The president of the Karachi Chamber of Commerce and Industry, Shamim Ahmed Firpo, has urged the federal finance minister and the governor of the State Bank to review the entire situation and immediately withdraw the unjust decision to impose a 100 percent cash margin on import of numerous consumer items, saying this would provide relief to perturbed traders and go in favour of the masses.
Slamming the State Bank's decision to impose the 100 percent cash margin on import of a number of consumer items, he said that this move was likely to promote smuggling and inflate prices of many items, thereby intensifying the hardships not only of the traders concerned but also for the general public.
The KCCI president noted that the requirement of a 100 percent cash margin has been prescribed on items such as motor vehicles, mobile phones, jewellery, cosmetics, personal care, electrical and home appliances. Except for a few items in which the 100 percent cash margin has been imposed, most items are used in almost every household across Pakistan, he said. Therefore, the State Bank's claim that impact would be nominal on the general public was "completely baseless," he added.
He said that the relevant importers and suppliers were forecasting a 60 percent drop in imports of these items which would obviously result in creating severe shortages and trigger inflation, having a deep impact on the public. Shamim Firpo pointed out in particularly the fact that the 100 percent cash margin requirement on import of mobile phones would adversely affect mobile phone importers who have invested heavily in this industry and have contributed billions of rupees to the national exchequer for many years.
He said that with the same level of investment, the business would shrink by 60 percent and if the same rate of return on equity was maintained, the price will inflate significantly, whereas those who are working with banks on different financing arrangements, such as Finance Against Imported Merchandise (FIM), Murabaha and Running Finance. will not be able to do business at the same scale after this regulation.
This regulation will give ample opportunity to the parallel economy to flourish and reduce the government's revenue as no rational businessman would double the investment in mobile phone industry which has a history of a fluctuating duty structure and inconsistent import policy, he added.
He said that some major importers with substantial liquidity available with them will stay afloat, whereas the majority of small importers whose businesses were operating purely on the basis of credit, will be completely wiped out of the scenario.
The KCCI president pointed out that although the State Bank claims to bridge an alarmingly high trade deficit through this move, by devising such discouraging and anti-business steps, the government should seriously focus on devising an effective strategy on a war-footing basis to deal with Pakistan's depleting exports.
It seem that the government has remained totally unsuccessful in all its attempt to improve the descending exports, and therefore it had no other option but to block the imports in order to deal with the widening trade deficit and save foreign reserves to clear the country huge debts, Shamim Firpo said. Instead of taking steps to reduce the cost of doing business which was the only way to improve Pakistan's competitiveness and enhance exports share in foreign markets around the world, he added, the government decided to penalise importers, which was not the right solution and must be condemned.
He said he hoped that the decision-makers would pay attention to this serious issue, hold consultations with stakeholders prior to the implementation of decisions which directly affect trade and industry and take those steps which are in favour of the economy, businesses and the masses.
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