Business community seek friendly policies amid reduced cost of doing business
Interview with Agha Shahab Ahmed Khan – President, Karachi Chamber of Commerce & Industry
[box type=”shadow” align=”” class=”” width=””]Profile:
Director Convenience Food Industries (Pvt) Ltd
- Sectoral Advisory Committee, Environment Climate Change & Coastal Development Department, Government of Sindh.
- Provincial Steering Committee, Services, General Administration & Coordination Department, Government of Sindh.
- Karachi Metropolitan Corporation (KMC).
- Sindh Solid Waste Management Board, Government of Sindh.
- Industrial Liaison Committee, Industries & Commerce Department, Government of Sindh.
- Coordination Committee, Labor & Human Resources Department, Government of Sindh.
- National Centre for Dispute Resolution (NCDR).
- NICVD National Institute of Cardiovascular Diseases.
- Federal Tax Ombudsman Secretariat.
Member Board of Governors Universities/Educational Institutions:
- Hamdard University
- Iqra University
- Ziauddin University
- Greenwich University
- Sir Syed University of Engineering & Technology
- Institute of Business Administration (IBA)
- Institute of Business Management (IoBM)
- PAF Karachi Institute of Economics & Technology (PAF-KIET)
- Indus University
- ILMA University
- Preston University
- Newports Institute of Communications & Economics
- DHA Suffa University
- Commecs Educational Trust
- National Vocational & Technical Education Commission
- Khadim Ali Shah Bukhari (KASB) Institute of Information Technology
- Pakistan Institute of Tourism and Hotel Management
- Karachi Medical & Dental College
- Sohail University
Social & business activities:
- Member of the Board, Sindh Food Authority
- Former Vice President, Karachi Chamber of Commerce & Industry -2014-15
- President, Student Union, PECHS Foundation Science College, Karachi
- Member Executive Committee (FBATTI)
- Vice Chairman, F.B. Industrial Area (FBATTI)
- Chairman, Export Committee (FBATTI)
- Winner – 1st Prize, Pakistan Navy Shooting Range
- Managing Committee Member, KCCI 2005-2007
- Managing Committee Member, KCCI 2009-2011
- Managing Committee Member, KCCI 2013-2015
- Chairman, Export Sub-Committee, KCCI-2013-2014
- Advisor, Export Sub-Committee, KCCI-2016-2019
- Represented KCCI in Japan and completed short course of the Art of Japanese
- Member Observer Tri-Pak Project Birmingham Chamber – KCCI[/box]
PAGE: Could you tell us about the cost of doing business in Karachi in particular?
Agha Shahab Ahmed Khan: Karachi generates more than 70% of revenue to the exchequer, while 90% of Pakistan’s exports are routed through Karachi’s ports alone. Yet the irony of the matter is that despite paying the highest taxation in the country, little attention is paid towards development of its infrastructure, and provision of basic facilities to its residents and industries. Lack of infrastructural improvement tends to increase costs of business owing to higher production costs and transportation lead times. Furthermore, it appears that national tax machinery is mainly focusing on extracting more tax from Karachi alone, which already pays the highest tax in the country. Recent data released by the FBR has proved that traders of Karachi alone pay umpteen times more taxes than the nearest competing city, let alone its industries. Yet, FBR recurrently targets Karachi’s business community for higher collection. Such biased taxation leads towards higher costs. Furthermore, higher valuation of land in Karachi due to its prime location and humungous business potential it offers is a key cost determinant in business decision making.
PAGE: How is the business sentiment at the moment due to the current policies of the government?
Agha Shahab Ahmed Khan: Business sentiment is weak at the moment and one only has to look at large scale manufacturing where most of the industries are experiencing negative growth. Auto sector is a prime example where due to weak demand, factories are observing quite a number of non-production days in a month. Business unfriendly conditions of the IMF loan program, high interest rates, a weak PKR, abolishment of zero rating on five value-added sectors and then subsequent replacement with an inept system of refunds disbursement have all created hordes of problems for the business community.
With the purchasing power of people already diminished, markets are devoid of customers while the FBR’s reinvigorated documentation drive is further testing the nerves of businessmen. The government, instead of enacting phase-wise structural reforms, seems bent upon fixing everything in one go. To rub salt in wounds, the Prime Minister has claimed that nobody wants to pay taxes. As per FBR statistics, small traders of Karachi paid tax of PKR 30 billion while those from Lahore paid a mere amount of PKR 567.7 million, with other cities registering even smaller amounts. We believe that the actual contribution of Karachi has to be publicized without any excuse of being the port city and Karachi needs to be given the respect it so much deserves.
PAGE: Your views on the import and export policies:
Agha Shahab Ahmed Khan: Pakistan’s trade balance has been a cause of concern since long. The monumental import bills and struggling exports are a perpetual cause of concern. Consecutive governments have made a lot of effort to promote the country’s exports but nothing seems to remedy the situation. Even countries that have a lower GDP and concentration of natural resources like Bangladesh and Vietnam are able to compete in the global market better than Pakistan. Adoption of conventional ways would not get Pakistan anywhere; hence innovative ideas are needed. Pakistan needs to focus on e-commerce, especially B2B e-commerce to increase exports. One way they can do this is by creating a cross border e-commerce zone in Karachi similar to the Chinese cross border e-commerce zone of Hangzhou.
China is moving towards producing higher value-added goods and is looking to move a portion of its manufacturing sector to other developing countries. Pakistan must try to get as much of China’s relocating manufacturing as possible by setting up joint ventures with the Chinese under CPEC. Pakistan must produce a wide range of higher value-added goods and services that reach a diverse geographical market. Greater focus also needs to be on creating a knowledge based economy so that Pakistan’s IT sector can fetch more export orders. Pakistan trade deficit can be improved by creating innovative export friendly policies and capacity enhancement of its manufacturing sector on the one hand, while reducing import dependence on the other. To cover both facets, Pakistan needs to lay extra emphasis on import substitution as unnecessary imports at cheap tariffs have caused enough damage to the local industry.
PAGE: What must the government do to improve the economy of Pakistan?
Agha Shahab Ahmed Khan: Pakistan lagged behind in the third industrial revolution but it is highly critical that it does not repeat the same mistake in the fourth industrial revolution, and produce a wide range of higher value-added goods and services that reach a diverse geographical market.
Pakistan also needs to encourage formation and proper functioning of skill development institutions. Regional competitors have systematically developed the skill levels of its human resource leading to a sustained growth in exports and enhancement of value addition levels in the production chain. Pakistan also needs to pursue a similar level so that its exports, domestic commerce, productivity and employment levels increase substantially. Pakistan has weak state institutions, and this has a negative effect on both the implementation of anti-poverty programs and the provision of key social services and infrastructure to the people, which needs urgent improvement. Instead of making the poor dependent upon free food, it would be better if industries are supported so that people can buy the food themselves.
To improve the business sentiment, government needs to make business and trader friendly policies that focus on reducing the cost of doing business and the trust deficit between the business community and government institutions such as NAB and FBR. It needs to restore the confidence of businesses in FBR for economic development and elimination of corruption. The conversion of FBR to Pakistan Revenue Authority should not just be a change of name but an actual change of mindset, with reforms to continue unabated.