth trajectory, promising job opportunities.

The SMEs too are poised to be on a growth trajectory. In my opinion, due to CPEC and the influx of Chinese investors and their partnering in large, small and medium enterprises has a real potential to spur economic growth in Pakistan. Also, investments made under CPEC in the development of Pakistan’s infrastructure, its energy sector and the establishment of special economic zones has the potential to usher in an era where investors from other countries will look upon Pakistan as a country to favor for business and investments as 52 countries have shown interest in the vital project. But the leading challenge of current account and trade deficit can reverse the rising trend of growth and may force Pakistan to revert back to again take loan.

The other challenge is conduct of the political parties in the forthcoming elections in 2018 and aftermath. Government should introduce reforms to make business workings easier. According to the World Bank’s Ease of Doing Business Index, Pakistan had slipped three places on the Index and now ranks 147th among 190 economies; this index is mostly used as a guide by foreign investors to learn more about a country. It is unfortunate that the country slipped from its last year’s rating despite the introduction of some reforms in areas of starting a business and making international trade relatively easier. As I shared earlier, instead of broadening the tax base, the government relied heavily on the existing extremely narrow tax base to meet its additional revenue requirements. This made business uncompetitive.

PAGE: What is your take on the depreciation of rupee?

Shamim Firpo: At present Pak Rupee is facing ongoing depreciation pressures against the US dollar. Businessmen are worried over a massive depreciation of rupee in the last few days as this will have a devastating effect on the ‘already beleaguered’ economy. The depreciation will increase prices of all the essential items and will result into high inflation prices of imported food products. I would say that currency devaluation for a country like Pakistan will have negative economic implications in the long run. At present, the importers have adjusted import prices while exporters are happy to have additional gains, but imports will become costlier for new foreign purchases and exporters will also bear the brunt due to rise in cost of imported raw materials. As we know petroleum products have major share in import bill of our country so as oil prices in the international market are increasing, import cost will also escalate.

In my opinion rupee depreciation may provide some incentives and short-term jubilation to the export sector of the country, but due to rise in the cost of imports, production cost would further go up that would affect the competitiveness of our exports too. I would say that the government should take urgent measures to bring stability in the value of domestic currency as the continuous fall in the value of rupee would bring imported inflation in the country and curtail domestic demand leading to further slowdown in the economic growth of the country that would not be in the best interest of the country. It would also adversely affect employment generation and give rise to a new wave of price hike in the country.

Pakistan mostly depended on imported capital goods and raw material for industry, but the falling value of rupee would make all imported goods and raw material costly. It would also increase the prices of petroleum products and would further enhance the cost of debt servicing leading to more pressure on our forex reserves. While formulating the strategy, the Government of Pakistan should think that our imports are much higher as compared to our exports and rupee continues depreciation would thus bring more problems to the overall economy.

PAGE: Your views on the export from Pakistan:

Shamim Firpo: As we all know that exports are the back bone of any economy. Exports can help in earning valuable foreign exchange, which is quite important for a country like Pakistan, which has to pay its oil and defense purchase bills through foreign exchange. If exports decrease it would mean an unfavorable balance of payments which would put pressure on the exchange rate causing the rupee to depreciate, which we are facing nowadays and which would increase again the bill of imports.

If I talk about exports’ growth in our region I see all countries have growth in their exports but unfortunately with Pakistan, the case is opposite. This situation is not understandable for me given the fact that we have been awarded the GSP Plus status again by the European Union to help boost our exports. The possible reasons in my opinion for decreasing Pakistan’s exports are the same which are also responsible for decline of economic growth, high cost of production and inconsistence policies for increasing export volume.

I would suggest that prime ways of enhancing exports are to support entrepreneurship, to create new avenues for growth by guiding the young entrepreneurs, diversifying export from traditional items to non-traditional items plus value addition. It will create a cycle of prosperity as the young people not only get employed themselves and will also create value for the society and the economy but they also promote employment opportunities. We only need to promote culture of entrepreneurship and value addition.

The other important way out to increase export is to diversify our current export base. Our current export base is mostly limited to traditional commodities or basic commodities which include textiles, leather, cotton and other basics e.g. grains, fruits etc. We never focused on other important sectors apart from textile and rice, which is keeping the country out from many valued markets. We should make a transition from these exports to more value added items in the global value supply chain e.g. information technology, software exports, computer components like chips, integrated circuits, semiconductors, parts used in mobile and laptop manufacturing and other high tech items. IT has a great scope of exports even a small component like glass protector of smart phone has huge market in whole world as everyone hold mobile phone and definitely opt glass protector. The other non-traditional products can be fish and fish preparations, Halal food, vegetables, fresh flowers, dairy products etc.

We should concentrate on value addition in agriculture products, minerals, stones, plastic, chemicals and others. Along with that, we should identify other export opportunities from Pakistan and inform the investors and the public about them so that more people can take part in the value creation process. We can only increase our exports consistent policies and by enhancing value addition, innovation, diversifying products, motivating young entrepreneurs, and government’s sincere emphasis on increasing exports.

Government should emphasis on searching new markets and signing more FTA’s favoring Pakistan to increase exports. While concluding, I pray Allah RabulAalameen that He makes us able to do what we say and give us strength to act with sincerity and faith good for our country.

Let Deeds Correspond With Words. Pakistan Zindabad!

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