INTERVIEW WITH MUHAMMAD ALI, FORMER VICE PRESIDENT KCCI

(feedback@pgeconomist.com)
Jan 3 - 9, 2011

PAGE: TELL US SOMETHING ABOUT YOURSELF.

MUHAMMAD ALI: I have done my graduation in Commerce, masters in Political Science and also Law Graduation (LL.B). I have been:

Vice President of KCCI (2008-2009),
Member of Karachi Chambers Managing Committee (2004-2006),
Vice President (Karachi Tin Plate Merchant Association),
General Secretary (Karachi Iron & Steel Merchant Association (2009 Till today),

Achievements in Steel Sector:

I want to highlight one important achievement as Vice President (KCCI). There was ban on some small size steel imports which was a 50 year old problem faced by steel importers. I got it solved by having negotiations with the Ministry of Commerce and now this ban has been lifted because of my efforts.

PAGE: HOW WOULD YOU DESCRIBE DOING BUSINESS IN PAKISTAN?

MUHAMMAD ALI: Present conditions of doing business in Pakistan are worse whether you talk about any industry or any trading business. There is no planning for infrastructure, power failures, and supply of raw materials for industries. I don't think I can or any one can attract any foreign investment in Pakistan. Even Ministry of Privatization, which has all the resources of the world, has accepted this fact that they are also not able to attract any foreign investment in Pakistan. This condition of Pakistan is very alarming because we have done all efforts but we are not able to increase our exports and we are not able to generate employment opportunities. And, due to low exports the trade deficit is keeping on increasing day by day and because of that our currency is depreciating against dollar and other countries' currencies are appreciating against dollar so we are getting double impact on the import price which leads to the inflation in the country.

PAGE: WHAT ARE YOUR VIEWS ABOUT BANKING SECTOR IN PAKISTAN AND HOW WOULD YOU COMMENT ON BANK BORROWINGS?

MUHAMMAD ALI: Banking sector in Pakistan grew robustly from 2001-07 and in 2008 when the recession hit the world and everybody saw that banking sector of developed countries collapsed due to the subprime borrowings, even then Pakistan's banking sector showed resilience. Banking sector was developing and growing on its full strength but due to the present monetary policy of State Bank (high interest rate), bank borrowing is no longer affordable to any trader or any industry in Pakistan, and due to that it is very difficult for banks to show success as it had done earlier.

It has become difficult to do any business by getting finance from bank at 18 percent. In our country, the spread is higher than the interest rates in the world. However, if you see how quickly our currency has depreciated, it has taken the purchasing power of the people. I am not talking about one percent of people, but I am talking about the other 99 percent who are suffering from this inflation. Due to low purchasing power, the thing which is hurting the most is the demand of the products. It hurts even the demand of the flour, which is the most necessary thing for a human being. And, it will lead to low turnover and low manufacturing in industries. If you want to increase the purchasing power or increase in demand, this 18 percent annual interest rate is to be decreased and you must know the fact that due to high inflation the profit margins of the borrowers are not even 18 percent annually.

PAGE: WHAT STEPS, IN YOUR OPINION, SHOULD BE TAKEN BY PAKISTAN TO CONTROL INFLATION? AND WHAT INCENTIVES INDUSTRIAL SECTOR NEEDS FROM THE GOVERNMENT?

MUHAMMAD ALI: In order to answer this question, there is no rocket science required. We need to increase the production in agriculture sector. Per hectare production needs to be increased. We have to grow the industrial sector, especially small and cottage industry, which will lead to the employment generation. In Musharaf's tenure, government emphasized on the service sector but we need to emphasize on the manufacturing sector which can give long term benefits to our nation. The government needs to give land on easy installments; low cost loans and they need to work out on the power sector, which is the basic necessity for any industry. I have a request to all my business friends that please increase the culture of opening businesses as early as possible and sleep early so that day light will be utilized more and more and in this way we can save power. Our country is facing an alarming and emergency situation so we have to take a step forward and government should ban the night marriage ceremonies, and they should keep ban until the power problem is resolved.

The government should give the utmost protection to our business and industry. It should ban the cheap imports and smuggling so that the local industry can flourish. The government should give ways to new industry and with the new industry, the transfer of technology is the most important thing in this era. The government should ban the imports of mobile, electric savers and it should give incentives so that these products are produced in the country.

PAGE: TELL US SOMETHING ABOUT STEEL SECTOR IN PAKISTAN.

MUHAMMAD ALI: The demand of steel in Pakistan is more than 4 million tons and the production is less than 1 million ton so we have to import the other 3 million tons in order to fulfill the demand of the country. Steel is mainly used in our engineering and light industry. And steel is a lifeline of our cottage industry; it means steel is used as a raw material for any industry. Therefore, my request to the government is that it should decrease the duty slab from 20 percent to minimum rather than 20 percent on imports of iron and steel. Another most important thing, which I want to highlight, is that the government is doing discrimination in GST of steel. It is charging 2.5 percent more than other products. The government should re-consider the import policy on imports and taxes. (KA)