Dollarisation is inevitable - President Islamabad Chamber of Commerce and Industry

We're off into fiscal '16 and the controversial proposals of the Finance Bill have now become a reality. BR Research thought it best to speak to Muzzamil Hussain Sabri, the President of Islamabad Chamber of Commerce and Industry, to find out what the mood is like. Below are edited transcripts of our brief but scintillating interview.
BR Research: What are some of the impediments to increasing the numbers of filers in the country?
Hussain Sabri: I don't know about you, but even I can't fill the FBR's form! It's that complicated. I've requested them many times to simplify it, like a bank's slip. I've also said to translate it into Urdu. They need to see who the majority of the public is; go out of Islamabad, go towards Rawat even. Will you find anyone educated enough to fill this form?
In addition, the common man perceives the cost of filing as greater than the benefit. Who will file in such an instance? You need to facilitate the tax payer.
BRR: With regards to the budget, what are some of the new measures that may be perceived as damaging?
HS: The 0.06 percent tax on bank transaction is a major one. All the chambers are dissatisfied with this policy. It's been implemented for the purpose of turning non-filers into filers. But instead, it will only turn white money into black.
There will be a capital outflow from banks into lockers. Cash transactions are going to be on the rise. Bank commissions that the government also received will now end. And it's happening; we've seen the market. Why is the dollar rising? It has been still at Rs101 for so long; why is it now at Rs103? The public has started buying dollars. Money is leaving the market.
I don't understand why we're relying on such taxation measures. We should focus on the economy. Look how many refunds are lying with the government - Rs200 billion. They say they'll pay till August, but they've made such commitments before. If this money enters the market, imagine how much benefit it would have.
BRR: Didn't the Chamber have any role in the advocacy for or against such tax reforms?
HS: All chambers of Pakistan were on the FBR's Tax Advisory Committee. But the tax review took place just three days prior to the budget.
For the past two to three months, we had meetings regularly on cotton, exports, imports, and a lot of different economic angles. We wanted tax on imports to be raised slightly by say 1-2 percent, so that the local industry would not be disturbed. My point is we were doing a lot. But a lot of things, such as the 0.6 percent tax on bank transactions, these were never even mentioned to us.
BRR: What have these policies done to the overall business environment?
HS: Go to South Africa, go to Dubai, you'll see Pakistani industry there. Why has everyone left over the past year? The basic reason is all these notices. Who feels uncomfortable in their own home? Imagine the problems that a person is facing here on his own soil that he has to pack up his home and go abroad.
One very good measure taken in the budget, however, was for KPK - the free tax zone for five years. But they should do that for other cities as well. The point is to attract investment. And if you do this, industry is going to expand.
BRR: But they've done this before. Recall the amnesty scheme. But nothing happened. In fact, FDI also fell.
HS: We were already mired in terrorism. Then there's loadshedding; the government promised to end it in six months. It's been two years now.
A lot of people were relying on this government. It was expected to be business-oriented. People were expecting nice packages and were waiting for this government to bring relief. But they saw that there hasn't been any positive result - all the investment has been done in roadmaps. Industry infrastructure has been untouched.
Previously, delegations used to come and carry out market surveys for setting up different projects. There's a lot of potential here, always has been. Our labour, our location in central Asia is one of the best.
Now, delegations come and carry out publicity and marketing for their own countries instead. They know our industrialists and our investors are very strong. They're showing up and making offers to our investors to set up shop in their country, offering incentives. Such is the change.
A lot of industry has left for China. Especially garments; the garment industry cannot put up with the current state of affairs. Even single day's production being damaged or delayed incurs an enormous loss. So to mitigate this, a lot of our industrialists have gone to China.
BRR: How much of the Textile Policy (2014-2019) has been implemented?
HS: Nothing has been implemented yet. It's going to take time. But it should have been done a long time ago.
BRR: Are we looking at Chinese FDI inflow in textile?
HS: We're getting a lot of Chinese delegations. They're bringing their industry as part of CPEC. Our labour will be involved, job opportunities will arise, other departments will also be involved, but we want the Chinese to transfer their technology as well.
On the plus side, because of the Chinese, European delegations have started showing up as well. Some days back, there was a delegation from Italy interested in bringing back Fiat and Vespa. They wanted to survey Lahore, Faisalabad, and they also wanted to see shoe factories as well, for potential joint ventures with our leather industry in Sialkot. They were very keen about it.