Dec 03 - 09, 2007

Mr. Shamim Ahmed Shamsie is the chairman of Karachi Chamber of Commerce and Industry and has been associated with this chamber since 1990. He is a reputed industrialist and has worked in various capacities as Chairman of Taxation Committee, Anti smuggling, Environment, Education and health etc. He has also represented this chamber as a trustee at Karachi Port Trust for two years (1994-1996). PAGE met him in the chamber and asked few questions on the recent global hike in the oil prices and its impact on the trade and economy of Pakistan.

PAGE: You have a very wide perspective being associated with different fields of the trade and economy, how do you see the growing tension because of the recent hike in the oil prices?

SAS: Well, the oil is now touching almost $100 a barrel and the resulting affect would be here as anywhere in the world within two months time. In the coming two months, we will also get the report on the cotton situation in the country and we are expecting a shortage of around 2 million bales this time. The overall effect of the oil prices will aggravate the overall sales and exports scenario and I can see the difficulties ahead.

PAGE: Besides the US-Iran tension, what other reasons are there for the recent upsurge in the oil prices?

SAS: I think the world must be ready to accept the oil prices at $200 a barrel in the next two years. We should brace ourselves for such price.

PAGE: But it's easier said than done. A country like Pakistan that is totally dependent on oil imports, how can we brace this hike?

SAS: It is not jus Pakistan facing this problem but all the countries in the world should be ready to accept this challenge. The United States is the most prepared nation for it. They announced a new energy policy around six months back and there is a shift to the solar, wind and bio gas energy in that new policy which means that they have already worked out their plantation and they have also shifted their focus from cotton to corn which will be used to generate bio-gas product. Pakistan is also working out its options by signing IPI and going ahead with IPI with Iran and India. I would also say that it's a high time that a political decision for dams must be taken and we should start working towards our main resources and their proper usage.

PAGE: There is a direct impact of the oil price on inflation; do you think this inflationary pressure would be shifted to the consumer end more vigorously after elections and the prices for consumer goods would go much higher in the near future?

SAS: I think that after elections the prices will go much higher. And the result of this hike would start translating after two months, which means after elections. We are already witnessing the effect on the energy crisis. OGRA has already announced the increase in the gas prices and energy prices. We are filing a petition to be heard at OGRA about protecting the consumers of the power. But the situation is that no one can justify retaining the prices to the precious levels with the recent hike in the oil prices.

PAGE: How much do you see the rise in inflation which is already standing at 8-8.5% and what would be the stance of the government which has claimed to bring the inflation down to 6.5%?

SAS: Well, the government has made this announcement previous to the oil price situation globally. The new indicators are yet to be announced and State Bank and other ministries are working on it. I think that the whole global economic scene has to change in order to brace this challenge. Once we are through this political turmoil, I think then we will be putting our heads together to work out the dynamics of the economy.

PAGE: Are you hopeful that the new government would be efficient enough to take effective decisions to bring us out of this crisis?

SAS: Pakistan has to come out of it in any case as any other nation has to. The price hike for oil is not just for Pakistan but for everyone. I think the whole world is moving towards a situation where all the nations have to sit down together and reconsider the issues like whether they would like to go ahead with the crisis like Iran and further aggravate the price situation or they want to protect the respective nations and their consumers. It is that consideration that has to be taken into account. Today it's lose-lose situation, and everyone should try to make it a win-win situation and that would only happen through negotiations and not through war or crisis.

PAGE: How best we can make use of the financial adjustments to solve the current crisis?

SAS: The only way we can control the inflationary pressures is by resorting to financial adjustments and the State Bank has to work out its dynamics. Let's say, we talk about financial credit facilities. Today our textile industry is earning 60% foreign exchange for the country. We should use such financial policies where we will not collapse the whole industry but try to help them out in this difficult time. To save textiles is so much necessary as to save your own self. Today the cost of doing business is higher and it has to be brought down so the State Bank should increase its monetary supply through lowering interest rates etc. With this monetary fluidity, the industry would be able to work more and work efficient.

PAGE: What are the basic areas in exports and imports where you see the impact is at its most?

SAS: Basically, we are a net importing country and what we usually import is the food stuff, raw material etc. The price differential comes in when we import commodities sometimes from India, sometimes from Sri Lanka and other times from Myanmar. Hence price differential settles in due to the transportation cost. There are few food items which have their international prices, you can go and buy it from any country around the world on the same prices, the FOB price will be the same but our price differential comes in when we use to import from far off places. We have to readjust our thinking as to how to import commodities on competitive prices for a better living.

The same situation is with the raw material. Chemical raw materials are mainly the by-products of petroleum so when oil prices gets higher, their prices will also go higher. If then you are importing them from distant countries, your import bill will further worsen because of the freight charges.

In order to balance this situation, we need to improve our relation with India and China and we need to think that "are we ready to give India the most favorite nation status?" We need to rethink as to which products we would be lacking in the next six months and start planning its import from nearby countries on competitive prices.

The European countries should also think that the duties in the form of non-tariff barriers and tariff barriers which they have imposed on Pakistan in different forms should be removed so that their consumers could get these commodities on much cheaper prices. We have to make such a plea where we can show the European countries that it's in their own interest to remove such duties.

PAGE: What alternate options do we have with us to manage the energy crisis?

SAS: The first option is that we must plan ahead and start working towards it now. It's now or never. The decision for dams should be taken in no time. We shouldn't flare up the issue for political gains; it should be treated as a life line for Pakistan. We should also give incentives for alternate energy options like solar energy, wind mills etc so that the people will establish it as fast as they can. Secondly we should also take care that if the world is moving towards the bio-gas then we should plan our fields in a way that we will not be having any problem or shortage regarding the food stuff. Also, cotton must be given its due importance and we should be self sufficient in its production too. Thirdly, one another thing that we should be ready for that if due to any crisis, our C-lanes will be ceased then the edible oil that we use to import will no be available. We must try to produce edible oil on our own and should not be in short of its production either.

We must adopt better farm practices and not just better manufacturing facilities for our industry. We need to be more and more efficient and less and less political as we can't take chances any more.

PAGE: If I ask about your hopes for Pakistan's future?

SAS: Well, when Pakistan came into being in 1947, we were just few millions of population, didn't have enough to eat, and even didn't wear enough good cloth. Today we have grown tremendously, our population, food, cloth and education all has improved manifolds despite that we have passed a traumatic phase in terms of our political history. We have survived and I hope Pakistan will survive and will be in much better situation than today as we are a pretty resilient nation.

PAGE: Anything that you would like to say on behalf of the chamber?

SAS: The chamber carries a vision that Pakistan should be able to hold Asian Games by 2015 and we will be able to hold Olympic Games by 2040. It is not because I am a sport's person but because I am a business man and I see tremendous business possibilities once you start holding those games here. By 2050, we should be able to achieve the millennium development goals initiated by United Nations for Pakistan. The top most being 50% reduction in poverty. If poverty is reduced by 50% that means we will have a lot more consumers available, a lot more spending available and a lot more business available.