Aug 24 - 30, 2009

Syed Ali Raza, President National Bank of Pakistan predicted a leading role of Asian region in next 25 years in the world economy and foresaw Pakistan's unique position in the global economic paradigm shift due to mainly its geographical stature as well as demographic characteristics. He was speaking at 10th meeting of banking and insurance subcommittee of Karachi Chamber of Commerce and Industry (KCCI). The previous giant economies of West are reeling under economic and financial downturns. The global wealth has been destructed. Not only investments will originate in Asian region but also new markets of investments will emerge there in future, he suggested.

He said Pakistan had faced a long history of crises and even then, it showed a remarkable resilience. It was a flashpoint during the Afghan war, he said and adding it is still withstanding multipronged crises. Consider the Asia a universe and, he averred, Pakistan was at the pivotal point. He was of the view that Pakistan would be amongst preferable investment destinations in future. Investors look for large markets, he said, which they would not find in Japan and Western Europe anymore, what he dubbed as sunset economies. He sees no future of these economies because, he said, they were running out of young population. Sizeable old citizens and scarcity of working age population are increasing state expenditures on welfare and making them dependent on foreign recruits. 'After 15 years, such expenditures (on old aged welfare) will corrode away 80 percent wealth of Europe.' Japan will confront with more or less the same challenge after some time, he believed. 'Sixty five percent of their population will be unable to work.'

What else makes him optimistic about the bright future of Pakistan's economy is, he said, 'unique work ethics' of workforce in Pakistan. He said Pakistan's workforce was dedicated and willing to work. He said he did not find the exemplary willingness in any other country across the border. 'I have lived in many countries, but the dedication found in Pakistani workers is in rarity anywhere.' President NBP saw dim future of 15 to 20 economies world over, positioning Pakistan's economy into a safe zone. While citing an international report, he said national economy held positive long-term outlook. He expressed his satisfaction over the average annual growth rate of the economy in last 62 years. He said Pakistan's average annual growth rate was 3.8 to 3.9 percent in 62 years. "Although this is below than what we should have actually achieved, given the long list of problems and challenges the economy has undergone since partition the rate was not bad."

President NBP said global wealth had been destructed. There are enormous sovereign wealth funds unscathed in Middle East and other Asian economies. If the funds, which are in trillion dollars, are mobilized and funnelled in to the mainstream economy, the economic growth will multiply. Dubai and other financially developed states will not likely to digest all flows, hinted Syed Ali Raza. 'It is a small market.'

Syed Ali Raza wants Exim and OPIC, lending arms of US government, to extend financial assistances to Pakistan. He urged US government to activate facilitation services of duo in financing imports in the country. He said financing would be helpful in importing machineries from USA. Nuclear weapons programme precipitated ban on financial assistance and export credit guarantees of Overseas Private Investment Corporation (OPIC) and Export and Import (Exim Bank) and ban on bank loans to Pakistan's government. The history of US financial sanctions on Pakistan dates back to 1979. The US enforced limited sanctions over the country in 1979, but it repudiated them following Pakistan-backed battle against Soviet Union. After nuclear test in 1998, G8 resorted to sanctions on Pakistan. He also requested lifting of travel advisories.

"There is a parallel economy of $100 to 200 billion in Pakistan," observed President National Bank. There are lot of advantages of being documented, he said and added proper recordings on balance sheets were beneficial for taxpayers in many ways. He said taxes were for the betterment of the people and the economy. Until people pay taxes dutifully, there is less likelihood that we can control price inflation, he believed. "Revenue is the biggest issue facing the country. Economic crises can be subdued and country becomes prosperous if people recognize their obligations. Normally, we talk about rights and overlook our obligations to nation building. Government can not alone steer the nation out of the crises," he explained. He said electricity crisis was affecting the banking sector.

Syed Ali Raza said changing mindset was an uphill task. Mindset in the society is the major hurdle in the way of progress. "Ever since I joined the bank I have been endeavouring to set mindsets right. And, at this stage I would say it is not easy," he maintained.

Anjum Nisar, President KCCI said reduction in discount rate was not sufficient and monetary policy was not in accordance with the popular expectations. He said we were expecting cut in proportion to inflation reduction. He demanded of government to bring down interest rate by 300 basis points in the next monetary policy to be announced in October.