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  • Feb 19th, 2004
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Zahid Anwar, Chairman, National Businessmen Forum (NBF) has feared that Indian goods will flood Pakistani markets at the cost of our domestic industry by taking advantage of cost of production, which has remained highest in Pakistan as compared to other South Asian countries.

Talking to newsmen, here on Wednesday, he strongly demanded that the government should convene a roundtable meeting of all segments to dispel the apprehensions of the business community, in addition to encouraging domestic industry to compete with the developed Indian industry.

He said that the Safta agreement comes into force on 1.1.2006. India, Pakistan and Sri Lanka have the status of non-least developed countries, on the other hand Bangladesh, Nepal, Maldives and Bhutan are categorised as least developed countries (LDCs).

In the first phase non-LDCs have to reduce their existing tariffs to 20 percent within 2 years starting from 1.1.2006. LDCs have to reduce to only 30 percent, he added.

Zahid Anwar, said that the second phase in reduction of tariffs starts from year 3. This phase spreads over 5 years from year 3 to year 7, the tariffs have to be reduced in equal instalments, from 20 percent to zero to five 5 percent.

After this treaty comes into force w.e.f 1.1.2006 trade between Saarc countries, especially between India and Pakistan will increase.

It is a general feeling that Indian goods will flood our market and affect our industry adversely, he added.

He mentioned that it was a fact that the cost of production in India was cheaper than in Pakistan, therefore industrialists of Pakistan were handicapped and they feel threat of closure.

The big question is whether we are ready to face tough competition? he quipped.

Similarly under WTO regime, abolishing of quota system starts from 1.1.2005. This gives a chance to the Pakistani industry to work at their full capacity to increase their exports.

Our industry has to work efficiently to meet increased supply demands on one hand, an on the other, it has to reduce cost of production to meet competition, he added.

In Pakistan, he said that the cost of production is much higher especially when compared with India. Main component of the cost of production is the cost of energy and power. Electricity in our country is expensive. We will have to put in a lot of efforts to reduce the cost of this component of the cost of production.

He said that the industrialists will have to help themselves and the government will have to help industrialists. In early 1990's the government allowed independent power plants to be set up, not for cheap electricity but for smooth supply of electricity.


Now the government has to help in producing cheap electricity. In this regard industrialists are now shifting to gas fired generators to produce electricity. Government can help us by quickly supplying the gas connections, by reducing the import duty on gas generators from presently 5 percent to zero percent and by not charging sales tax at import stage on gas generators, as this involves blocking of funds for a considerable time, until the refund claim is finalised.

Chairman NBF proposed that Pakistani government, businessmen and industrialists must also analyse deeply the repercussions of free trade and motives of India behind this sudden and strong push towards free trade, besides looking at simple benefits of getting cheaper machinery, raw materials and some share of the Indian market.

Zahid Anwar, Chairman NBF said that the "Business Competition" is an unfriendly business and it should be anticipated that once it gets its foot in the door, Indian industry could initially, in order to capture the market share in Pakistan, resort to dumping measures.

Indian industrial conglomerates are giant- footed and, may be with government assistance at their back, could permanently cripple the weak-kneed Pakistani industry. In Safta agreement there are no anti-dumping regulations, which is alarming from our point of view, he added.

He said that the multinational companies, who are the highest revenue generating source in the country, could relocate their manufacturing units from Pakistan to India for obvious reasons of logistics, production efficiencies and market dynamics.

Taking advantage of free trade, they could then channel their products through their strong selling network into Pakistani markets.

Such trans-border manufacturing methodology has already reaped immense benefits for the multinational companies in Europe, the Americas and South East Asia.

There is no reason that this will not happen in South Asia. Measures should be adopted to avoid this flight of capital from the country, he demanded.

Talking about the problems confronting the industrial sector, he said that the industries are discouraged to borrow from banks and invest in new projects because of the Financial Institutions (Recovery of Finances) Ordinance 2001.

This ordinance is inequitable, one sided and is very clearly tilted in favour of the banks/DFIs.

It gives no protection to the borrower from any wrong doings or breach of agreement of the lender.

Section 15 of the Ordinance has given wide ranging powers to the banks and financial institutions.

Sub Section (2) of this section states that in case of default by a customer, the financial institution may sell the mortgaged properties or dispose off same through public auction without even referring to a banking court.

Now it is not a secret as to how the banks will exercise this discretion of theirs, against the borrowers.

Irony of the situation is that the whole Ordinance is silent about a situation where there could be a dispute of accounts between the parties; how the mortgaged property could be auctioned by the financial institution without determination of liability by the judicial authority and who will judge the actual liability without filing of a suit?

Anomalies like this should be removed for the benefit of industry and promoting equality, he added.

He said that we couldn't afford bureaucratic delays and obstacles in our march towards higher productivity and achieving better efficiencies.

In the wake of Safta and WTO agreements, time for us to improve our production capacity and quality is short. A lot of valuable time of industrialists and businessmen is wasted by the hurdles created by our bureaucratic machinery.

He demanded special efforts to remove or at least decrease the hurdles created by bureaucracy, especially in cases involving sales tax, income tax, customs etc.

Presently, Zahid Anwar said that about twenty agencies are conducting investigations.

Industrialists feel as if they have committed a crime by setting up the industry they are operating. There are investigations after investigations and audit after audit; 90 percent of their total valuable time is wasted in fighting out these investigations.

If we are constantly fighting within, how can we fight and compete with the outside world, he added.

He mentioned that the government agencies, institutions and departments, which manufacturing agencies have to confront, include the department of income tax, sales tax, social security, EOBI, Education Cess, Cotton Cess, Environmental agencies, SECP, Stock Exchanges, Statistical Departments, Property tax etc.

Zahid Anwar strongly demanded that the role of external financial auditors be widened.

They should conduct audit on matters like income tax, sales tax, social security, EOBI, Education Eess, Cotton Cess, government duties etc and mention expressly in their audit report that they have conducted audit in these areas and in their opinion every thing is satisfactory or otherwise and that the amounts paid or shown as payable to the concerned departments are correct. It is felt that this way a lot of time and bother will be saved.

He mentioned that in England income tax and other government departments accept the accounts audited by external financial auditors.

He further said that the "Delivery of Justice" is very slow. Industrialists knock at the door of court seeking justice on points involving disputes of commercial nature. Delay in court's decision means blocking of much needed cash flow and wastage of valuable time.

It is provided in the constitution of Pakistan that decision of a case should be given in six months. Based on this, courts grant stay eg for recovery of the disputed amount, for six months.

However the ground situation is that cases are not decided in six months and the stay expires. Plaintiffs thus have to make unjustified payments for matters which are still pending in the court.

It is requested that this anomaly should be removed. If the cases cannot be decided within six months then at least the period of 'stay' should be increased to a reasonable time.

After the incident of September 11 and Afghan War, he said that a negative image of Pakistan has been propagated in USA and Europe as if we are supporting the terrorists.

This image has to be corrected, he concluded.

Copyright Business Recorder, 2004


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