The Lahore Chamber of Commerce & Industry on Tuesday informed President Dr. Arif Alvi that fast galloping inflation and high dollar rate are hard hitting all segments of economy therefore it is essential to overcome these challenges to give relief to the businessmen.
LCCI President Mian Nauman Kabir, who was heading a delegation, gave various suggestions to get rid of the issues being faced by the trade, industry and economy during a meeting with the President Dr Arif Alvi at Presidents House.
LCCI Senior Vice President Mian Rehman Aziz Chan, Vice President Haris Ateeq also spoke on the occasion while Executive Committee Members were also part of the delegation.
President of Pakistan Dr Arif Alvi said that the Government is committed to provide a competitive and fair business environment to entrepreneurs and has taken a number of steps in this regard.
Dr Arif Alvi said that despite the limited resources, the Government has provided maximum relief to the business community and vulnerable segments of society during the Covid-19 pandemic.
He urged LCCI to play its role in encouraging businessmen to pay their taxes so as to reduce the budget deficit and allocate more funds for development works.
While highlighting the issues, hampering the economic growth, LCCI President Mian Nauman Kabir said that the devaluation of more than 10 per cent has taken place since the beginning of this financial year (July 2021). Since Pakistani industry relies on imports of raw materials, components and machinery, therefore, this devaluation has resulted in exorbitant increase in the cost of production.
He recommended that the government should curtail imports of non-essential and luxury items and use state bank interventions to control exchange rate. The Government should work on currency swap with China since our imports from China are well above 13 Billion Dollars and focus on a concrete strategy of import substitution and enhancing exports.
The LCCI President said that the issue of rising inflation needs attention of the government. The inflation rate for the month of October stood at more than 9%. The persistent rise in inflation has increased the cost of doing business/production. He said that the main reasons for the increase in inflation are exchange rate depreciation, increase in global crude oil price, over reliance on imported commodities/raw materials/machinery/Oil and the increase in electricity tariff.
Nauman Kabir said that to control inflation, the Government should increase the energy production through renewable sources to decrease reliance on imported Oil. An increased reliance on public transport through a proper policy framework would also help in curtailing the oil imports. At the same time, the provincial governments should be urged to strengthen their price control mechanism to control food inflation. Strict and indiscriminate actions should be taken against all those involved in illegal profiteering and hoarding.
The LCCI President said that the issue of a steep rise in trade deficit needs urgent attention of the Government. In the first four months of the current financial year (July-October 2021), the trade deficit stood at more than 15 Billion Dollars – that is 105% higher as compared to the trade deficit in the same period last year. This recent increase in trade deficit has played a strong part in the devaluation of Pak rupee.
He added that Pakistan’s export products are heavily concentrated in a few products lines as textiles, rice and leather account for almost 70% of our exports. There is a need to diversify our exports, especially focusing on potential sectors like Pharmaceuticals, Engineering Industry and Halal Food etc.
He said that these potential export sectors of the economy should be completely zero rated so that their export competitiveness can be increased. He said that there is a need of collective actions for exploring new export markets as about 65% of the Pakistan’s exports go to just 10 countries. For enhancing our exports to untapped potential markets like Africa, Russia and Central Asia etc., the formal Banking Channels should be established on priority basis.
Nauman Kabir said that Pakistan has been neglecting regional trade for a long time. According to the statistics by the State Bank of Pakistan, our exports to South Central Asia (Afghanistan, Bangladesh, India, Iran, Sri Lanka etc.) were 1.99 Billion Dollars in 2020-21, that were merely around 8% of our total exports.
There needs to be a separate policy for promoting regional trade.
He said that the decision to increase the policy rate by 150 basis points that has taken the policy rate to 8.75%, would have dire consequences on economic growth rate. It will surely hinder the process of Industrialization and private sector growth. Pakistan should bring its interest rate at par with the regional rates which are much lower (India 4%, Bangladesh 4.75%, China 3.85%, and Sri Lanka 5%).
Mian Nauman Kabir said that the Federal Board of Revenue has allowed its officers to forcefully recover taxes from the bank accounts of taxpayers without seeking approval of Chairman FBR and intimation to the CEO/owner of the company. He said that actions like bank attachment would prove to be a big hindrance in the creation of business friendly atmosphere in the country and result in creating undue harassment. He recommended that such discretionary powers should be withdrawn.
He further stated that the credit available to the private sector in Pakistan is only 17% of GDP, the lowest in the region. SMEs only get 6% of private sector credit while the number of SME borrowers is just around 163,000.
He said that in the recently approved SME Policy 2021, Government has planned the provision of collateral-free loans of up to Rs 10 million for the SMEs. He hoped that Government would ensure full implementation of this initiative.
The LCCI President said that the Government has reduced import duties on many raw materials lines in the last couple of years and also in this Budget.
We hope that this process would continue and all remaining raw materials which are not manufactured locally would be declared zero rated through the elimination of Regulatory and Customs Duties.
He hoped that ample consideration will be given to the economic issues in the light of LCCI’s recommendations for the earliest resolution.