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Govt rightly alluring foreign investment, funding

Govt rightly alluring foreign investment, funding

Interview with Muhammad Azam Khan — Economist/Capital Market Expert

PAGE: Tell me something about yourself, please:

Muhammad Azam Khan: I have more than 20 years of experience in financial sector including investment banking, capital markets with primary and secondary market activities, mutual funds, equity brokerage (local and international), block deals & corporate finance within and outside Pakistan. Over the last 12 years, I performed as CEO/Nominee Director of leading brokerage house, provided expert advisory services to equity desk of major institutions (local and international both), portfolio management, portfolio advisory of high net worth individuals (local and international), administrative, operational, research, accounts/finance, compliances and sales & marketing objectives in the financial world of Pakistan. I had started professional financial career with international exposure at Mashreq Bank Dubai in a highly professional environment with dedication and commitment. Subsequently, contributed my skills in the growth and development of Atlas Investment Bank — a subsidiary of Atlas Group.

Furthermore, I represented my abilities as Chief Operating Officer at Standard Capital Securities Private Limited and brought structural reforms in the institution and succeeded with effective exit strategy before the financial crunch of capital markets in 2008. I started my career with M/s Bhayani Securities Private Limited (formerly Kausar Abbas Bhayani Securities) as Head of Research way back in 2001 and then joined Atlas Investment Bank Limited in equity research and corporate finance department as Investment Analyst in 2004, later promoted as a Senior Investment Analyst and assigned to handle International Corporate Client (JP Morgan Chase & Co) with other local corporate institutions like Abamco (currently JS Investments), PICIC Asset Management, Arif Habib Investments etc. All World Harvard acknowledged my efforts, dedication and performance. In 2014, Harvard accredited me The Best Entrepreneur in Pakistan Capital Market.

PAGE: How much could Pakistan receive through remittances during the current financial year?

Muhammad Azam Khan: Remittances during July-March 2021 stood at $21.46 billion, which is very healthy sign and relief for Pakistan which showed the trust on current government. Secondly after Covid-19 the investment scenario has changed mainly because of annual returns.

The PTI government is planning to launch a host of initiatives for overseas Pakistanis and their families in order to encourage them to remit more funds through legal channels. Moreover, the State Bank of Pakistan also hiked payment limits against freelance services for an individual in computer and information systems and other freelance services from $5,000 per month to $25,000 in order to attract more foreign exchange. “The enhancement in limit will facilitate freelancers to route greater value of funds through a more economical and efficient channel of home remittances and help in receiving foreign exchange flows through formal banking channels in the country. This would also enable freelancers to expand their business/operations and engage new freelancers to join the workforce,” said the Central Bank in its statement. There is always a trust deficit between Pakistan government and overseas Pakistanis as they always have a doubt about their remittances and surety to get back their investments when and where needed. There is still a communication gap and need more product to attract remittances for Pakistan. My expectation is not more than $25 billion remittances in this fiscal year 2021 but next fiscal year it can reach out to $30 billion.

PAGE: What must be the strategy to attract more remittances?

Muhammad Azam Khan: Pakistan was seen as a model of economic development around the world with a GDP growth rate of 6.8% during the 1960s and there was much praise for its economic progress. Overseas remittances could have reached $50 billion if the previous governments had worked on overseas Pakistani; currently remittances are around $25 billion which is insufficient for Pakistan economy. This is the ideal time as all over the world interest rates are almost near zero whereas Pakistan is still in the list of highest discount rates and overseas Pakistanis are looking for attractive returns and this is the perfect time to attract. International Returns were 3% on maximum side but after Covid-19 pandemic, the returns have come down to 1.5 to 2% maximum whereas Pakistan is still offering minimum 8% returns. There is a trust deficit, between overseas Pakistanis and government of Pakistan because of political uncertainty. Government of Pakistan has introduced new schemes to attract overseas Pakistanis and convince them to invest in industries where Pakistan can control unemployment as well which is out of control concern day-by-day in Pakistan especially in last 2 and half years.

Government of Pakistan can play their role as bridge between overseas and industrialist through surety on investment and fixed annual returns and arrange road shows to guide overseas about investment avenues in Pakistan rather than to get fixed returns from banks.

PAGE: Your take on exchange companies and banks when it comes to foreign remittances received by Pakistan?

Muhammad Azam Khan: Even after 74 years of independence Pakistan is still facing difficulties in the international markets as compared to other regional countries especially when we talk about Bangladesh. There is no positive or constructive role of exchange companies and only 2 to 3 exchange companies are in this business internationally and secondly they rely on unofficial way to transfer remittances in which they get handsome returns whereas officially because of competition with banks the service rates are very low. Secondly they have no branch networking nor look interested to expend this business. Pakistani banks have very limited excess globally specially in Europe and do not focus to expend this business internationally and after HBL’s huge penalty they are more reluctant to go further. Secondly, the service charges of banks are very high which discourage the overseas Pakistanis to remit through banks or officially.

Government of Pakistan should talk to all international branch banks to withdraw services charges on remittances at least for next 2 years, which would encourage the overseas Pakistanis to remit for Pakistan as much as possible which will definitely strengthen Pakistan economy.

PAGE: Your views on Hundi/Hawala and the requirement of the Financial Action Task Force:

Muhammad Azam Khan: The Financial Action Task Force (FATF) is an intergovernmental organization founded in 1989 on the initiative of the G7 countries to develop policies to combat money laundering. In 2001 its mandate expanded to include terrorism financing. It monitors progress in implementing the FATF recommendations through ‘Peer Reviews’ of member countries. The recent government curbs on Hundi/Hawala to meet the requirement of the Financial Action Task Force to exit its so-called ‘grey list’ is sufficient and we have witnessed very quick action against them, which is justified because they had damaged the country’s official remittances badly and reason to park black money outside of Pakistan, which resulted in appreciation of dollar against Pak rupees but the worrying factor is the unemployment of people engaged in this business.

Unless comprehensive reforms of these institutions are undertaken, we will have serious difficulty in maintaining the speed of growth and spreading its benefits to the poor. Next, FATF decision can help to stop this fly of capital and encourage investment and confidence otherwise we can witness major 2 to 3 billion outflows in the coming months because of this high discount rate and devaluation of Pak rupee. Pakistan is a ‘golden bird’ in this region. As a nation we have to respect and realize the potential of our beloved Pakistan and only for once we need serious and sincere leadership with this land of opportunity.

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