- Port services need to change to meet international standard
- Essential to bring out-of-the-box ideas to boost trade
Interview with Malik Naeem Azam — President, Global Business Solutions
Profile:
- Global Ambassador Commonwealth Entrepreneurs Club
- President Global Business Solutions Pakistan
- CEO Millennium Pakistan
- Former Managing Director Deugro Projects & Logistics Pakistan
PAGE: What is your perspective on Logistics and Transportation in Pakistan?
Malik Naeem Azam: The transportation, shipping and logistics of any country depend on both imports and exports and strategic projects in Pakistan such as CPEC connected with SCPEC and RPEC in the future and Pakistan being gateway Transit Business for Afghanistan and Central Asian countries. Pakistan’s logistics and transportation compared to other countries of the world are still working on old fashion principles of British times.
Pakistan’s logistics and transportation industry should be modernized like other countries such as Dubai, Singapore, Thailand and China so that we attract international companies especially investors like overseas Pakistanis and other countries also see a lot of attraction in Pakistani logistics and transportation industry due to CPEC, SCPEC and CIS Corridors. They have also a keen interest in investing. Pakistan is facing post-Covid economic crises, post-flood and political crises and needs to come out of this scary situation. We have to seriously look, first of all, at the laws, rules and regulations of this industry, infrastructure, incentives and facilities to stakeholders, etc.
PAGE: What is your take on port handling in Pakistan?
Malik Naeem Azam: Pakistan has three seaports Karachi, Bin Qasim and Gwadar out of which only two are operating. Gwadar is not operative yet in full swing, which is our deepest seaport and has long drafts to bring Mother Vessels into the port. We also have International Container Terminals operating both at Karachi and Bin Qasim Port, which also have altogether a huge volume of handling containers every year but there is always room for improvement, while modernization is also needed in port handling to save stakeholders’ time and money and damages of cargo. Port authorities should follow the international standards and operating procedures implemented at seaports of other countries.
Transit has a huge business potential but we do not market our products properly in the world, which is the most profitable business and can create the human resource and additional foreign exchange for the country. In 2022. we have announced a CIS Transit Policy with Uzbekistan but so far have not been able to have a consistent start. We need to use digital methods to advertise the same in the world. Similarly, transshipment has always been a profitable business in any country’s seaports and airports but we are unable to implement those policies in our country and could not take benefits which other nearest countries who made business hubs such as Dubai, Colombo, Thailand and Singapore.
PAGE: How would you comment on taxation on logistics and ports?
Malik Naeem Azam: Tax collection is very helpful in the development of any country. There should be tax collection in ports and logistics too, but to the extent that the impact on the cost of our exports and imports is minimal so that our importers and exporters can compete with their orders in the world market. We have a competition with our nearest ports such as Nhava Sheva, Jabel Ali, Muscat, Colombo, Singapore and Bangkok we have to be cost-effective in our taxation towards the logistics Industry.
PAGE: Are the current policies favorable for the logistics sector?
Malik Naeem Azam: Logistics Industry is in crisis at this moment due to a shortage of foreign exchange in the opening of the Letter of Credit. We have to bring out-of-the-box ideas to boost trade. They should take suggestions from the private sector and highly experienced professionals from the shipping and logistics sector of our country.
There are always two ways of running any industry or any country.
Increase revenues (sales) by inducting new dynamic policies as per the situation of the country or easy option to have conservative policies, which create unemployment and shutdowns.
We never adopt the difficult option to increase our revenues whereas we have many potential and resources available in the country but contrary we always made our budget in deficit. The year 2019 was the worst year in which the Government of Pakistan selected as an easy option and slowed down the economy by stopping all imports in the country, which resulted in a huge drop down in our economy and that continued in 2020 due to Covid.
External balance on goods and services (formerly resource balance) equals exports of goods and services minus imports of goods and services (previously nonfactor services). Data are in current US dollars.
- Pakistan’s trade balance for 2021 was $34.47 billion, a 41.33% increase from 2020.
- Pakistan’s trade balance for 2020 was $24.39 billion, a 24.92% decline from 2019.
- Pakistan’s trade balance for 2019 was $32.49 billion, a 12.81% decline from 2018.
- Pakistan’s trade balance for 2018 was $37.26 billion, a 21.66% increase from 2017.
New planning of the present government for economic emergency proposal under consideration in Islamabad, which includes:
- Restrict all economic activity from 8am to 6pm. Meaning all markets, and businesses are to close at 6pm including restaurants etc.
- Personal vehicle usage to be restricted to 3 days only or the car must have 3 occupants. (Issue on implementation traffic police in all provinces has been asked to device a plan)
- Reduce foreign flights to Gulf states by half and each traveling passenger must justify the trip. (MOFA and MOI instructed to prepare method) also, revert to the old system of no more than 2 international flights on foreign carriers a year for more than 2 trips citizens must travel PIA or other Pakistani carriers. If NTN is not provided at the time of booking a flat fee of Rs5000/- for domestic travel and Rs65,000/- for international flights is to be imposed and collected at the airport before boarding.
- Stop all self-financed Hajj and Umrah and ziarats. The citizen must receive NOC from the Ministry of Religious Affairs while finance and travel history must be used to determine.
- Any dollar remittance for education overseas only from taxes money. If your tax returns do not justify a citizen’s ability to fund a child’s education overseas that transaction must not be allowed.
- Minimum one-year closure of money exchanges nationwide. Only banks are allowed to change the currency after due diligence is prepared by SBP.
- Essential import priority. All LCs to be categorized per importance and need. Unless the exporter justifies import with confirmed orders for export no new machinery or plant import LC is to be opened.
- All inward settlements are to be credited in PKR. All foreign currency accounts in local banks are to be put on temporary hold and withdrawals only in PKR on SBP set rate.
- Government official foreign trips are to be halted unless the host country is paying. Only state visits for bilateral importance are to be undertaken with minimum support staff and no private citizens or family members to travel and PM and other dignitaries are to use only commercial flights for travel unless the destination has no commercial airline connectivity.
A total of 22 points of a preliminary summary including the above 9 points has been proposed to the Ministry of Finance with a lot of resistance at every level. The situation is dire and all-out efforts are being made to keep appearances and maintain positive sentiment but officials are saying that IMF has become increasingly difficult and demanding unrealistic steps. The current government is fighting all such adverse proposals with full force but finding it increasingly impossible to further delay such harsh and impractical steps.
Meanwhile Pakistani elite are quietly setting up businesses and relocating their wealth overseas. Let us not forget only 2 years ago Sri Lankan economy was tipped as the best-performing economy in this part of the world and today is left in ruins. Important and very painful days ahead.
We are again not even considering how to increase our revenues (sales) here are some potential points for increasing revenues for a country.
I would like to highlight some of the methods to boost the economy of Pakistan in the upcoming years. These concepts are already being practiced by many successful countries around the world.
Business-friendly policies
- Such policies include domestic investment laws which grant specific incentives to a number of sectors including industry, agriculture, tourism, hospitals, transportation, and energy and water distribution are all counted as business-friendly policies.
- The laws also allow the cabinet flexibility in offering investment incentives to other sectors.
- It provides a pulse of what is going on in a country in terms of regulatory burden for businesses and creates pressure for any responsive government to take corrective action.
- And that is exactly what happened in Pakistan. The country’s falling ranking in recent years compelled the government to focus on reforming the business environment.
Investment opportunities
- Government should welcome overseas Pakistanis and foreign nationals to make direct investments in the real estate sector, be it residential or commercial.
- Government should facilitate foreign nationals from China, Malaysia, Singapore, Japan, Azerbaijan, Uzbekistan, Tajikistan, Middle East countries and the rest of the region by providing 2 to 3 years of residential visas on a certain amount of investments in Pakistan. Or any other lucrative scheme to facilitate foreign investors.
- There are many mega projects which are already open for investments like; Capital Smart City Islamabad, Top City-I Islamabad, Eighteen, Bahria Town Karachi, ARY Laguna at DHA City Karachi etc. Such projects are easy to attract foreigners to make investments.
- FDI (Foreign Direct Investments) is the most important factor for any country to boost its economy in a short time.
Trade promotions
Trade promotions are marketing campaigns and promotions organized by brands that are aimed at increasing sales within a retailer, sweetening the pot for both the store and the shopper. For brands, the primary goal of trade promotion is to increase sales through their chosen retail channels.
Ultimately, this sales bump will hopefully mean your brand is more beneficial for the store than your competitors. This is partly a B2B marketing play, but it’s also a B2C play as well —which means there’s plenty of room for creativity in trade promotions.
Trade promotions can take several different forms. Here are some of the most common types of trade promotions:
- Discounts and markdowns
- Incentives to individual stores
- Field marketing opportunities
- In-store displays/visual merchandising
- Offer Bundles
Rebate exports
- Export tax rebates are an important trade policy tool for promoting exports. They entail the refund of value-added tax and consumption tax already paid on exported goods during production, circulation and sales.
- Export rebates (exemption), referred to as the export tax rebate, its basic meaning is the refund of export products, domestic production and circulation in the actual payment of the product tax, value-added tax, business tax and special consumption tax.
- Export tax rebate system is an important part of national revenue. Mainly through the refund of export tax rebate exports to balance domestic taxes already paid the tax burden on domestic products
- If we look at the economy of Bangladesh, Many Pakistani investors are interested to invest in Bangladesh because they provide multiple facilities to the investors and the residents.
- Pakistan should also plan something like this by which we can facilitate the investors and our own residents so that Investors will be interested to invest their money in Pakistan which is directly proportional to the development of Pakistan’s economy.
Bonus-based trade & tax schemes:
Bonus-based trade & different tax schemes affect a trader’s propensity to trade and which bonus scheme improves a trader’s performance. If traders get the direct benefits of trading in terms of bonus or tax minimization they will surely try their best to increase their trading to avail of maximum bonus & tax schemes. In Germany, this law is already implemented and they are facilitating their residents and taxpayer, some of the benefits they are providing to their tax payers are mentioned below:
- Statutory Maternity Pay
- Maternity Allowance
- Child Benefit
- Child Tax Credit
You may be able to get extra help if you’re working 30 or more hours per week, have a disability, or are aged 50 or over and returning to work after a period of benefit.
Tax collection/say no to corruption
- Federal Board of Revenue is the national department of Pakistan and the only department that collect Tax from all over Pakistan and make reforms to facilitate taxpayers and this department doing very well, but on other hand, some sort of corruption also exists in this type of governmental department we should make reforms for minimizing the corruption and targeted victim.
- FBR should filter and minimize their employees and adjust them in other departments and head toward the system digitalization to get rid of corruption through these reforms.
- FBR can collect taxes accurately and on time efficiently. Also, digitalization will make the system updated and the taxpayer is also just one click away from their FBR record, Tax payer can see the notification on their mobile if FBR issues notice to them, and everything should be crystal clear between the Taxpayer and the Department. Everything will be updated timely regarding the taxpayer and new reforms if any.
CIS Trade
Commonwealth of Independent States Free Trade Area (CISFTA) is a free-trade area between Russia, Ukraine, Belarus, Uzbekistan, Moldova, Armenia, Kyrgyzstan, Kazakhstan and Tajikistan. Five CISFTA participants, all except Ukraine, Uzbekistan, Moldova and Tajikistan, are members of the Eurasian Economic Union, comprising a single economic market. Efforts have also been made to diversify Pakistan’s export destinations. The figure below presents the regional configuration percentage share of our exports. Pakistan’s main trading region remains Asia.
- Increase Pakistan’s cumulative exports to $95 billion for the three-year period
- Make the export sector an engine of growth
- Enhance Pakistan’s export competitiveness in short as well as medium term Measures announced to achieve goals of STPF the following instruments of policy were employed;
- Institutional strengthening and governance
- Export Development Initiatives to enhance export competitiveness
- Regulatory Amendments in the trade regulations
Trade with Afghanistan
- Afghan Transit Trade (ATT) through Pakistan is frequently a bone of contention between the two countries. Afghanistan complains that Pakistan is a major obstacle to transit trade with frequent changes in rules.
- Pakistan on the other hand observed Afghan traders of blatant misuse of the ATT leading to rampant smuggling and the closure of domestic industry. In addition, the Government of Pakistan is frequently under pressure from its ‘friends’ to ease transit trade rules and also from other stakeholders who fear that Pakistan will lose its ability to manage Afghanistan if there is a reduced role for Pakistan in Afghanistan’s transit trade.
- The PBC Study in 2015 had shown that Pakistan was still the major transit route for Afghan imports – accounting for 58% of Afghanistan’s trade and that the drop in trade was more an outcome of reduced Afghan imports in 2014.
- Bilateral trade accounts for nearly half of Afghanistan’s exports being destined for Pakistan. Further bilateral trade between the two countries can grow by about $576m.
Free zones virtual
- In a free zone virtual office can mean a real shared office space, which is not occupied for the entire day. In case the investor does not require an office, the company can operate with a flexi desk or a virtual office. Free zones virtual offices are established in Pakistan and many entrepreneurs and freelancers are availing this opportunity to run their businesses without a huge amount of investment, and also we can provide 2 years residential visa to foreigners who want to invest and avail the opportunity of free zone virtual office in Pakistan in reasonable fees structure.
- We can also facilitate them by providing the option of paying fees through foreign exchange and multiple facilities. In Dubai, the concept of Free Zone Virtual Office is considered an opportunity. The concept is popular with companies of all sizes, including self-employed entrepreneurs. One of the primary allures of the virtual office is the flexibility it offers for employees and freelancers to work from a satellite office, home office, remote location, or even on the go via mobile devices.
- At the same time, a company can offer its clients and employees a stable home office with access to amenities such as a receptionist, conference room, desk space, mailboxes, printing and faxing at a permanent address, which is owned and maintained by the virtual office provider or a third party. Virtual office providers may also include digital capital such as cloud storage, web hosting, email and other web-based applications. In Jebel Ali Free Zone port, they have established many virtual offices and even built towers for the purpose of Virtual Offices.
In light of the above facts, I would like to request you restructure economic development policies so that they will benefit our country economically generating such a huge foreign exchange, creating jobs for Pakistanis and opening a new market for our traders and manufacturers to develop exports in the country.
In order to assist Pakistan in its economic development and future trade links and communication network to Central Asia and neighboring countries, it is requested that we may kindly be allowed to be able to meet the relevant minister/officials who can be explained our vision and projects in detail for the country.