TARIQ AHMED SAEEDI-tariqsaeedi@hotmail.com
Dec 17 - 30, 2007

Government's research and development fund is not properly utilized for the purpose it is earmarked, said Dr. Shahid Hasan Siddiqui, an astute economist, a learned columnist, and Chairman of the Research Institute of Islamic Banking & Finance. Commenting about the research and development funds allocated by the government to capture global market share during an interview with PAGE, he said significant percentage of R&D fund of over Rs.30 billion is not being utilized in industries. "It is a mere misappropriation," he added. There was a confirmed report of documents' forgery to file sales tax return of around billions of rupees in past. "Our export figures are manipulated, forged, and fictitious. "Out of US$8 billion export figure US$5.5 billion is on paper only." To get subsidy on account of R&D, many companies fabricate over-invoices of their exports. "Unless, we know our standing, how do we plan about future," Dr. Siddiqui enquired. When scribe enquired him to single out any industry which he thinks in Pakistan conscious about investing on R&D, Dr. Siddiqui prompted, "in fact none." First of all, he said, our mainstay is textile forming 65 percent of country's export and generating employments to a larger extent. But, we also have to know that world export of cotton textile is only 5 percent. That is a wake up call for economic policy makers. The direction should be changed. World trade focuses on engineering sector rather. Unless we invest in research and development of engineering sector we could not stand along global trade.

Health and education are the two major areas to be stressed in anticipating refined lots for economic development. Teachers in past were committed to their profession. System of primary education should be revamped in order to produce talents whose learning would further be improved through higher education. Government should restrict high echelon members of society to admit their kids in public schools. This definitely will help in boosting quality of education in government-run schools as well. As that, he opined, will generate revenues for schools to invest in quality improvement. There is a complete incompatibility with the market while educational institutes develop students. Syllabi have to be in conformity with industrial developments. Rather, it should be completely revised, he remarked. Vocational training should be focused. The number of vocational institutions must increase to several hundreds. Had government invested in these areas in last few decades, he stated, exports of Pakistan would have been US$125 billion per annum.

Dr. Shahid Hasan Siddiqui is a banker of international repute and an eminent economist. He is in editorial board of Institute of Bankers Pakistan and Fellow to Institute of Islamic Banking & Insurance, London. He was born in Meerut-UP, India on July 2, 1943 and got his early education in India. He migrated to Pakistan along with his parents in 1952 and settled in Karachi where he continued his education. He holds a degree in Law and P.H.D. on Islamic Banking. Dr. Siddiqui is also a member of Research Advisory Council, College of Business Management, International Advisory Board, Pakistan Business Review, PAF-KIET, and Economics Advisory Committee of SZABIST. He is also member of Shariah Supervisory Committee, Bank of Khyber. Dr. Siddiqui for over three decades has been serving top level management hierarchy of banks in Europe (BCCI), Africa, Middle East, and Pakistan. He has contributed over three hundred articles on different subjects covering issues of banking and finance and economy in international and local's journals and newspapers and magazines.

Research Institute of Islamic Banking and Finance was founded by Dr. Siddiqui in 1998. The institute is performing central advisory role alike for government and private sector. But, the consultancy services to government have been called off because of, Dr. Siddiqui retorted, bureaucratic snags. Explaining about them, he said, economic planners have developed habit of engineering twist in statistics for their vested interests and ulterior motives. Henceforth, genuine research is no more needed. International and domestic loans and rampant corruption have destroyed the fabric of economic system. In his paper, he said, budget deficit could be slashed through application of taxes on all and a sundry. Government should expand its network of taxes on urgent basis. There have still many professions exempted from government taxes relegating inflationary pressure onto have-nots only. Lawyers, doctors, stock traders-enjoying tax exemptions on CVT, real estate transactions are few of such "protective" cohorts, Dr. Siddiqui underlined and adding that according to economic survey 2006-07 government had to sustain a loss of Rs.112 billion due to exemption of taxes over CVT. It is relatively easy for government to generate revenue and get rid of external and domestic loans through tax application and eliminating root causes of tax evasions. Additionally, he propounded GST should be scaled down to at least five percent from current 15 percent, which may give masses a relief. Similarly, gasoline price should decrease by Rs. 10 per litre. In turn revised tax structure would compensate government's outlays and budget deficit.

The institute has brought forward many acclaimed research papers on factors impacting economic growth. Dr. Siddiqui has presented several economic models which are recognized and acknowledged internationally. The prime focus of researches being conducted in the institute is to analyse and study Islamic banking scenario and financial sector of the nation and to develop congruity in research studies according to circumstances of local market. According to a research conducted in the institute, Islamic banking has yet to be applied onto the financial sector of Pakistan. He termed present banking as, "un-Islamic". There has to be a time frame to transform financial sector into a pure Islamic financial system. Right now banking system is not following "Shariah", he said.

Referring another research he said till December 2006, 276 billion rupees were sanctioned as consumer financing, Rs.141 billion to finance agriculture, and only Rs.11 billion for micro financing. It is evident of our priority. Consumer financing implies expenditures on extravaganzas of low income group; on imported cars; and insane buying spree. He questioned whether a nation with considerable current account deficit can afford this life style? Dr. Siddiqui suggested consumer financing except in housing should immediately be banned. Entrepreneurship should be encouraged through expanding loans. Women house holds should be given money to start home business to embark on cottage industry. Basically, he said, our economy is infested with feudal approach which allows selected few to avail benefits of economic growth. Notwithstanding progress of financial sector numbers of bank accounts have not increased due to criterion on account opening of Rs.10, 000. He advised that the limit must be relaxed.

One of the institute's researches revealed that banks achieved present growth rate mainly at the cost of reducing rate of returns to depositors. In 2000, pre-tax profit of all banks was Rs.7 billion. That stood at Rs.123.4 billion in 2006: a recorded leap jump. Dr. Siddiqui associated the development with squeezing off of depositors" profits. "Had it been the other way around, 20 million depositors would have gotten Rs. 500 billion," he stated. It is a violation of legislation committed by banks not to share profits with the depositors. Dr. Siddiqui nullifies the theory of trickle-down effects. Substantiating his stand he said primarily it hasn't been applied practically. Above all economic growth should spring up from people end. People should participate in the process of economic growth rather than be contingent upon any kind of trickle-down effects showering on them from upside, he illustrated.

In his reply to a question, "How does he find state of research in the universities of Pakistan?" He said our universities have potentials and proficiency to produce world class works. Unfortunately, Dr. Siddiqui added, our budget allocation for education sector is the lowest as compared to other developing countries. This budget should be enhanced to at least 6 percent of total GNP. Moreover, mentors should enjoy a unique stature over others instead of being subservient to State Governors and authorities. Chancellor of higher education institute would have to be a senior scholar. Syllabi have to be completely revised and designed in accordance to needs and requirements of the industry and the market.

Although the capital market of the nation has not been grown insofar, Dr, Siddiqui said, rising tendency of investors in stock market expecting multiplied-return affected investment inflows in large scale manufacturing. During last three years investment in LSM has gone down to 8.8 percent from 18.1 percent in 2004. "It is the heaviest consistent fall in the history," he added. To promote capital market transactions in stock exchanges should be transparent. Mutual funding should be encouraged instead of margin financing by banks to punters who again confine pay-outs in "few hands".

Equally he does not favour foreign investment and foreign ownership in banking sector as he thinks when investor would remit profits to home country, we would have no more dollars with us. Besides, this is tantamount to transfer of one's prestige. Furthermore, he thought, foreign investments are not harnessed in productive sectors of the economy.

When asked if he shares studies and researches with the government, he replied at institution level contact with government has been jammed because of government's propensity to act in contrast to our suggestions. Intellectual corruption is rapidly increasing which is more dangerous to financial corruption. While describing intellectual corruption, he said, to one reason or another few exposes false statistics to the government misguiding for attaining personal expediency.

While icing to the information he shared during the interview, he concluded public pressure can bring genuine economic turnarounds. Therefore, he is quite busy in penning down articles and speaking onto various plate forms analysing of economic perspectives and updating public of economic prospects.