INTERVIEW WITH FORMER DG RESEARCH FPCCI
Jan 17 - 23, 2011
PAGE: TELL US SOMETHING ABOUT YOURSELF?
DR AYUB MEHAR: I am in economic and financial research since last 20 years. Socio-cultural aspects of economic policies, technology and business competitiveness and international trade and finance are the areas of my expertise. I have been working on various responsible positions in industry, financial markets, and educational institutions in Pakistan. Currently, I am serving as 'research professor' in Iqra University Karachi. I served Federation Pakistan Chambers of Commerce and Industry (FPCCI) as 'Director General (R & D) for three years.' I served as founding 'Dean Faculty of Management Sciences' in the Institute of Business and Technology (Biztek) for more than 3 years. In recognition of my expertise, the Technology Policy and Assessment Center at Georgia Institute of Technology acknowledged me by its membership in the distinguished panel of international experts for indicators of technology-based Competitiveness Project (Supported by the US National Science Foundation, United States Government). It is also important to note that the IDEAS/ RePec -an internationally recognized think tank to collect and rank the economic research - participated by world leading economic institutions, journals and publishers including American Economic Association, Centre for Economic Policy Research UK, IMF, World Bank, and Indian Institute of Management- has placed my name in the list of top ranked economists in Pakistan. According to the report released by 'REPEC' in 2010, my name was included in the list of "World's" top 5 per cent economists whose works were highly viewed by research community. I frequently participate in the discussions/ interviews on national/ international TV channels and leading newspapers and magazines on contemporary economic issues.
Recently, I participated in an international conference hosted by Indian Institute of Foreign Trade (Indian Ministry of Commerce) New Delhi to discuss the issues in regional trade in South Asia. Last month, I have also discussed trade related contemporary issues in the presentations in the international conferences in Tehran and Jakarta. One of my studies on the assessment of financing requirements of Muslim world has been published in the China Finance Review International published by School of Economics of Shanghai Jiao Tong University, a top-tier exchange platform of scholars and policymakers from the China's central government departments including China Securities Regulatory Commission, People's Bank of China, and Ministry of Finance.
At present, I am also working on a project on the assessment of the possibilities and consequences of financial integration between China and Muslim world. This study is mainly based on the UNDP Funded South-South Global Assets and Technology Exchange (SS-GATE) Program'. United Nations Development Program (UNDP) established a special unit - South-South Cooperation Unit. I participated in this program at its initial stage. Under this program, a new institution - South-South Global Assets and Technology Exchange (SS-GATE) was established with the technical support and assistance of the China International Center for Economic & Technical Exchange (CICETE) and the Shanghai United Assets and Equity Exchange (SUAEE).
The aim of this venture is to provide a global and sustainable South-South transaction platform that facilitates market-driven and transparent exchange of technology, assets, services, and financial resources among private sector, public sector, and civil society for the inclusive growth of developing countries. Pakistan is one of the signatory in this program. An MOU to launch this project was signed in Shanghai on 27thNovember, 2008. Chinese government in Beijing signed the MOU as the witness.
PAGE: HOW WOULD YOU COMMENT ON REGIONAL TRADE?
DR AYUB MEHAR: In the present regime of globalisation, free trade is considered as a flagship policy of the classical economic thoughts. WTO, Adam Smith Institute and the networks of many NGOs are working for the liberalization of economies. So, ultimate goal of all trade related policies is to achieve the desirable benefits of free trade. So far as regional trade enhancement -either through competitiveness or by means of regional trade policies- is concerned, it should be considered as a part of global economic policies. Regional trade is a sub set of global trade; it cannot be isolated from the globalization regime. In this scenario, I think that we will have to liberalize the regional trade. Now it is not a matter of choice; like it or dislike it; it needs to be adopted. However, it is important to identify the policies and parameters of regionalization, which are initiated from the defining of region. South Asia, ECO, Muslim bloc, and Central Asia are the concerned regions in case of Pakistan. In fact, when we talk about South Asia, we cannot ignore China and Afghanistan. Pakistan is a country, which represents not only South Asia, we are equally parts of Middle East and Central Asia; in fact we link all the three strategically important regions of the world. However, it is unfortunate that regional trade is much lesser in all these three parts of the world. Central Asian trade routes have been modified because of 70 years historical changes in the economic system under the Soviet regime.
Pakistan is linked with central Asia through Iranian boarders and Arabian Sea; but trade in this region is not equitable. South Asia is facing various geopolitical issues. The mutual trade of South Asian countries is less than 5 per cent of their global trade; this ratio is 49 per cent for NAFTA and 26 per cent for ASEAN. It is envisaged by the historical record of growth in the trade between the regions that mere regional blocs did not accelerate the mutual trade growth, the factors of growth require economic justifications.
Existence of the trade barriers, interaction among the peoples and the mechanism of the demand and supply forces are the determinants of trade growth. Trade barriers in South Asia can be measured by their average tariffs on primary and manufactured products. In world, the simple average tariff rate is 8.7 per cent for primary products; it is 15.8 per cent in case of South Asia. The weighted average tariff rate for primary products is 2.2 per cent in the world; it is 7 per cent in South Asia. For manufactured products, the simple average rate of tariff is 6.9 per cent; it is 13 per cent in case of South Asia. The weighted average tariff for manufactured products is 3.3 per cent in world; it is 7.1 per cent in South Asia. This quantification indicates the restriction on international trade by protectionism. The interaction among the peoples of South Asian countries indicates a darkest picture, which is another cause of the lower trade volume between the countries.
PAGE: WHAT ARE YOUR VIEWS ABOUT CHINA AND PAKISTAN TRADE RELATIONS?
DR AYUB MEHAR: China is the world's 2nd largest economy with 11 per cent rate of growth and 2.6 trillion dollars GDP. Pakistan and China have historical good friendly relations. Here, it is notable that these good relations have no dependency on the nature of relations of both the countries with India. India does not have good relations either with China or Pakistan. A report released by the Federation of Indian Chambers of Commerce and Industry (FICCI) in 2009, aggressively indicated that good relations with Pakistan and China are not possible in the current political scenario. Despite of all these realities, Pak-China relations are above than all these geopolitical issues. It is interesting that China has good relations with almost all the Muslim countries. It is also a fact that economic relations with China are not properly developed. Though we have trade relations and Chinese investment in the economy of Pakistan play an important and strategic role, these relations can not be classified as economic integration between the two countries. It is just economic relations between two neighboring countries. There are much potential for establishing strong and sustainable economic relations. Chinese economy has surplus liquidity, and Chinese investors are looking for attractive avenues to invest their funds, while Pakistan and the countries in Central Asia have deficiency in the investable funds. In this scenario, the financial integration with China is required. We should focus our investment policies on this strategic point.
PAGE: HOW WOULD YOU COMMENT ON IMPORT OF CHINESE PRODUCTS IN PAKISTAN?
DR AYUB MEHAR: It is notable that China's share in Pakistan's import is about 12 to 15 per cent, which is second largest after Saudi Arabia. However, this share is mainly focused in the consumer products. I do not understand that what are the problems in the policy making to divert Chinese imports to industrial goods including machinery, plant and infrastructure related investment. There are several possibilities to induce such imports. Joint ventures, mergers and acquisitions, and formation of the new corporate entities with Chinese investment in Pakistan are possible. Such strategies can divert and enhance Chinese trade with Pakistan on import front from consumer products to industrial products. It is notable that flood of low price consumer' oriented Chinese products may lead the unrest in local industry. We should encourage Chinese imports in industrial sector. This policy will lead the investment promotion and will create employment opportunities, infrastructure development and economic growth in the local economy.
PAGE: WHAT STEPS, IN YOUR OPINION, SHOULD BE TAKEN BY PAKISTAN TO INCREASE ITS EXPORTS TO CHINA?
DR AYUB MEHAR: China's share in Pakistani exports is about five per cent. In monetary term, it is more than one billion dollars. Yarn, cloth, fisheries, plastic material, and leather products are our main exports to China. Pakistan and China signed a bilateral free trade agreement in 2006, which became effective from July 2007. This agreement covers trade in goods and investment. In the overall package, Pakistan got zero rated market access to industrial alcohol, cotton fabric, bed linen and other cotton home textiles, marble and other tiles, leather articles, mangoes sports goods, citrus and other fruits and vegetables, iron steel and engineering goods. There is also a long list of products for reduced in tariff by 50 per cent. This policy, no doubts, added some trade enhancement for Pakistan, but it does not match with our potential. Honestly speaking, we can enhance our trade volume manifold. If I want to describe the revolutionary strategy, I can say that the product diversification is much important to enhance trade volume. In enhancing trade relations, it is not important that what we are producing at present; it is important that what is needed by the buyers. We will have to produce those products which are required by the buyers in international market. To achieve this objective, we need to change our infrastructure- both physical and human resources.
PAGE: WHAT INCENTIVES MANUFACTURING SECTOR NEEDS FROM GOVERNMENT OF PAKISTAN?
DR AYUB MEHAR: I do not believe on incentive mechanism in the free trade regime. The only sustainable and workable incentive is to synchronization in the policies. We need change in the economic policies. Pragmatism of these thoughts depends on the attitude of policy makers. Though, trade enhancement is closely associated with the trade policies, yet it is highly correlated with the interactions among the peoples. This aspect of trade promotional activities should be incorporated in the trade policies. Free trade agreements, bilateral treaties, and monetary union cannot achieve the targeted goals unless the interiors and foreign affairs ministries participate in these agreements. The roles of transportation and communication departments are also important in trade promotion among the nations. It was recommended that at the time of agreements of the mutual economic relations, the interiors and foreign affairs ministries and the concerned departments of the transportation and communication must be taken into confidence. Recent economic studies suggest that migration and trade integration affecting development are closely linked to one another. In a case study based on Pakistan economy, it was observed that Pakistan imports more than 60 per cent of its required goods from those 23 countries where its 70 per cent migrants are settled. Migrants promote the host countries products in their native countries. Though migration improves the trade relation also at the export front, the empirical results show that role of migration stock is more significant in promoting the exports from host country to the country of origin of the migrants.