By Maria Khalid
“I am from a business family based in Karachi since 1920. We migrated here from Gujrat in India. The conventional business of our family is real estate; afterwards we embarked on different businesses like automobile and movies. I was a commercial pilot but I had to finish my flying career since my father was under the weather and I started looking after our family business. I was also the President of the Lasbela Chamber of Commerce and Industry in Lasbela, Balochistan. Later, I met Mohtarama Benazir Bhutto in the year 2002 when she was in exile. She was interested in bringing new people to the party so she insisted me to join, thus I worked with her. When she came back, the ideal place they thought for me was Board of Investment (BOI)”, Saleem Mandviwalla.
E.A.What are the factors that hamper investment flows into Pakistan?
Terrorism, domestic law and order situation and global slowdown are the factors that have some bearing on the investment inflows to Pakistan in recent years. However in particular, it is the untoward system and bureaucratic hurdles that almost dampen the spirits of foreigners when they intend to invest in Pakistan.
Shockingly, our local businessmen resist to foreign investors. They do not even cooperative in initiating joint ventures with foreign investors and create obstacles by collaborating with local bureaucratic officials. It is because the local businesses are enjoying liberty for making cartels and lobbies, unjust profiteering and of tax evasion, and they feel foreign investors are a threat to their traditional market practices of making more profits by investing less. Our domestic investors don’t want new players in the market who abide by laws, fulfill their social responsibilities and care for their consumers.
Even though, I brought big companies like Yamaha, Japan and Lotte (South Korea) into Pakistan. In fact investment from South Korea the success story of BOI. Yamaha, Japan is intent on installing Asia’s largest motorcycle manufacturing plant in Hyderabad. It plans to investment 300 million dollars on the said project. Awkwardly, local producers of motorcycles made an alliance against them. Three years have passed and yet Yamaha Japan has not been able to initiate work on manufacturing plant because of invisible hurdles. Similarly, when the South Korean company Lotte started operations in Pakistan, the whole textile industry got united against it, however, now Lotte Pakistan is running its business successfully. Thus, mostly there are individual driven problems instead of institutional hurdles.
TCC is the worst example of discouraging investments. It was just an issue of ego of former CM Baluchistan, and nothing else. The TCC case has damaged the investment profile of this country and we will have to pay the price, because we would never win the case in the International Court of Arbitration, which the TCC has filed against Pakistan and we will have to pay for their losses in recompense.
E.A. What investment opportunities do you see in Pakistan?
Our biggest sector and opportunity is the agriculture sector. I think it is still unexplored or it has not been really looked at by the real investors who are in the agriculture business. It is a vast area with a number of fields and businesses which can attract massive investment. If we take the example of milk, Pakistan is the 4th largest producer of milk and 80% of our milk is still sold loose. So it means all of this 80% requires investment. Similarly we need huge investment in storage and warehousing. We still store our raw materials in open storages places. These days it is stored in silos around the world which maintains a certain temperature and moisture for every product. We also need investments in exploration, mining and energy. We have no alternate energy in Pakistan which is again an investment opportunity.
E.A. How was your experience as the finance minister?
I never thought of becoming a finance minister. My only dream was to become a senator and to do some legislative work in the upper house. It was not my wish but I am grateful to the PPP leadership that they chose me for such a momentous responsibility.
When I held office of the finance minister, I was surprised to learn that there were about 300 of routine files that were pending for the signatures of the finance minister. I cleared all of them in my short span at the finance ministry. It is misfortunate that PPP doesn’t have any suitable person in its senior leadership to be appointed as finance minister. Mr. Shaukat Tareen and Mr. Hafeez Shaikh were outsiders and not aware of party’s aptitude and political commitments.
What I observed is that Mr. Hafeez Shaikh was running his own government that was distinct to that run by the prime minister. He had set his own priorities and was making his own decisions and the finance minister was not functioning in accordance with the vision of the prime minister and that was the reason PPP had to face criticism on various issues.
Now, PML N has made Ishaq Dar its finance minister and I think it’s a good choice because he belongs to the party and is aware of his party’s vision, therefore running the affairs accordingly.
E.A. Why is there a sudden rise in value of US dollar?
It’s all artificial, just a move to make money by hoarding it first and then selling it at higher rate. When I was the finance minister, I gave this statement outside parliament that dollar should be for 90 PKR and I came to know that the exchange companies were holding over 2billion dollars in cash, whereas one currency exchange company alone was holding 500 million dollars. That was a move by currency companies to earn profits by devaluing rupee. Similarly, there is no pressure on rupee, there is no shortage of dollar in the country, after signing of loan agreement with IMF, there are no reasons for hike in dollar price. I know, it’s all preplanned and a move to artificially raise dollar up to 110 rupee and that’s when the hoarders will start selling.
E.A.What is the difference between the PPP agreement with the IMF that of PML N?
Pakistan People Party did not agree to those IMF conditions for which PML N has agreed for extended loan facility e.g. increase in sales tax, hike in power tariff and removal of subsidies. We paid price for not accepting the hard conditions as the IMF discontinued the loan program and made it tough for the PPP government to manage financial affairs. Once the loan program was suspended, PPP wouldn’t return to IM F and focus of revenue generation was the local resources. The PPP had even introduced a bill in the parliament to expend the tax net. We proposed in the bill that the Federal Board of Revenue shall be allowed to impose first time tax of Rs.50, 000 each on three million tax evaders, for which a list has been prepared already. However, the PML N opposed introduction [wouldn’t it be implementation?] of the bill.
There are alternative options for the government to generate revenue e.g. tax expansion, auctioning of 3G licenses, recovery of 800 million dollars from the Eatisalat and privatization of loss making entities.
E.A. Now, the N League’s government has been installed. How would you judge their performance?
I am glad about PML-N coming in power but they have come with a huge list of promises like bringing prosperity, business and energy. Delivering those promises wouldn’t be easy and the hopes of nation are high now. My concern is that they will not be able to deliver and thus will lose their credibility. Media is vigilant and they have started counting 90 days, as promised by N league, to judge the performance of this new government.
E.A. You, as Chairman BOI chalked out an ambitious scheme to establish Special Economic Zones (SEZs) across the country and you have accomplished the task. How do you feel about that?
Typically, a SEZ is a geographical region that has more liberal economic laws than a country’s typical economic laws and regulations. We at BOI undertook a benchmarking study of the best practices in SEZs in regional countries like China, India, Thailand, Malaysia, Egypt, Vietnam, Jordon and UAE to develop policy framework for SEZs in Pakistan.
It was my brain child and I am glad that the SEZs have been established and facilities have been provided to investors. Now it is the job of current government to continue to facilitate investors in manufacturing units and factories in these special economic zones.
E.A. What is the progress on the Pak-US investment treaty?
Well, talks on Bilateral Investment Treaty (BIT) with America have been completed and now it is the decision of the government to sign the treaty.
The BIT with US will not only help in multiplying investments and exports of Pakistan, but also lead towards signing of a Free Trade Agreement (FTA) with the US. The BIT is a commitment to reciprocally promote and protect investment, thereby Pakistani investment in US will also get the reciprocity under international laws. The signing of BIT will lead towards FTA between the two countries, resulting in market access with increased exports to US markets and more investment from the US. Here I would like to make it clear that the civil nuclear technology exchange and arms trade are on the restricted list of BIT.
Ends
Pakistan Rupee Exchange Rate