BUSINESS PERSON'S VIEWS
INTERVIEW WITH AMIN HASHWANI
May 16 - 22, 2011
PAGE: WHAT ARE YOUR VIEWS ABOUT THE UPCOMING BUDGET?
HASHWANI: I do not expect anything dramatically new except government's focus on macroeconomic stability in a very volatile and fragile environment. Most of the measures like reformed GST and removal of subsidies are already in the process. The emphasis would be on increasing the tax base and taxing the sectors that have been out of the loop in the past while controlling inflation and kick staring growth. It will be a tough balancing act and will depend on the will of the government not to just announce but also implement these decisions in an effective and efficient manner.
PAGE: WHAT IS YOUR OPINION ABOUT TAXATION SYSTEM IN PAKISTAN?
HASHWANI: The taxation system should be broad based, effective, and equitable. The system is inherently handicapped when a major portion of your economy is undocumented and a politically influential class is exempted from being taxed. In the last few decades, the service sector has grown to become the major segment of the economy and remains mostly undocumented. Shop keepers, lawyers, doctors, etc, no one pays even a fraction of what is actually due. The large agriculturalists are legally exempted. Only the salaried class professionals or the corporate sector, which has no choice, ends up paying major chunk of the income tax. This leaves the government with little fiscal space but to impose indirect taxes and remove subsides to balance its budgets.
PAGE: HOW CAN INFLATION BE TACKLED?
HASHWANI: Basic economics teaches us that prices are determined by demand and supply forces. To improve the supply side, we need to produce cost effectively, efficiently, and with better productivity. All these unfortunately entail long-term measures like investments, infrastructure development, education, skilled labor force, and a culture of work ethics where waste and corruption is socially unacceptable. There are no free lunches. With a high population growth rate and a youth bulge, we need to implement basic socio economic reforms if we are to ever think about seeing Pakistan as a progressive nation within the span of a generation. Tight monetary policy is a bandage solution to control inflation especially when on the downside it chokes capital and growth. Increase of international commodity prices like oil has also not helped the situation, when the government has no fiscal space to subsidize the energy sector for its people.
PAGE: WHAT ARE YOUR SUGGESTIONS AND RECOMMENDATIONS FOR THE UPCOMING BUDGET?
HASHWANI: The tough choices of reducing the non-development expenditures, checking wastages, improving governance, and with the country's government and politicians leading by personal example to motivating a nation to contribute towards its progress, would be the bigger challenge than just balancing the numbers.
PAGE: HOW CAN PAKISTAN IMPROVE ITS REMITTANCES FURTHER?
HASHWANI: Improve skill levels of labor force to meet the demand for special skills internationally, negotiate diplomatically with countries to give preference to Pakistani work force (especially in the middle east), and by creating a conducive environment for the overseas Pakistanis to feel comfortable in sending back money for their families and for investment purposes.