‘Charter of Economy’ need of hour: LCCI chief
LAHORE – Critical economic state-of-affairs demands a collective and instrumental approach from the political parties as the ongoing political scenario is pushing the economic affairs towards no point of return.
These views were expressed by President of Lahore Chamber of Commerce & Industry Mian Nauman Kabir while speaking at a seminar on economic affairs which was also addressed by the representatives of business community, economists, government officials and experts from various sectors. The LCCI president said that we have to succeed in formulating a comprehensive strategy on the problems facing our economy and their possible solutions. He said that Pakistan is currently facing severe economic challenges. He said that the foreign exchange reserves held by the State Bank of Pakistan have now reached ten billion dollars and our country is on the verge of bankruptcy. We have to improve these economic conditions as soon as possible.
Mian Nauman Kabir said that the rupee depreciating against the dollar, inflation (which reached 13.4% in April), low tax collections, trade deficit (which has reached 39 billion in just ten months of this year), rising internal and external debt repayments are some of the major reasons of economic meltdown. He said that one of the main reasons for these economic difficulties is the extreme lack of consistency in economic policies in the country. As soon as a new government comes, the existing economic policies are scrapped. He said that local investors and businessmen are facing uncertainty and foreign investors are also not interested which is a matter of concern. That is why, in the first 9 months of the current financial year, our net FDI is limited to only 1.3 billion USD.
Mian Nauman Kabir said that in this scenario, it is very important for the country to have a unified Charter of Economy by the political parties in order to ensure continuity in economic policies despite the change of government.
He added that it has become very important to increase the share of value added and IT exports. He said that the country needs to focus on import substitution to reduce the trade deficit. He said that we need to upgrade our manufacturing sector. African countries and Central Asian states have immense potential to increase exports but our exporters are reluctant to do trade in these markets due to lack of banking channels. He said that the State Bank of Pakistan can play a key role in this regard.
The LCCI president said that the dynamics of each sector are different, so it is important to formulate sector-specific policies in consultation with the stakeholders so that we can increase the potential sectors of our economy such as engineering, pharmaceuticals and halal food exports. He said that Pakistan’s tax-to-GDP ratio is 10% which is very low in principle which should be at least 20%. He said that immediate tax reforms are needed to increase the tax base, which is limited to 3 million, and achieve the desired tax targets through direct taxes instead of Indirect Taxes. He said that the collection does not happen at all or at low rates, they should also be made part of the tax net so that they also make tax payments as per GDP contribution.
“We also need to improve our tariff policy”, Mian Nauman Kabir said and added that the government should abolish duty on all raw materials which are not available in Pakistan. Similarly, import of luxury items especially 1800 CC and above Luxury Cars through tariff measures must be restricted.
Mian Nauman Kabir said that the reduction in production cost should also be an important part of the Charter of Economy. Energy cost in Pakistan is very high due to which our goods are unable to compete in foreign markets. Reducing electricity and gas tariffs has become essential to improve export competitiveness. At the same time, we need to pay special attention to renewable energy and energy conservation.
He said that one of the main reasons for the low growth rate of our economy is the backwardness of the agricultural sector which is 19% of our economy. The development of corporate farming and agro based industry will not only increase agricultural production in the country but also create new employment opportunities and attract foreign investors.
He said that the number of small and medium enterprises in Pakistan is more than 5.2 million while their share in GDP is about 40%, but their potential has not been fully utilized yet. The share of SMEs in private sector financing could not exceed 6.5%. The contribution of SMEs in our total exports is still limited to 25%. These figures are evidence that much work needs to be done in this regard.