INTERVIEW: MAJYD AZIZ, EX-PRESIDENT KCCI

A REVIEW OF THE TRADE IN 2007

SADAF AURANGZAIB
Dec 31, 2007 - Jan 06, 2008

Mr. Majyd Aziz, the ex-president of KCCI in an interview with PAGE said that the Pakistani exporters must shed their complacent nature and refrain from waiting for manna to fall from heaven. Mr. Majyd Aziz is a known figure in the trade and industrial side of the economy. Having being associated with the textile industry for the good thirty four years, he is heading many industries and is also the president of MHG Group of Companies. Here is the script of PAGE recent interview with him.

PAGE: How do you review the overall trade development during the year 2007?

MA: During the fiscal year 2006-07, the country achieved most of its targets. The glaring exception was the inability of the exporters to attain the target of US$ 18 billion. The much-ballyhooed figure was pragmatic and could have been achieved but due to various reasons, the bells did not ring. During the last two years, the economic policies that were well-planned during the first three years of the Musharraf government, and reasonably executed and implemented in the subsequent years, became susceptible to inertia in the hallowed halls of the economic managers. The economic agenda was set aside and there was reliance on ad-hoc management. The domestic and external events and compulsions became over-powering and these became difficult for the economic managers to handle.

The country's trade deficit became ominous and no fallback position was envisaged. There were no contingency plans to counter the looming threat of a US$ 100 per barrel scenario. The oil bill escalated beyond control. The government was not politically strong to enhance the petrol and kerosene prices for fear of a severe citizens' backlash. The long-drawn judicial crisis and the May 12 Saturday Afternoon Massacre on the streets of Karachi provided the much-needed diversion to shift the feelings of the people from economic hardships.

The year 2007 will sadly end with the export regime under serious pressure. The textile industry is in doldrums and its captains are unable to convince even the caretaker government to at least understand the need for immediate measures to plug the holes and saving the ship from sinking. The Textile Ministry set up to deal exclusively with textiles fell much short of its objectives and the Minister, although a staunch supporter of the textile industry, was not able to navigate in the troubled waters in Islamabad's bureaucratic milieu.

In short, the fall in export figures is a manifestation of disoriented export planning, lack of harmony between the exporters and the government, and succumbing to local and foreign economic occurrences. The transformation of Export Promotion Bureau into Trade Development Authority of Pakistan was hailed as a significant step in catapulting the export regime from trudging in global waters and soaring high over other competitors. The vision is still blurred and thus the comments are reserved.

PAGE: What are the milestones which we achieved in our trade and export areas?

MA: The most important milestone has been the attainment of the previous year's export figures. The country would have faced the ignominy of being in the category of an export-losing nation if the exports would have decreased. The government planners, of course, have a lot to do to achieve whatever was achieved. They announced that there was a wheat surplus and the government gave the green signal to commodities exporters to find international buyers for 500,000 tonnes of wheat. Thus the precious and much-needed wheat was sent from the shores to foreign lands at a ridiculously low price of a notch over US$ 200 per tonne. Of course, the decision boomeranged and soon some wise guy discovered that the country's wheat production was less by over a million tonnes. Panic struck in the corridors of power and a weak-kneed edict was issued that Pakistan is in the market for a million tonnes pronto. The world traders, drooling with delight, stepped in to bail out these decision-makers and offered wheat at twice the price obtained by the Pakistani wheat exporters. Wheat was exported to jack up the export figures. Wheat now imported with scant care for the trade deficit which is a classic example of adhocism. This is what is being done to the export regime of Pakistan. What can one expect in the years to come?

PAGE: What are the setbacks of the year and what are those shortcomings that became the main cause of those setbacks?

MA: Well, the non-attainment of the export targets is the most highlighted shortcoming. As stated above, the lackadaisical performance of the export sector is a grave cause for concern. The question which is of significant importance, is whether Pakistan will be able to formulate a pragmatic, workable, and effective export policy or whether there will be a continuation of the adherence to the present dilly-dally attitude towards exports. It should be noted that although exports are not the only panacea for the economic development of any country, the case for Pakistan takes on a very profound understanding of the critical need to expand the export base.

PAGE: What were the export targets and what have we achieved with regard to our main export industries like textiles, rice, cotton, etc?

MA: The niche export sectors have to perform strongly to maintain the sanity in the export regime. Pakistan relies on the capabilities of these sectors to stay in the global marketplace. The country is still deficient in exploring new markets as well as in introducing new products and processes. The slow development of alternatives to the niche sectors would halt economic progress no matter how much effort is made to push the already established export lines. The fact of the matter is that the increase in exports of the niche products is not comparable to the growth witnessed by regional competitors or even other nations such as Vietnam and Cambodia. The end of the quantitative restriction for Chinese textiles in 2008 will definitely put pressure on Pakistan in the European and North American markets. Pakistan is not ready for the incoming onslaught. Rice is another area of concern. Recent news emanating out of Islamabad disclosed that Pakistan is thinking of importing rice. Rice, being a member of the one billion dollars export club, is still a dangerous signal. Domestic cotton is being consumed locally and also part of the export scene. However, the textile producers are sourcing their cotton requirements from other countries. Again, the signals are dangerous.

PAGE: How fruitful this year has been for our textile industry?

MA: Very difficult. It has been more of blowing cold than blowing hot. The textile industry is still enveloped in the raw material and semi-processed stage to a large extent. Value addition is still a long shot. Lack of skilled manpower to operate the ultra-modern machinery, equipment, and processes, is another dangerous signal. The harsh buyer-driven conditionalities are impacting negatively on a large number of players in the textile industry. Exports are a fractionally higher than last year, while the month-to-month figures paint a gloomy picture. As stated before, the interim government is letting the textile industry float or sink without any lifeguard facilities from Islamabad. The chickens have come home to roost for the textile exporters. It is time for them to get out of their self-afflicted complacency as it is do-or-die time for them. The first six months of the new government would not be a promising occasion for them. There would be less attention paid to them and more efforts of the government would be on other more pressing issues besetting the nation. SMEs in the textile sector would bear the main brunt of this continued governmental thinking. The year 2007 could be termed as the defining year for the textile industry. The prognosis for 2008 is also depressing. It would be a replay of the situation prevailing in 2007.

PAGE: How much the government has paid attention to the cost of doing business in Pakistan in the context of energy tariff, financial charges, wages, and transportation costs?

MA: Pakistan, like most of the countries, is dependant on external resources to maintain its progress. Oil is imported, raw material is not produced in the quantities required to maintain growth, and global customers have their own mindset. Regional countries have a better game plan for their export regime than maybe Pakistan has. The lack of infrastructure has had a ruthless impact on the nation's progress. Hydro electricity is susceptible to provincial distrust and lack of political authority. Gas reserves are being depleted due to inertia in development of alternate energy. Water is a scarce commodity in Sindh and Balochistan. Privatization of KESC has had a drastic effect on Karachi's commercial and industrial activities. Foreign ownership has made matters worse for the denizens of Karachi.

The financial institutions have made windfall profits over the past few years at the expense of industrial development. The cost of borrowing is atrociously high and the situation in the textile industry, for example, has made repayments a difficult task for so many.

The government announced an enhancement in the minimum wages of workers. The result was a correspondingly increase in wages of other categories of workers. This too affected the cost of production. The shortage of transportation vehicles, the increase in maintenance expenditure, and other factors such as rising food inflation, etc also directly enhanced the cost of doing business. So far, the government has refrained from increasing the price of fuel. Soon, the bitter pill would have to be swallowed as the nearly Rupees 500 million daily subsidy on petrol, diesel, and kerosene is giving nightmares to the economic planners.

PAGE: What advice would you like to give to the new government about how to keep up with the pace of the economic growth and what could be the major impetus to drive our economy on a faster pace?

MA: There is no magic wand to achieve an ideal situation. Pakistan, like other developing countries, will be compelled to fundamentally restructure her mode of manufacturing for the world market. The policy makers, the exporters' associations, and the various think tanks, will have to shed their lethargic posture and start a movement on a war-footing basis to make the country a viable world trade player. The present ad-hoc policies of the administration, the rigid nature of government officials, and the plethora of bottlenecks and hurdles in matters of exports, have been classic deterrents in boosting the nation's exports all these years. The government has to get away from inventing the sixth wheel. Learn from others and decide in a pro-active mode. Pakistan needs a Jihad in its export culture. Buyers do not come because there are no compelling reasons for them. There are no obvious advantages for them to do business.

Law and order scenario is alarming. Big names in global politics call Pakistan the most dangerous state in the world. All efforts to promote Pakistan in a positive way are being treated with scorn and suspicion. The myopic thinking of some parties, the extremist attitudes of so many people of influence, and negative images in the media, has also affected seriously trade and industry.

PAGE: What resolutions do our trade and industry possess for the coming year?

MA: First and foremost, shedding their complacent nature and refraining from waiting for manna to fall from heaven. The global marketplace is for strong operators and not for slow pokes. Improve quality, pay heed to productivity, and source for better inputs at best available prices. There must be aggressive marketing, there must be enlightened thinking, and there must be new products and processes to stay a step ahead.

The business leadership has to be very active and should lobby assertively for the sake of the country's development. Pakistan's presence at important international exhibitions and events must be accelerated. The businessmen must ensure that policies are initiated and then implemented and enforced.

More importantly, they must address the question whether there will be export-led industrialization or whether the nation will be satisfied with import-substitution industrialization. This point takes more of an urgent nature if the realities of the globalization are held into account. The Asian Tigers shot into prominence with a devoted and determined approach to export-led industrialization. Although devoid of essential minerals and crops like cotton, etc, the Far Eastern Asian countries, such as Singapore, Taiwan, Thailand, and South Korea, became economic juggernauts in a relatively short time. These four countries have been in the forefront of the rapid growth of manufactured exports from the developing world. Pakistani businessmen and government must learn from them. They also need to understand the achievements of Vietnam, Bangladesh, and Sri Lanka. This should be the resolution for 2008.