Urgent need to resolve socioeconomic issues and be a true investor towards education reforms
New govt is ardent to strengthen ties with US and Russia and support regional countries
Interview with Mr Gul Mohammad Lot, Chairman Mehran Group of Industries
PAGE: Tell me something about yourself, please:
Gul Mohammad Lot: I was born in Pakistan in the Diplo area of Thar District in Sindh. From the very young age, I joined my father, Mr. Ghullam Muhammad Lot, in his business. As far as education goes, I completed my bachelors from the London School of Business in business administration and obtained my master’s degree from the University of Sindh, Hyderabad, in political science.
I am the Chairman of M/s. Mehran Spice & Food Industries. It began its journey in 1975, making our industry 43 years old now, and within a few years of its inception, the company grew to become one of the leading spice and food industries worldwide. Mehran is a world leader in quality rice, spices, sauces, pickles, vermicelli and ready to eat sweet dishes. Our company has equipped the most advanced rice plant from Germany and other production packaging machines from all around Europe, making our products virtually untouched by human hands. The combination of using sophisticated methods whilst being mindful towards our consumer’s health has encouraged us to prioritize using natural ingredients, free of artificial color and preservatives. We pride ourselves in producing food in the healthiest manner possible to aid in catering to our consumers’ best of health.
At Mehran, we have invested a huge amount of capital to modernize our production techniques. Our two main production units were established in the United Arab Emirates for the past 30 years and in Saudi Arabia for the last 12 years. Our factory in Saudi Arabia is one of the largest food production industries in the region.
Mehran Spice & Food industries has been honored with many prestigious awards, both nationally and internationally.
During the last 34 years, Mehran has won the best export award every year consecutively — the best brand of the year four times, business man of the year three times, the presidential medal and the lifetime achievement award by the Federation of Chambers of Commerce and Industry (FCCI). Mehran Group of Industries is the only food company to be awarded all these prestigious awards.
Mehran Spice & Food Industries is an ISO 9001 & ISO 22000 certified leader in the quality food business. Our mission is to be a consumer-oriented company with a keen insight of food products ensuring quality, consistency and an authentic taste, backed up with state-of-the-art technology to obtain optimum result.
PAGE: How would you comment on the challenges being faced by the government?
Gul Mohammad Lot: It is a hard fact that Pakistan is facing the worst financial instability in its history. It suffers through poverty alleviation, corruption, misrule, internal securities, with a dire need of improvement in the state of education and economic condition, broadening the tax base and zero tolerance for racketeered money. I think the new government will have to act fast as the country is on the verge of a balance-of-payments crisis. The budget deficit has grown steadily over the past five years, and foreign currency reserves have declined. The rupee has been repeatedly devaluing and this is responsible for fueling inflation. Pakistan has been hit by militant attacks and sectarian violence in recent years. Upon such challenging situations, Pakistan needs to tread carefully. More than 200 million Pakistanis suffer from unemployment, power shortages and terrorist attacks. We will have to keep an optimistic mind towards our country’s outcome after all it has suffered lot of bad times. The marginal export growth was heavily offset by soaring imports, which swelled the trade deficit and caused the scales to uneven.
Hopefully with the encouragement of the rising of local companies and controllable sanctions in our import whilst expanding our export, the scales will see a balance the country need desperately for the future growth.
PAGE: What must be the priorities of the government at present?
Gul Mohammad Lot: The main priorities of the government at present are education, gender equality, health, accountability, transparency, and police and civil service reforms. The oldest and simplest justification for a government is being a protector, by protecting citizens from violence. The idea of the government performing its duties as a protector requires taxes to fund, train and equip the police force; and to appoint the officials to pass and implement justice and laws citizens must obey and be held accountable for when they break.
A more expansive concept is of the government being viewed as a provider in the social welfare state: government can cushion the inability of citizens to provide for themselves, particularly in the vulnerable conditions of youth, old age, sickness, disability and unemployment due to economic forces beyond their control.
The most important responsibility of the government is to be an investor towards education. Another priority of the government is to increase exports and attract investments by policy reforms and introduction of new incentives. The SME (small and medium-sized enterprises) sector will be revived so as to improve the national economy. There is also a progressive approach to enhance the health sector, to facilitate the farmers and promote export activities.
PAGE: Should the government opt for IMF or not?
Gul Mohammad Lot: Pakistan has ended up with an increasing level of debt, balance of payments crises, and a government struggling to keep the growth spurt going. When these challenges become dire, Pakistan often ends up getting a loan from the International Monetary Fund (IMF). And, if our policies remain the same, we will without a doubt keep knocking at IMF’s door every few years (or some other lender for that matter).
The government needs to bring meaningful reforms to our economy. The most direct culprits are lack of exports and the increasing cost of imports. Pakistan imports nearly twice as many products and services than it exports. We mostly export basic textiles, cotton and rice and other related products. Most of them are low-value items in the global value chain, so we earn little revenue from exporting them, and are hence unable to cover our import bill. This entire situation puts Pakistan’s financial stability in jeopardy. While a number of countries have promised to help Pakistan financially, none of the international states or monetary institutions are offering Pakistan funding without tough conditions, hence it comes with a double edged sword.
While some states, including China, are open to giving Pakistan loans, they have placed tough monetary or trade conditions in place. It is likely that the IMF, before offering any new loan program to Pakistan, will ask for a number of reforms that may not be in the best interest of Pakistan’s middle and poor classes. It is expected that the tax base targeting the salaried class is expected to grow and more direct and indirect taxes are likely to be called into action. Meanwhile, subsidies in the field of agriculture and other areas are likely to see a significant reduction.
PAGE: How do you see the economic growth by the end of this fiscal?
Gul Mohammad Lot: Imran Khan pledged to create millions of new jobs and build five million homes for the poor. He claimed that affluent overseas Pakistanis have promised him to bring in billions of dollars in investment and expertise to rebuild the country. As the country’s elected leader, he will now be expected to deliver on all these promises.
Pakistan’s inflation is expected to rise in fiscal year 2018-19 and will remain high till fiscal year 2020. The outcome of the devaluation of Pakistan rupee against US dollar in the domestic market incidentally coincided with a rise in the crude oil prices in the global market resulting in an upward trend in oil prices from January 2018. The trend will cause an increase in the manufacturing and transportation cost resulting in price hike of all the commodities produced locally.
Pakistan’s economy has time and again shown resilience and the capacity to bounce back. The new government’s strong commitment to focus on pockets of vulnerabilities and implement pro-job and socioeconomic development policies will stimulate robust and sustainable growth in the coming years.
Pakistan is facing significant economic challenges, with declining growth, high fiscal and current account deficits, and low levels of international reserves. Pakistan is facing an increasingly difficult economic situation, with high fiscal and current account deficits, and low international reserves. This mostly reflects the legacy of an overvalued exchange rate, loose fiscal policy and accommodative monetary policy. The fast rise in international oil prices, normalization of US monetary policy, and tightening financial conditions for emerging markets are adding to this difficult picture. In this environment, economic growth will likely slow significantly, and inflation will rise.
PAGE: Your views on the friendly trade relations with the neighboring countries:
Gul Mohammad Lot: The new government stands committed to ensuring better relations with the neighboring countries. The new government will also need to ensure China stays committed to its planned investment, which is expected to aid in developing a much needed infrastructure for the country. The Chinese government has been extending shoulders to help Pakistan’s economy. The recent China-Pakistan Economic Corridor is a monumental step in ensuring closer relations for the future.
Pakistan is currently under colossal debt and on the brink of borrowing more from the International Monetary Fund (IMF). Behind this friendly overture, the new government shall have to understand that the loan extension has covert objectives; to prevent Pakistan from developing closer relations with Iran. As Saudi-Iran tensions reach new heights, the Muslim world is slowly becoming polarized. Secondly, Saudi Arabia needs military cooperation from Pakistan as its horns are locked in Yemen and Qatar, along with other ongoing conflicts in the Middle East. China, always dreaming of regional cooperation, has asked Pakistan to balance its relations with both Saudi Arabia and Iran in order to safeguard its own economic gains.
However, despite the potential benefits of CPEC and relations with China, economic pressures will force Khan’s administration to strategically mend ties with the United States, which have been under strain since earlier this year. While the issues pertaining to security and terrorism, a robust bilateral relationship will not only encourage the United States to participate in Pakistan’s commercial prospects, but also help support the country’s global economic interests. On a more positive note, Imran Khan has offered to play the arbitrator between Iran and Saudi Arabia. We also hope that he will be able to maintain relations with both the US and Russia, alongside strengthening regional cooperation.