INTERVIEW WITH KHALID TAWAB, CHAIRMAN TAWAB GROUP OF COMPANIES

KHALIL AHMED
(feedback@pgeconomist.com)
Apr 25 - May 1, 2011

Mr. Khalid Tawab is the Chairman of Tawab Group of companies which is renowned named in the manufacture of paper and board and steel. In recognition of his outstanding contribution in the field of public services, he is awarded of Sitara-e-Imtiaz.

He was awarded FPCCI'S best export trophy award for the export of Galvanized Iron and Steel Coils for the year 2005-2006 and Gold Medal by former Prime Minister Shaukat Aziz. He also holds the office of the Honorary Consul General of Mozambique in Pakistan from past 22 years and has played a key role in developing trade between the two countries. Currently, he is the Vice President of Federation Chamber of Commerce & Industry.

PAGE: YOUR VIEWS ON ALTERNATE ENERGY.?

KHALID TAWAB : Our energy sector, already marred by inefficiency and over-hiring, continues to face a serious supply-demand crisis in 2011. Alternative energy sources can play a useful role in bridging the supply-demand deficit. Alternative energy sources that are technologically viable and have prospects to be exploited commercially in Pakistan include micro-hydel, bio energy, wind energy, and solar energy. Moving on to more traditional alternative energy sources such as wind, solar, biomass, geothermal, ocean tides and bio fuels, a number of western countries have today successfully minimized dependence on fossil fuels.

The potential sites of solar energy are available across the country and coastal areas for wind energy. On the other hand, the present contribution of these resources is negligible in the total energy picture of Pakistan. This can supplement the energy shortfall of the country. Without incentives from the government such as Feed In Tariff (FIT), Net-Metering, and Net-Billing, renewable energy would not be able to succeed.

PAGE: YOUR VIEWS ABOUT RECENT ECONOMIC PERFORMANCE OF PAKISTAN.?

KHALID TAWAB: According the government, the year 2011 is remarkable year in history of Pakistan, when Pakistan achieved more than US$10 billion of remittances and exports of US$22 billion after facing the worst floods in the country. Further, our foreign exchange reserves have also increased to US$17 billion, which is the highest in the history of Pakistan and it is also expected that our GDP is likely to grow by three per cent during the current year. On one side, the government showed the above mentioned improvement and on the other side, our finance minister met with the IMF for another grant of US$3-5 billion for sustaining the economy.

Internationally, our image is deteriorating day by day due to terrorism, corruption, and bad governance. The poor law and order condition has increased our dependency on international agencies. Resultantly, our external debt has rose to US$58 billion and FDI inflow declined by 28 per cent in the first nine month of the current years. The existing industries of textile and leather also shifted their business to Bangladesh and Sri Lanka due to poor law and order, high cost of doing business and energy crisis in the country. According to some newspaper reports, more than Rs100 billion of investment shifted to other countries. If current situation continues, it is expected that more capital will be shifted to other countries; resultantly poverty and unemployment will increase in our economy. Moreover, the rising crude oil prices will increase the oil prices in Pakistan and the import bill. This is not a good indicator, when our economy is facing many challenges from internal and external sides.

PAGE: WHAT IS YOUR OPINION ABOUT RISE IN EXPORTS?

KHALID TAWAB: Currently, the exports of Pakistan lie between US$20-22 billion and also concentrate on the traditional items such as textile, basic agriculture products and leather. Government indicates that current year export increases, whereas in 2007-08 Pakistan also achieved export valued US$20 billion. If we compared the current value from the year 2007-08, there is no progress in the current volume. The export values just increased due to increase in international inflation and global crisis, which hit the economies of developed nation. There is a need to diversify our exports by moving progressively to the exports of steel, electronics, chemicals, and other engineering goods. Asian economies like Taiwan, Hong Kong, and Korea started with the sharp increase in the exports of textile and then gradually shifted to the capital intensive production of electronics and other light and heavy engineering goods. Market access and compliance issues are also needed to enhance exports of Pakistan. In WTO, Pakistan comes in developing nations and market access is given to least developing nations like Bangladesh. Due to this facility, Bangladesh increased their exports and also used market access facility. Furthermore, there ism no trade and industrial representations and seminars and exhibition facilities in traditional countries such as Japan and other countries, that's why the volume of exports has been low.

PAGE: WHAT SHOULD PAKISTAN DO TO PROMOTE THE TAX CULTURE?

KHALID TAWAB: Our tax to GDP ratio is low due to complicated tax system and non taxable of agriculture and service sector. In retail, only 2000 person are the tax payers. In Pakistan, business community paid 80 percent of total tax collection and remaining collected from other sources like income tax and other. RGST is good for increase in tax net, but there are many harassments in RGST draft, which we want to remove before implementation. Further, we suggest that everybody who earns more than Rs0.3 million should be included in tax payer list. Moreover, we have 22,000 registered companies, out of which only 2000 pay taxes, remaining show the loss and break even points. Currently, government imposes the tax on agriculture inputs by 17 per cent, whereas we suggest that tax should be imposed on income rather than on inputs, because this just increases the cost of production and further declines the total factor productivity of agriculture sector.

PAGE: WHAT INCENTIVES SHOULD THE GOVERNMENT OF PAKISTAN GIVE TO THE INDIVIDUALS OR CORPORATE SECTOR FOR DOCUMENTATION OF THE ECONOMY?

KHALID TAWAB: A significant percentage of the economy remains undocumented and operates outside the tax net. Not only does this act as an impediment towards broadening the tax net, it discourages honest taxpayers. Tax should be progressive like the other developing nation. This would encourage the poor people to pay less tax. Moreover, the government should offer incentives to registered entities to deal with tax compliant units only. Moreover, the service sector like retails and property activities should be taxed. I suggest many times that the government should reduce tax rate, just to bring the people into tax net. Government should avoid harassing people for documentation of economy. Government should take NADRA data base to document the economy. The utility bills (gas, telephone) may be used to identify the tax potential.