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Pakistan’s economy heading in right path, will see more positive results soon

Pakistan’s economy heading in right path, will see more positive results soon

Mega CPEC projects can help overcome major economic hardships of Pakistan
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 life’s struggle at a very young age. When I was six year old my father died and after his death my mother played a vital role in building my personality and future. My mother motivated and encouraged me in every walk of life. I am determined and optimist kind of a person and always believes in Allah Subhanahu Ta’allah 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 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 Subhanahu Ta’allah 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 getting success in 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 devotion, 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 celebrated 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, Hungry, 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 and happy with my life and thankful to Allah Subhanahu Ta’allah for giving me this respect and success.

PAGE: How would you comment on trade and industry in Pakistan?

Shamim A. Firpo: I would like to comment on the trade, industry, industrial growth and economic prosperity of any country are intertwined with its political stability and persuasion of prudent economic policies by the government. Today, Pakistan is ranked 108 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Pakistan improved to 108 in 2019 from 136 in 2018. Pakistan has jumped up 28 places on the World Bank’s (WB) Ease of Doing Business Index and secured a place among the top 10 countries with the most improved business climate, a development that will greatly improve Pakistan’s image abroad. But the trade and industry in Pakistan is still being confronted with enormous challenges like shortage of utilities, high cost of doing business, depreciation of rupee, raising dollar value, security concerns, soaring inflation and unemployment etc.

However, the government inherited a weakening economy but the present government is committed and has taken several policy actions to meet these challenges. We all know industrial sector is of great importance for economic development of every country. It is historical fact that countries with strong industrial sector have showed more economic growth and development.

Pakistan industrial sector is the second largest individual sector of the economy accounting for 25% of the GDP. The government has taken measures to curtail non-essential imports, encourage remittances and with support from friendly countries reduced external vulnerabilities. The exchange rate adjustment was aimed to bring it to equilibrium value. Energy prices, which were artificially suppressed for a prolonged period of time, were adjusted and import duties and tax rates were rationalized.

In my opinion for growth of trade and industry, the industry should identify and manufacture the sophisticated and high value added products which are in demand and specify the raw materials required for their manufacturing and request the government for rationalized customs duties on them, for bringing them at par with other export inputs. Only then mutually advantageous and reciprocal FTA would be useful with desirable trade balance.

As I stated above industrial revival among other things has become certain for the economic growth of the country. Pakistan requires a well correlated tariff, trade and industrial policies which reflects objective of industrial revival to produce import substitutes and export surplus with domestic and international competitiveness. We need prioritization, incentivization, import substitution industries, export oriented industries, low and high value-added industries, low-tech and high-tech industries, labor-intensive industries, capital-intensive industries, small and large scale industries.

I am also of the view that improvement in index ranking is just one aspect of an overall business environment that does not fully guarantee the foreign investment and growth in trade and industry. For that there is need for consistency in industrial, economic and taxation policies and political stability in Pakistan.

PAGE: Kindly give your views on the benefits of CPEC for the economy of Pakistan:

Shamim A. Firpo: As we all know that China-Pakistan Economic Corridor (CPEC) is a bilateral project of Pakistan and China consisting of a long route for the betterment of the economies and mutual benefits of both countries. CPEC has initiated as a mega project by China and Pakistan to benefit economic growth and free trade. We are considering CPEC as a “game-changer” for both the countries, as, potentially, it will generate numerous business and employment opportunities for local citizens as well as international outreach. It is aimed to configure multiple sectors, including industrial, sector, economic zones, infrastructure, health sector, educational institutions, and employment across the length of the route of the CPEC project.

The government and political bodies have already reported CPEC as a crucial indicator in various aspects, including standard of living and employment opportunities for local communities but it is not yet known how the local community perceives the benefits of CPEC and the projected development.

Presently, Pakistan is facing big challenges of security, terrorism, and GDP declining. In this backdrop, CPEC is considered a very potential project, which can promote free trade and overcome the major economic hardships of Pakistan and at the same time can also give a number of export related benefits to China. CPEC can significantly help Pakistan in maintaining a good relationship with neighbor countries, such as India, Afghanistan, Iran, Bangladesh, and the Middle East. Most importantly, CPEC is a mega projects’ platform in building a stable route between Pakistan, China, and Europe. CPEC is considered one of the most critical determinants in trade promotion and industrial growth. Both of the governments (China and Pakistan) consider CPEC as a game changer, with around 27 economic zones in spreading across both the countries, which will help in industrialization, economic growth, and development of the energy sector, etc.

As discussed earlier, CPEC is categorized as one of the major determinants of poverty reduction and is expected to start its operation in the near future to benefit Pakistan’s economy in terms of employment generation and poverty reduction. CPEC is a mega project that is expected to produce millions of jobs in various sectors, which will mitigate poverty. Similarly, near about 30,000 Pakistani professionals, including management, engineers, doctors, IT experts and policy experts are being employed in various CPEC projects in Qasim port and Coal Power projects. CPEC is very beneficial for both the countries, as it will boost both economies through employment generation. CPEC projects have the potential to generate employment opportunities in different sectors, such as energy, construction, infrastructure, and railways. Hence, the government promises to engage and consider the local communities to fill the jobs, to help them improve their overall social conditions.

 

In addition to these projects based jobs, the local communities can capitalize on the investment opportunities, and the entrepreneurial ventures which would further enhance the project created opportunities. Under the CPEC, Chinese loans and investment will facilitate the operational activities of Pakistani business, industries, and the SMEs that are considered to be the backbone of the economy.

As mentioned earlier, CPEC will enable rural communities to start a local business with an affordable budget. In other words, many people living in rural areas are unable to start their businesses due to lack of financial resources and the lack of market demands. CPEC will encourage them and will boost entrepreneurial intention among rural individuals. CPEC can become a significant predictor of economic growth for both regions because of its crucial role in improving various industrial sectors. Due to CPEC, inflow from China into the energy sector and infrastructure is already increased and more is also expected. This inflow will, in turn, spur economic growth and propensity of Pakistan economy. CPEC has significantly improved investment in the different industrial sectors including energy, road and oil and gas etc. which directly or indirectly contributes to economic growth. CPEC will also increase regional cooperation and trade ties of both countries with other South Asian regions. The CPEC will open doors to immense economic opportunities not only to Pakistan but will physically connect China to its markets in Asia, Europe and beyond.

Almost 80% of the China’s oil is currently transported from Strait of Malacca to Shanghai, (distance is almost 16,000 km and takes 2-3 months), with Gwadar becoming operational, the distance would reduce to less than 5,000 km. Hence, it is expected that people in China and Pakistan will access adequate resources that will improve economic growth and will reduce poverty. In general, CPEC will be a source of progress in various sectors including business and non- business in rural and urban areas of Pakistan. This will alternatively enhance the economic growth of Pakistan and the local communities will able to start a new business or finding jobs, which would develop a positive perception among the local communities about these projects. While considering the potential benefits, all Pakistani perceive a positive change in the economic goals.

PAGE: Do you think Pakistan’s economy is on the right track?

Shamim A. Firpo: In my opinion Pakistan’s economy is on the right track as our economic indicators and all international experts are forecasting that Pakistan economy is growing despite facing internal and external challenges. Pakistan economy is finally heading in right direction as more of our economic reforms bear fruit. We all know the country’s current account turned into surplus in October 2019 for the first time in four years. The current account balance was +$99mn in October 2019 compared to -$284mn in September 2019 and-$1,280mn in October 2018. For first four months of our fiscal year our current account deficit has fallen by 73.5 percent compared to same period last fiscal year. Our exports of goods and services in October 2019 rose 20 percent over previous month and 9.6 percent over Oct 2018. I am of the view that the present government is sincere and trying to bring stability in the country through decreasing inflation rate and holding across the board accountability, which will bring very positive results on country’s economy in coming days.

The government has recently implemented measures to make imports more expensive, so that people start consuming locally-produced products. When people use products made-in-Pakistan it helps local industries and reduces our imports. I am hopeful that Pakistan is becoming an attractive place for investment. It is appreciable that growth rate has been revised, however, boosting of manufacturing and exports is imperative to bring economy to comfortable growth path. It is a positive sign that government is well aware of the challenges and taking bold steps to combat these challenges to stabilize economy and also taking positive measures to boost economy. There are visible signs of improvement and further steps are being taken to reduce fiscal and current deficit. I congratulate our exporters and encourage them to do more. However, Pakistan is still facing multiple challenges and threats which need long-term reforms but I am sure that the coming months will further strengthen the economy and soon the country will achieve economic prosperity.

PAGE: Your views on the regional trade of Pakistan:

Shamim A. Firpo: By the Grace of Allah Subhanahu Ta’allah, Pakistan has a strategically important geo-political location, has Afghanistan, China, India and Iran in immediate neighborhood, is at the corridor of world major maritime oil supply lines, is located between gas and oil rich Middle East and world’s population centers (East & South Asia). It is obvious that the regional trading alliances have helped their respective member states to become competitive and contributed greatly to their economic development.

Pakistan borders four countries; these include Afghanistan, China, India and Iran. Of these four countries, it is only with China that the Pakistan has significant trading linkages, though this too is not across their land borders. Pakistan has been maintaining a close relationship with People’s Republic of China and Arab nations. With the other three neighboring nations, Pakistan’s trade position is very low. Despite having potential, Pakistan’s diplomatic and trade relation with India has drastically scaled down over held Kashmir issue now a days. On the Eastern front, trade with Iran has been restricted due to international sanctions on that country.

There is a huge potential for Pakistan to import oil and gas and export processed and value-added industrial items to Iran. As for Afghanistan, their economy is largely underdeveloped mainly due to the ongoing war. Pakistan is in a high economic growth zone as it has more than one-third of the entire global consumer base on its immediate borders. China and India jointly constitute around one-sixth of the world’s GDP and have been posting a consistent high growth; the trading patterns in the oil-rich Iran, distorted during the sanction era, are being redefined with Pakistan having the proximity advantage. Afghanistan, as a landlocked country, with strong cultural and ethnic ties with Pakistan is a natural extension of domestic market.

The improved infrastructure under CPEC will also provide an optimism for enhanced exports to the Chinese market. The immediate neighborhood of Pakistan offers huge growth potential for exports, reducing dependence on the distant EU and US markets. Unlocking of the potential, however, depends on de-escalation of political tensions with India, improvement in security situation and bilateral political environment with Afghanistan, up-gradation of connectivity with China under CPEC and renegotiation of market access under China-Pakistan FTA, and removal of economic sanctions on Iran.

Regional trade has proven to be a key tool in economic development and competitiveness in various regions of the world but Pakistan is one of the lowest regionally-integrated countries in the world as the country’s trade with its regional partners has remained paltry over the years. Pakistan’s trade balance with its regional partners has cumulatively been mostly negative in the last 10 years but Pakistan has much greater potential to tap into regional markets and integrate its trading capital with its regional partners to enhance the value of its trade.

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