BR Research recently had a chance to talk to Ibrahim Qureshi, President of the All Pakistan Business Forum. Ibrahim is also the founder and CEO of Raffles, a multinational IT company involved in assembling desktop computers and laptops among other services. His company is an Intel Premier Partner in Pakistan, Microsoft Gold Certified Partner, and he is the distributor for Apple Computers for Pakistan and Afghanistan. He did his undergraduate and postgraduate studies from the United States. We talk to him about the recent budget, performance of the present government and APBF’s advice to the next set-up. 

 Below are edited excerpts from the interview.

BR Research: What are your initial thoughts on the budget FY19?

Ibrahim Qureshi: This is a budget that they have floated out with the perception of everything being hunky-dory and everything seems to look very nice in the budget in general. We have been trying to convince the government for some time now to remove the GST and excise and federal duties on IT payments. But for five years they did not listen.

The other thing is that it isn’t even necessary that the next government will even take up this budget and whether they will be able to implement the incorporated changes. So it should have been for a shorter-time period.

It seems to be a relatively easy budget. Everything is very open-ended and there are a lot of loopholes. The most important thing that has been totally neglected in this year’s budget is repayment of our ever rising debt and other liabilities. It briefly touches upon the twin deficits and mentions that the government will make certain amount of repayments by the end of its tenure.  But ultimately if the solution is to borrow more to finance debt servicing, then that is not sustainable at all. The focus should have been on improving revenues by broadening the tax base, increasing FDI and boosting exports.

Eventually the option that they might resort to is to print more money, which will in turn cause inflationary pressure that is going to make matters worse for the next government.  The present government has not paid export rebates till now and is instead counting those as part of the foreign exchange reserves while the industry continues to suffer. Had these been cleared in a timely manner, exports would have surely risen. The alarming circular debt has also been swept under the rug and there is no mention of the way to tackle it in the budget.

BRR: Do you see this as an export friendly budget?

IQ: No, precisely because the government has come up with a short-term gap arrangement. The previous five budgets had a controlled and inward policy and have not been industry and export based. Overall, I don’t see much difference between the current budget and last few budgets when it comes to export promotion. There is a slight relief in this year’s version, but it is dependent on the upcoming government, which might not even choose to adopt these relief measures.  Lack of continuity in policies has also been a big issue for the business community and investors.

BRR: What should be the way forward for improving the export situation and improving the current account deficit?

IQ: We have to come up with our export policy based upon more than one industry. Our solution is to have four to five different segmentation of industry. Those should be prioritised according to our competitive advantage and available skillset. Then comes specific sectoral policy-making for each of these industries.

There is a need to have extensive stakeholder discussions, which have good representation from the business community. What would it take for them to increase their revenues and generate more employment and taxes?

Second, we also haven’t worked out what are the other sectors and industries that are going to become a major contributor to our GDP in the future. These should be figured out now and policies should be drafted accordingly. Export policy-making should be proactive rather than reactive.

In particular, the IT industry should be incentivised as there is a lot of potential in software and application exports. Pakistan’s IT exports can be doubled today if PayPal is authorised in Pakistan and local businesses can pay and receive money through it.  This will be a confidence building measure for other international investors as well.

BRR: What are your views on the recently announced amnesty scheme?

IQ: It is not a good step because it sends out the message that it is alright to indulge in corruption and then bring that money and get it legalised. Also, if you look at the previous two or three amnesty schemes that have been doled out, the results have been nothing. A big reason for this has to do with the fact that people don’t have trust in the government anymore.

The other gap in this amnesty scheme is that even if money is brought back into the country, there is no mechanism proposed for keeping that money in the country for a certain time period. What’s to stop people from utilizing this scheme and making their money legal only to send it outside the country again? There should have been a clause to at least keep the declared money for at least three years in Pakistan.

BRR: What is your assessment of the overall ease of doing business between over the past few years?

IQ: In the past eight years, Pakistan’s rank in the ease of doing business has fallen from 77 to 148. The problem is that in order to attract big companies and genuine international investors, the government needs to work with them on intellectual property rights (IPR) issues.  Our arbitration laws and contract enforcement are so weak that no company allows Pakistan to be the home country for dispute arbitration in contractual agreements.  These factors have not exactly made our country a destination for foreign investments right now.

However, at the same time undue facilitation and preferential treatment is being provided to the Chinese companies. If you provide this kind of facilitation to your local industry and businesses, our growth can be doubled.

BRR: How would you rate PML-N’s economic performance in the last five years?

IQ: The PML-N has not been able to come up with any substantial reforms especially at the federal level. One thing that a government needs to think about before borrowing is the sources of repayment. Even though the PML-N has crossed all records when it comes to borrowing, it has totally failed to take into account the capacity to repay all these liabilities. All development and infrastructure financing is being carried out at heavy interest rate loans, which is not a sustainable model for economic growth. The focus on improving competitiveness of the local industry and entrepreneurs has been missed altogether. This government remembered to cut the taxes when their tenure is at an end. Our policies need to long-term and the PML-N government has not been able to do that. Each budget they have presented has come up with different policies.

BRR: What would be your advice for the next government?

IQ: There are some things that should be followed. Firstly, all stakeholders should be taken on board and policies should only be drafted after a thorough dialogue has been undertaken. The policy should be at least for five years and a short-term approach should be avoided. Secondly, if the next government would like sustainable growth, it has to facilitate local industry and businesses by providing them a level-playing field. Emphasis should be placed on diversifying our exports but exploring new avenues in fields such as IT and e-commerce instead of just focusing on textile. Last but not the least, our legal system needs to be very upfront and solid. Nobody should be considered above the law and spared if found guilty.  If Pakistan has to go forward, the rule of law should be absolute.