- Strategic reforms help country propel towards growth and prosperity
- Six priorities that could extricate Pakistan from the quagmire of despondency, disaster and depression
Interview with Mr. Majyd Aziz — a renowned businessman
PAGE: Please tell us something about yourself?
Majyd Aziz:Â I am Former President of Karachi Chamber of Commerce and Industry, Employers’ Federation of Pakistan, South Asian Forum of Employers, (UN) Global Compact Network Pakistan, and Former Chairman of SITE Association of Industry. I am Former Member of Board of Directors of the government-owned Zarai Taraqiati Bank Limited and Former Chairman of the government-owned SME Bank Limited. I am President of our family-owned business group.
PAGE : How would you comment on Federal Budget 2024-25?
Majyd Aziz: The ritual of preparing and presenting Federal Budget proposals begins in the Chambers, Trade Associations, Service Providers, as well as Professionals, months before the B-Day in Parliament. Year in and year out, the tradition continues, culminating in the proposals being presented to the Minister of Finance. At the same time, expensive coloured advertisements in the newspapers ‘APPEAL’ to the decision makers to save their sector from impending disaster. Business leaders and professionals make it a point to do intensive lobbying in Islamabad, incurring millions in airfare, hotels, food, and transportations.
The Budget should focus on six priorities that could extricate Pakistan from the quagmire of despondency, disaster, and depression. These are economy, economy, economy, exports, employment, and education. Unfortunately, these have never been seriously handled by successive governments. Pakistan has an ever-growing population that has nearly crossed 250 million while the country is perennially faced with low exports, high imports, low foreign exchange reserves, and high inflation. Political governments have lop-sided priorities, primarily focusing on white elephant projects, political employment, and wasteful expenditure. These are financed through extensive borrowings from banks, international development financing institutions, as well as soliciting aid and funding from friendly countries. Hence, back-breaking debt servicing impacts negatively on the development of the nation as well as on providing quality of life for the populace.
The Federal Budget 2024 would endeavour to bring about financial reforms and improvement in the economy, but if the direction is to zoom in on the revenue targets, then it may not be achievable if sectors are excluded from the tax net and if vested interests prevent the government from collecting revenue from them. Notwithstanding the fact that the last couple of months have shown a decline in inflation, increase in exports and remittances, and growth in tax revenue, the fact is that trekking to the top of the summit still requires a vision that is sustainable.
The first and foremost item on the agenda is political instability is not being seriously addressed by the political parties despite gradual improvement in the key economic indicators. The ruling political parties should have taken the first step in diffusing the situation through a meaningful dialogue with the Opposition to formalise a formidable strategy to focus on the economy. Pakistan is said to be a democracy, which means all people are equal, so tax must be applied equally and equitably, to all its citizens, not as at present where a ‘special cadre’ is above everyone else.
The second item should be to investigate and understand the issues faced by industries and to determine why most of these industries are retrenching workers and closing down their units. If APTMA (All Pakistan Textile Mills Association) moans the fact that half of the textile mills have shut their gates, then there must be some truth in it or if half of weaving mills in Karachi are not working then there must be some truth in it. Unemployment or lack of employment opportunities are dangerous for society as these can lead to an unmanageable law and order situation.
The third item should be to get rid of state-owned enterprises that are hemorrhaging the financial reserves of the country. The newly coined term “Strategic SOEs” reflects the convoluted mindset of those who want to milk these holy cows for their personal benefits. These SOEs provide unneeded jobs for political appointees, are a golden goose for bureaucracy as well as management of these units, and a source of power, perks, and privileges for the workers and staff working in these units. Every incoming government announces the privatisation process but the whole façade begins with PIA and ends with PIA. Result: no privatisation.
The fourth item is education spending has not increased in Pakistan on an inflation adjusted basis. In fact, it has decreased from 2.1 per cent of GDP in FY18 to 1.3 per cent of GDP in FY22. Every one-year increase in the average education level of a nation adds 13 per cent to its GDP. So, if average education level in Pakistan were 6.6 years as instead of 4.5 years, Pakistan’s GDP would have been about $475 billion plus instead of $375 billion at present.
The fifth item is that focus should be on low-cost housing, regional trade, and SMEs to jump start the economy and provide large scale employment. Affordable basic food commodities through strict monitoring, reduction of duties, taxes, and levies for textile weaving industry, and low-cost housing through waivers of sales tax, excise duty, and surcharges on products such as steel, cement, and ceramic items, etc, altogether are the recipe for the fast-track solution to ROTI, KAPRA, MAKAAN.
The sixth item is cheaper modes of financing, both for capital investment as well as working capital. Operating under 24-25 per cent markup rates in this suffocating business ecosystem is unsustainable. At the same time, it is essential that the government gets serious in increasing the tax base, rather than taxing the taxed who would find ways round it, if taxes become unbearable. Taxpayers are now fed up paying, complaining, and watching nontax filers getting away with it.
To summarise, there are sixteen suggestions for improving the economy:
1. Immediate embargo on new hiring in all government, quasi government, and semi-government entities.
2. Immediate reduction in number of government employees by 05% in first phase and then by 05% every quarter.
3. Immediate withdrawal of sovereign guarantees given on behalf of state-owned enterprises.
4. Immediate embargo on procurement of vehicles till further orders.
5. Immediate closure of those state-owned enterprises that have been regularly losing money by paying off employees, and selling assets to pay off liabilities
6. Revisit GST regime by fixing GST rate at 05% Non-refundable.
7. Mandatory tax registration of everyone doing any business with the proviso that their place of business would be sealed on non-compliance.
8. ABAD members must include the actual total cost of the residential and commercial unit in advertisements and payments to be made from the bank accounts of buyers.
9. Maximum income tax rate should be 20% for individuals and companies.
10. Agriculture Tax should be under Federal government so that there is better and correct collection.
11. Immediate installation of solar panels on all government buildings.
12. Immediate embargo on non-essential foreign trips by government officials, Judiciary, Armed Forces and politicians.
13. Formation of Oversight Committees consisting of private sector representation for all major government projects.
14. Maximum reduction in number of vehicles and personnel for protocol purposes and entourage.
15. Maximum reduction in issuance of self-promotional advertisements in media.
16. All efforts be made to balance the budget, thus reducing the need for bank loans, and paying heavy interest charges.
The Federal Budget 2024 must be visionary and practical and not give the impression of being draconian and disrupting the rules of the game. The options are limited to get out of the economic quagmire. A positive outlook is crucial for all, especially the private sector. However, as the poet remarked: “Yaqeen mano ke jib tak ye nizam-e-zar nan badlay ga / Bhayanak muflisi ki raat ka manzar na badlay ga.”