- Â Poor storage of POL products is a matter of concern
- Ease taxation policy; roads need improvement
Interview with Mr. Barkatullah Lone — Chairman, GB International Economic Forum
Profile:
Mr. Barkatullah Lone is the Chairman of GB International Economic Forum and a renowned young Economist of Pakistan. He is a Chartered Accountant from England & Wales, a Chartered Management Accountant from UK, a Chartered Certified Accountant from UK, a Chartered Global Management Accountant from the USA, Gold Medalist Management Accountant and Public Finance Accountant from Pakistan plus he holds a master’s degree in Economics and Law from Karachi University. He has been associated with the corporate sector in the Finance and Audit profession in various positions (CFO/GM Finance/Chief Internal Auditor) for the last many years.
He has rendered his professional Finance/Audit/Accounting services in Pakistan as well as abroad. Simultaneous with his job career, he has been appearing on various Local and International TV channels as an Economic & Financial Analyst for the last Eight years. His Articles on Economy and Finance are also published in various reputed magazines.
Association with Organization:Â Presently, Barkatullah Lone is associated with a reputed large Conglomerate Corporate Group in the Eastern Province of KSA (Dammam) as the Group’s Chief Financial Officer. He joined this Group with a vision to professionalize the business functions and streamline the processes by embedding the business activities into integrated Information Systems. He has ample experience in converting the traditional owner-based culture into a corporate culture in his ex-organizations and he is envisioning inculcating a corporate culture in the existing Group as well.
PAGE: What is your perspective on logistics and transportation in Pakistan?
Barkatullah Lone: Transportation and Logistics are not restricted to physical infrastructure usage of rails, roads and transport, sea trade and related freight, but it also includes packaging, delivery, storage facility and trade logistics. Moreover, insurance, renewal costs, high freight, and longer delivery times also add up to costs. Opportunity cost, service standards and trade facilitation play a pivotal, crucial and detrimental role in defining the efficacy of transport and logistics.
For the sustainable development of Pakistan, we need robust and cost-effective transport & logistics sector. Export also depends on this very important sector. Though we are undergoing an economic slowdown transport & logistics have shown positive trends. Pakistan has a ranking of 142 out of 160 countries. This standing is because of poor performance in custom clearance, tracking, tracing and timelines throughout our country. Pakistan is also experiencing the same political, industrial and financial difficulties as are faced by Bangladesh, India and Nepal. There is no long-term government plan to develop a logistic value chain as a means to climb out of the economic black hole Pakistan is trapped in.
The logistics industry is contributing globally $4.3 trillion creating thousands of new jobs and improving export competitiveness substantially. The nations with the top twenty LPI are among the 10 strongest economies of the world. When we have a deteriorating Balance of Payments and languishing exports instead of believing in traditional exports (agriculture, textile & medical equipment to name a few), there is a dire requirement to move to modern manufactured innovative goods exports to earn more foreign exchange. The need is to eradicate supply chain inefficiencies in bringing products, raw materials and finished goods to market for making Pakistan’s exports more competitive. If quality and linkages of transportation infrastructure are improved then our exports can be increased.
PAGE: What is your take on port handling in Pakistan?
Barkatullah Lone: Increasing traffic and the resulting congestion but other obstacles also include limited storage facilities at ports, non-utilization of a specialized oil pier, excessive sampling and testing times, use of oil piers by non-oil tankers and low pumping rates of oil and non-oil tankers. The main constraint in the handling of cargoes at Keamari is inadequate storage of POL products, especially the storage for the fast increasing. There is a need for tremendously increasing storage at Keamari and also at the same time increasing imports of petrol. Moreover, a ban on new tank construction at Keamari and land availability for this magnitude of storage development is also a big limitation at the port.
PAGE: How would you comment on the taxation on logistics and ports?
Barkatullah Lone: Logistic sector in Pakistan has always suffered due to high-income tax rates which are deducted at the payment stage and treated as the full and final discharge of tax liability. The profit margin of Logistic companies is lesser than 15% and out of it around 8% is paid as income tax therefore the net margin left for the investors is too squeezed.
This is true that there is not much requirement of fixed investment for the logistics industry but this industry needs much operating investment. Therefore, the entrepreneur of the logistics industry always hesitates in expanding the business because of the low-profit margin as the operating leverage risk increases multifold as compared to any other industry.
In view of all the aforementioned facts, we see small and medium-sized firms in this industry in general not big giant companies. In order to develop this industry, my suggestion to the government is to lower the tax rates, in particular, Income Tax rates and improve the road infrastructure too which has also been one of the big issues of this sector. Damaged road infrastructure has been the cause of an increased in the operating cost of road transport and lower efficiency of service.
PAGE: Are the current policies favorable for the logistics sector?
Barkatullah Lone: Logistics is an elevated priority for the Islamic Republic of Pakistan because facilitating trade and transport is at the core of stimulating economic development and a precondition of national competitiveness. Pakistan’s growth and development prospects are inextricably linked to its ability to better integrate into world markets. For the country to leverage its geographic proximity to many emerging markets and increase its exports and integration into global value chains means more and better jobs.
However, this is partly dependent on an efficient logistics system. Current policies of the government are not favorable for the logistics sector as the sector needs tax relief and subsidized finances like the other struggling sectors like textiles. The logistics sector provides service to all the other business sectors of the economy, therefore, this sector needs the key attention of the government. One of the reasons for the economic development of countries like China, Germany, Japan and the USA is that these countries focus on their logistic sector and draft policies that ease out the business of this sector.