Low cost of doing business and utility rates will help economy prosper
Interview with Mr Shamim A. Firpo – Chairman, Firpo Group of Companies
PAGE: Tell me something about yourself and your organization, please:
SHAMIM A. 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. As I shared that, at a 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 and 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. 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.
Firpo is our registered brand name which is known as a name of trust and a symbol of quality in market.
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: What are your views on the budget for the next fiscal year?
SHAMIM A. FIRPO: As everyone was expecting that this year budget would be the political budget because the 2018 is a general election year and for that reason the existing government would try to take measures to provide maximum facilities and benefits to the business community and general public because if the measures taken are non-practical, the up-coming government would bear burden of these measures and whenever the new government feels, it will revise the measures as per its wish. In election year, no one waits for the announcement of the budget because a common man does not have any direct link with the budget. Every time the government says ‘tax-free’ budget but the budget is never tax-free because when the government increases its expenditures, the increased cost is adjusted through modification in taxes and duties. If they do not impose any new tax, they do increase rate of existing tax slabs of different categories.
I always say that instead of broadening tax net, the government burdens the existing taxpayers. The government wants to receive more tax amount from the existing tax payers that is why people who are out of tax net do not want to become taxpayers.
We knew that this year budget would be the lenient budget because of election year. So, exactly the same thing has happened. We all know Karachi is an economic hub but is always neglected, however, now the situation has changed. Leading political parties, which have the major vote bank in Karachi have some internal differences so a vacuum has created hence to fill this space and all political parties are focusing on Karachi to get vote bank of the mega city.
In my opinion, overall, this budget is a bit better compared to the previous ones, especially I appreciate the withdrawal of discretionary powers given to Federal Board of Revenue’s Chief Commissioner and Commissioners which was an old and major demand of the Karachi Chamber of Commerce & Industry. In this budget, it was also aimed to keep inflation up to only six percent, which would be an uphill task in my opinion, but if materialized, it would keep the prices in control and help maintain mark up at the low rate. As a result this would ultimately benefit industry, increase production and reduce unemployment. I would also appreciate the initiative of reducing duty on latest technology and electric cars which is an environment friendly step. Moreover, reduction in taxes on vehicle charging machinery would lay foundation of a new business that would provide more means of earning to the people.
I also welcomed the decision of conducting only one consolidated audit of a company that would be done after three years’ gap, if needed. These kinds of decisions would send a good message to the business community who, otherwise, were embarrassed because of the FBR tax collecting officers’ discretionary powers and frequent audits. The tax concessions to textile sector would help further growing this leading export industry of the country which will put positive impact on exports.
Further, I also appreciate the federal government’s announcement of providing buses for the Green Line project in case the provincial government is not able to do that. I would say that the federal government should not wait for the provincial government of Sindh, but bring these buses instantly because people of Karachi are suffering because of the poor mass transport system. The statement is very encouraging that federal government has announced to allocate rupees five billion for setting up combined treatment plants in the industrial estates of the city. It is also positive that the government had raised the limit of non-taxable income of salaried class up to Rs 1.2 million from Rs 0.6 million per year. However, there are some apprehensions about the budget implementation if new government comes up with different economic and social priorities.
PAGE: Your comments on the taxation for business in the next fiscal year budget:
SHAMIM A. FIRPO: As I told earlier, compared to the last five budgets, the Federal Budget 2018-19 is a bit balanced budget envisaging several pro-business measures. The one major step is withdrawing of discretionary powers given to Federal Board of Revenue’s Chief Commissioner and Commissioners which was an old and major demand of the Karachi Chamber of Commerce & Industry. The reduction in withholding tax rates on bank transactions to 0.4 percent from 0.6 percent is also appreciable but there should be no tax application on banking transactions as nowhere in the world this kind of tax is imposed on cash withdrawals from banks. If I talk about tax relief measures, the gradual elimination of super tax and reduction in corporate tax to 25 percent by 2023 along with tax credit to new industry would result in expansion and provide employment opportunities.
As I shared that the announcement that any company could only be audited by the tax authorities only once in three years would provide relief to the businesses. There are some other good announcements including limit enhancement for income tax exemption, removal of Regulatory Duty on important raw materials, increase in development budget, allocations for agriculture & livestock sectors and increase in pensions etc.
Removal of withholding tax on banking transactions is the longstanding demand of the business community but government has ignored this issue and decided to continue that would cause trust deficit and hamper the expansion of tax net. Overall in my opinion, reducing taxes would help the business community to boost economic activities in the country. As is shared, the government should take measures with consultation of all stakeholders to broaden the tax net instead of imposing mores taxes to the existing taxpayers.
PAGE: Do you think the budget would bring prosperity for the poor?
SHAMIM A. FIRPO: In particular budget does not directly link to the general public but some measures are taken every year to provide relief to public and salaried persons like cut in income tax rates, increment in salaries of government employees, increase in minimum wage, increase in pension amount and some other allowances and facilities.
The metro bus and orange train projects would benefit the poor more than the rich, as the poor use these services for travelling from one place to another. Particularly in my opinion no relief is announced for the general and poor masses in the federal budget. Province of Sindh produces 70 percent gas of total country production but still many areas do not have gas facilities.
I would suggest that priority should be given to health and education sector. Good Health, Good Education and Safe Drinking water is a right of every person. In this budget, the government has slashed duties on import of hepatitis and cancer drugs, which is a good move and has shown positive gesture for the poor masses by waving-off duties on import of these drugs. There should be education and health emergency in the country to steer the country into right direction. The government has also proposed an allocation of Rs.12 billion for the provision of advance to government servants for house building and purchase of transport facility which would also help to raise the standard of living.
PAGE: How would the economy of Pakistan in coming years?
SHAMIM A. FIRPO: The year 2017 left behind achievements and disappointments for the nation. On the economy side, Pakistan needs to promote economies of scale and ensure continuity of systems and policies for better economic growth. The cost of doing business is still too high in Pakistan as compared to the regional countries, which makes our exporter uncompetitive in markets. So until our exporter is not facilitated by providing low rate input cost, we cannot compete in the market and cannot increase export volume so there will be no betterment in economy. We do not need any subsidy. We are not happy with it. We only want low utility rates, low electricity rate, low gas rate especially as being provided to the business community of the neighboring or competing countries.
Unless the cost of doing business is reduced, there is no question of change in the state of economy. I would suggest that for the growth of economy, initiatives for organizing public-private dialogue on charter of economy should be taken and such dialogues should be held regularly to bring public-private sectors on one platform and develop consensus on economic policies. I emphasized that tax rates should be reduced to single digit level that would help in improving tax revenue. The government should focus on improving the competitiveness of Pakistan to promote trade and exports. The level playing field should be provided to foreigners and local investors in a way that local industry should not get affected by such investments. In my opinion, the current and future governments in Pakistan should carefully evaluate how they could help new enterprises and SMEs through reduction in cost of utilities, energy, tax compliance and labor.
Clear interventions should be devised by Ministry of Finance and Federal Board of Revenue for improved competitiveness of private enterprises. As I told earlier, higher cost of doing business is a major challenge that the business community is continuously facing. Besides energy and gas crisis; lack of tax reforms, shrinking exports, rising imports, and swelling current account deficit are the other major challenges being faced by the government which needs urgent actions to be taken on top priority. To conclude, the current state of the economy needs urgent attention of the new administration and one can only hope that some of the attention on the 2018 elections is diverted to it.
PAGE: How could Pakistan get rid of trade deficit, current account deficit and ever increasing imports?
SHAMIM A. 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. Pakistan’s economy is experiencing trade deficit, current account deficit and ever increasing imports. This situation can only be handled by controlling imports and reducing unnecessary expenditures, lowering borrowings and increasing our export to get rid of it. Unless we increase our exports, there will be no business expansions and employment opportunities. We are ignoring local business community and inviting foreigners to invest in the country but we must keep in mind that the foreigners will not invest without reviewing the market potential and status of local businessmen and if they do not get positive image about business environment in Pakistan, they will not invest.
We all know that exports are the backbone 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 means an unfavorable balance of payments, which would put pressure on the exchange rate causing the rupee to depreciate.
Pakistan is expected to book a current account deficit of around $16 billion during the current fiscal year 2017-18. Unfortunately, there has been an over reliance on short-term programs to correct the deficit in the trade balance, which has increased alarmingly. The government is looking at various options to fix the issues, including amnesty scheme targeted at foreign assets, to manage the current account deficit, but all of that will only be a temporary fix.
We will not get back our jobs, we will not be able to attract investment, and the real economy will not stabilize, unless and until, we fix the trade deficit. Long-term programs that improve the business environment for firms trading across borders are the need of the hour. The government may gain temporary relief from subsidies and currency depreciations. However, as the data suggests, such relief programs make trade more volatile and are less likely to alleviate the current dilemma on the balance of trade.
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!