INVESTMENT OPPORTUNITIES SHRINKING FOR SMALL INVESTORS
Aug 11 - 17, 2008
In the wake of multiple challenges such as making adjustment in fiscal revenue and oil prices, tackling the continuous rising inflation trend, high charges of utilities and improving demand and supply management being faced by Pakistan's economy, investment opportunities are shrinking for small investors while big investors are facing hard time mainly due to high cost of doing business.
The country's textile sector is facing difficult time and a number of units particularly of ginning sector have already closed down, industry sources said.
Small investors who were earlier investing in stock business are presently staying away mainly due to uncertain market situation. Despite attractive levels of scrip, the country's bourses are facing downward trend mainly due to uncertain situation, Nazir Ahmed, a small investor in Lahore Stock Exchange said.
Talking about investment opportunities in the country, experts said investing is essential to making money. ''You have to invest money to make money. Whatever your motto may be the idea to invest money is larger now more than ever and continues to grow more and more each year. The point is that investing is now part of our lives'', they said.
They added that great thing about investing in today's world is that there are many avenues available for people to invest money. The most common known areas to invest money are stocks, bonds, mutual funds, real estate, etc, they said, added that everybody plans to invest money in the stock market and for good reason because the stock market is a great way to make money. Millions of people have made millions in the stock market. However, millions of people have also lost millions in the stock market. The stock market is the poster for high risk, high reward investing. The stock market may be the most common area people actually invest but real estate is the most common area people want to invest, they added. They further said that people want to invest in real estate because it is a much safer investment than the stock market and still has the potential to be highly profitable. The reason that real estate is a safer way to invest money is because the real estate market does not fluctuate as often or as extreme as the stock market. Also, the real market typically does not fluctuate down, they said.
They added that real estate business is also facing downward slide these days and people are showing hesitation for investment in this sector.
At micro level, investment opportunities are contracting due to uncertain situation while at macro level, businessmen are facing pressure due to uncertain political situation.
The Chairman Pakistan Industrial and Traders Associations Front (PIAF) Mr. Irfan Qaiser asked the government to prepare a roadmap to bring the country out of the economic crises for which the political stability is a prerequisite.
He said that due to political instability, things are fast getting out of hands and the foreign reserves are depleting fast and if immediate measures were not taken, the situation would reach the point of no return.
Irfan Qaiser said that high cost of doing business and shortage of energy had already created multiple problems for Pakistani businessmen and they were hardly getting any orders from the global market.
He said that the government should initiate the process of dialogue with all the stake-holders to find out a viable solution to the situation. He was particularly expressed his concern over depreciation of rupee saying that rupee's depreciation would further escalate import bill and cost of indigenous goods, thus eroding their competitive edge, both in local as well as global markets, besides, further widening the current trade deficit. ''As such it is more crucial situation for the export-oriented industry as it is mainly dependent on imported constituents to produce exports goods and thus the devaluation of rupee would not work to boost exports", he added.
He said that the government had also failed to check the flight of capital which was also one of the major reasons for local currency depreciation causing it to loose its worth. He said that there was also no sign of intervention by the State Bank of Pakistan to support the falling rupee as it had been a common practice earlier, and said that it simply supports the assumption that the rupee would be allowed to fall to some "required level".
He proposed that the Central Bank should come forward aggressively to curb rising demand for the dollar by intervening in the market for support of local currency. They also stressed the need for government steps to enhance foreign remittance to maintain depleting foreign exchange reserves and demand supply gap.
The Zonal Chairman of Federation of Pakistan Chambers of Commerce & Industry Azher Saeed Butt said heavy taxation would result in increasing cost of production which would eventually lead to cut in export orders.
He said the manufacturers were already hard hit by high input costs including gas, petrol, electricity as well as weak Pak rupee against dollar. He suggested that federal government can comfortably generate additional revenue up to rupees 100 billion if government takes stringent corrective measures to curb the menace of smuggling and check under-invoicing, especially goods imported from China. He said that the industry is already facing severe energy crisis due to imposition of 10 percent withholding tax on electricity bills and at this critical juncture this would squeeze the liquidity. He said that imposition of 35 percent compulsory LC margin has created another severe liquidity crunch for the importers of industrial raw material. He said that one percent increase in sales tax would further burden the industrial sector which, he added, is already facing high mark up rate, 35 percent LC margin and serious energy crisis. "All these factors are driving the cost of doing business upward".