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Remarkable efforts can help Pakistan’s economy sparkle

Remarkable efforts can help Pakistan’s economy sparkle

Interview with Mr. Khalid Tawab — Chairman, F. Rabbi Steel (Pvt) Ltd

PAGE: Tell something about yourself, please:

Khalid Tawab: I am chairman M/s. F. Rabbi Steel (Pvt.) Ltd, M/s. Tawab Steel (Pvt.) Ltd, M/s. Qadria Board Mills (Pvt.) Ltd, M/s. Shariff & Co., (Pvt.) Ltd. I am also the Honorary Consul General Republic of Mozambique since 1989. I have also served FPCCI and Karachi Chamber of Commerce & Industry as Sr Vice President and Acting President respectively. My other prominent portfolios include Life Member Korangi Association of Trade & Industry Life member Federation of Pakistan Chamber of Commerce & Industry, and Life Member Arts Council of Pakistan. I have always tried to contribute to philanthropy and social worker activities.

PAGE: Are the current policies favorable for the investors?

Khalid Tawab: At the outset, I would say that the government did its best to take Pakistan out of the grey list of FATF which will boost the economy in all sectors. FATF has announced that Pakistan has implemented all the points of the action plan consisting of 34 points hence Pakistan stands out from the gray list. The business community welcomes this great achievement and terms it a great positive step for the success of Pakistan and the development of its economy and congratulates Army Chief General Qamar Javed Bajwa, Prime Minister Shahbaz Sharif, Minister of State Hina Rabbani Khar and former rulers of Pakistan on this great achievement.

The industries are the backbone of Pakistan and contribute to all economic segments including export, job opportunities, foreign exchange earnings, and investment opportunities. Pakistan ranks 40 among the countries of the world in nominal GDP, and number 55 in the world in factory output. Pakistan’s industrial sector accounts for about 24% of the GDP. Industries not only play a major role in the production of goods or services but provide jobs to all segments of the masses including skilled and non-skilled labor. The main industries of Pakistan are textile, leather, automobile and automobile accessories, chemical, pharmaceutical, IT, cement, construction, agricultural, automotive, steel, food processing, fertilizer, and paper industries. These big industries also encourage SMEs and cottage industries to contribute to value addition.

The top priority being accorded by the government is to curb speculative forex trading, combat inflation and bring down the interest rate to pull the economy out of the current deterioration but there is a need for much more to be done. While initiatives are in the initial phase of implementation focused on the recovery of the national currency, the however outcome of these initial initiatives has yielded productive results. All the initiatives will further improve the economy if they are sustained.

A stronger dollar has become a major problem not only for Pakistan but for all developing economies which are striving hard for their survival. However, the recent development on a global level there is a positive sign of the availability of Russian oil in the market for lower and middle-income countries – Pakistan will be beneficiary from witnessing some positive developments.

Banks offer loans to the industry while small enterprises and cottages are deprived of loans. The current situation is encouraging imports which, in turn, slows down the economy. It is imperative to focus on setting up solar panels for households, tube wells, hospitals, hotels etc, to cut the import of gas and petroleum products so that the industry may have an affordable power supply. 

There is much more need to be done to boost IT-related exports and reduce dependence on foreign debts. IT freelancers have parked $3-4bn abroad and shying away from bringing money into the country due to high taxes. The fundamentals of the economy have to be improved particularly because there is a dire need to improve the infrastructure of Karachi which is presently depicting miserable conditions. Other issues of water scarcity, exorbitant power charges, and electric and gas load shedding will badly hamper the industry.

PAGE: How would you comment on the dwindling foreign reserves?

Khalid Tawab: The American rating agency Moody’s, which is the global economic rating agency, on October 7 this month reduced Pakistan’s sovereign credit rating from B3 to Caa1, after which Pakistan’s credit rating has become negative, while on October 21, the second American rating agency Fitch also downgraded Pakistan. The credit rating of CCC has been reduced to negative. Moody’s has forecast economic losses of $30 billion due to recent floods in Pakistan, widening current and trade deficits, reduction in revenue, income and GDP and debt servicing difficulties for Pakistan, requiring Pakistan to seek other financial institutions. More loans and aid will have to be obtained from friendly countries. Moody’s estimate of economic losses at $30 billion, which is 10% of GDP.

At the moment, the three major credit rating agencies in the world are Moody’s, Fitch, and Standard & Poor’s S&P, which issue credit ratings of countries for credit and investment. But the international financial institutions, bonds and capital markets decide to lend and invest in the country. In case of a negative credit rating, the country gets difficult and expensive loans and has to depend on soft deposits and aid from friendly countries. 

Economically strong countries with a credit rating of AAA are in the best position to meet their financial obligations, followed by weak economies with a BBB rating and a negative rating of CCC, which is close to economic bankruptcy, while the D ranking comes at the end, which means that the country has failed to fulfill its commitments to financial institutions and to repay its debts, the most recent example of which is Sri Lanka.

Pakistan’s outlook was changed from stable to negative due to destabilization, reduction in foreign exchange reserves and pressure on external debt payments and indicating a significant deterioration in Pakistan’s economic conditions according to Fitch’s report. Fitch has also predicted serious economic challenges for Pakistan after the current IMF program ends in June 2023 due to the unstable political and economic situation. The same concerns about Pakistan were shared by Standard & Poor’s (S&P) which in July 2022 

PAGE: Could you give your perspective on inflation in Pakistan vis-a-vis the rest of the world?

Khalid Tawab: How long will we continue to depend on foreign aid now the political parties to fix the economy first, as the common man is longing for bread, inflation is on the rise, and the life of the poor has become more and more difficult. It is, and now is the time that all the political parties of Pakistan should come together in consultation with the leadership of the business community and make a future economic plan, otherwise the problems of the common man will increase instead of reduce, which will make Pakistan the weakest. Our main combined goal is to make Pakistan economically strong, only then there will politics and business in the country is possible.

PAGE: What is your take on the import and export scenario in Pakistan?

Khalid Tawab: UBG hails the tireless efforts of trade bodies in the promotion of exports. The export-oriented trade bodies of Pakistan have made great efforts for the promotion of Pakistan’s export particularly tireless efforts of the members of trade bodies of the non-textile sector. Overall growth in the non-textile sector is mainly led by the value-added sector. The members of associations of leather garments, surgical instruments, sports goods and engineering products have maintained growth in exports despite challenges that are praiseworthy. Pakistan is known and recognized as the main exporter of these products. 

Pakistan surgical instruments are remarked by western countries with their famous brands. Pakistan commercial sections should play their role to project the image of Pakistan’s surgical brands. The export of footwear, leather and canvas footwear and engineering products have witnessed continuous growth as per the PSB report which is very encouraging. It is urged upon the government to reduce the duty on the import of raw materials to promote export, particularly the export of pharmaceuticals, plastic chemicals, engineering and value-added textile products. It is appreciated that despite lesser demand in the international market export of Pakistan food products posted a growth particularly rice, spices, oil seeds, nuts, meat and fruits.

Incentives are to be announced for the promotion of the IT sector, pharmaceutical, rice, seafood, meat, and frozen food, as these sectors have the potential to grow more than double easily.

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