The SBP second quarterly review report is an eye opener for many reasons, first, being the cutting down of growth rate from 3.5 to 2.5 percent and the second being the dependence on foreign assistance. This is enough to make the point that economic indicators in the next quarter would also not be very encouraging.
It shows that we are not performing the way we are supposed to. Had we been, the projection would have been not so bad. Let me tell you frankly that we all are busy for nothing. We have failed to give results so far and the coming generations would have to pay a very heavy cost of our negligence. To my understanding there are four or five core areas where a little focused attention by those who are sitting at the helm could do miracles.
These are: supply of electricity; law and order situation; high mark-up rates; rationalisation of taxes and above all strengthening of institutions. Everybody knows that that the acute shortage of electricity has broken hell on all of us. The industrial production is going down with every passing day. A large number of industrial units have closed down while the remaining are fighting for their survival.
Exporters are unable to complete their orders and only because of the shortage of power our exports are stagnant. You would be surprised to know that the countries, including South Korea, Malaysia, Indonesia, Philippines and Thailand, collectively had lesser exports than Pakistan in the 60s. Now each of them has much bigger exports when it is compared to Pakistans. For instance South Korea has exports worth over $250 billion, Indonesia $85 billion, Malaysia $150 billion and Thailand $130 billion.
Look at Turkey, it has a population of only 70 million while its exports have crossed the $100 billion mark. I have no doubt that Pakistan, my country, is a land of opportunities. It has all the resources. It has huge fertile lands, rich mineral resources, abundant water, an excellent canal system, all four season weather and above all more than half of its population is less than the age of 25.
But in economic terms we have failed to perform and our industrial production is much lower than even Bangladesh, what to talk of other SAARC countries. Being Vice President of SAARC Chamber of Commerce and Industry, I would suggest that Pakistani businessmen should explore maximum business opportunities in regional countries as doing business in the region is cheaper than in the other parts of the world.
LAW AND ORDER SITUATION: Recent terrorist activities at Liberty Market, Lahore and Police Training Center Manawan have jolted the whole country. There is a need that the government should take immediate and concrete measures to control deteriorating law and order situation which is hurting the whole business atmosphere and even the local businessmen are reluctant to put their money in any new venture, what to talk of foreigners.
The government should expedite the intelligence network in the province besides further strengthening the police patrolling on highways. An expeditious judicial system could also contribute to a certain extent to purge the society of all such anti-social elements who are spoiling the whole atmosphere.
COMPARISON OF MARKUP RATES WITH OTHER COUNTRIES: The existing high mark-up rate was not only hitting the countrys competitiveness in the global market, but was also coming in the way of industrialisation which is a prerequisite to progress and prosperity. Keeping in view the fast increasing trade gap, the government should force the State Bank of Pakistan to announce cut in mark-up rate immediately.
The State Bank of Pakistan in consultation with all the chambers in the country, should evolve long-term policies for extending loans to the business community as it has been proven that a large number of businesses had fallen prey to ad hoc policies.
At the moment when the rate of interest was showing downward trend in most of the developed and developing countries, including US (0.25 per cent), UK (1.5 per cent), Canada (1.5 per cent), Australia (4.25 per cent), Japan (0.1 per cent), China (5.58 per cent), India (5.5 per cent)and Bangladesh (7.61 per cent), the interest rate in Pakistan has jumped to 17 to 18 per cent plus banking spread up to 8.3 per cent that is putting a very negative impact on industrial sector.
All the times, the mark-up rate is increased under the pretext of high inflation while controlling the inflation is not the job of industrialists but it is purely an assignment of State Bank of Pakistan. The country also direly needs wholesome approach to arrest fast increasing inflation as surge in inflation had not only eroded the purchasing power of middle class but was also earning a bad name for the government.
The inflation could only be controlled by enhancing productivity and by putting curbs on undue expenditures. The rationalisation of duties are the steps to bring the Large Scale Manufacturing Sector (LSM) sector out of mire. Only strong institutions could guarantee good governance but unfortunately never-ever in the past due attention was given towards strengthening of institutions.
The United States, where the economy is still on the wheels despite unprecedented economic recession and for business activity over there credit goes to a strong institutional framework. "Had their institutions been not strong enough, the American economy would have not sustained the shocks it has received." Weak institutions mean weak system and no country could achieve its targets with weak system.
(Vice President SAARC Chamber of Commerce & Industry, former President FPCCI)
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