Removal of systemic inefficiencies is essential to fix the economy and resolve the chronic problems being faced by the business community, argued business and policy elite at Pakistan Today’s Pre-Budget 2011-12 seminar titled “How to Fix the Economy.” Finance Minister Dr Hafeez Sheikh was the chief guest at the seminar while Governor State Bank of Pakistan was the guest of the honour at the event. MCB and Nishat Group chief Mian Muhammad Mansha, Silk Bank President and former Finance Minister Shaukat Tarin, JDW Group CEO Jehangir Khan Tareen, former Commerce Minister Humayun Akhtar Khan, former Finance ministers Sartaj Aziz and Dr Salman Shah, and Planning Commission Deputy Chairman Dr Nadeemul Haq participated in the seminar to chalk out a consensus over what ails the economy and what needs to be done to fix it.
Mansha pointed out that multiple gas tariffs for different suppliers were discouraging investment in this sector. “At present, 10 different tariffs of natural gas are in place, which are beneficial for a few people, mainly dealers. The government must withdraw these subsidies to ensure a level playing field in different sectors,” he said. The Nishat Group chief urged handing over loss-oriented public enterprises to the private sector, claiming that MCB and other banks that were either paying nothing or small sums in dividend to the government before privatisation, were now churning handsome dividends as well as paying billions of rupees in taxes.
Mansha also disclosed that over one billion dollars worth accumulated loss of the national airline, PIA, could be eliminated through its proper management. “I told a delegation of decision-makers from the PIA and Civil Aviation Authority that I can eliminate the losses of the national flag career, and turn it into a profitable organisation,” Mansha recounted a meeting to discuss the survival and revival of the airline. “‘What will we do if we hand over PIA to you,’ one of the participants of the delegation retorted,” he recalled, adding that this attitude was reflective of the fact that key stakeholders in PIA were not serious in making the national flag career financially viable.
Former Finance Minister Shaukat Tarin said that the government should enforce governance reforms to improve the system. He argued that without bringing reforms in governance, success in any field/area would be difficult. He also suggested that the corporate sector professionals must be absorbed in government departments and entities. Tarin said the Public Sector Enterprises (PSEs) should be handed to a holding company for their revival and privatisation, and this was the only option to get rid of the ailing PSEs. He further said that a World Bank reports claim a massive leakage of Rs800 billion tax revenues in a year in connivance with the officials of the Federal Board of Revenue.
“If we stop this leakage, we can control the fiscal deficit that is currently in the range of about Rs 1000 billion,” he said. He also pointed out that without imposing tax on agriculture sector, the implementation of the Reformed General Sales Tax would be a futile exercise. “When I was the finance minister, the fiscal deficit was at 7.6 percent while the inflation was hovering around 25 percent and it was the outcome of the wrongdoings of the Musharraf regime,” he said. “We reduced the fiscal deficit to 4.6 percent (from 7.6 percent) by implementing prudent fiscal measures,” he added. Responding to criticism of PPP government’s decision of getting loans from IMF, he said that only ADB and China gave $500 million each while none of the member of the Friends of Pakistan gave money. This left the government with no other choice but to get a bail-out package from the Fund.
At that time, monthly financial bleeding amounted to $200 million and there was no other option with the government but to approach the IMF, he said. He stressed the need to enhance the tax-to-GDP ratio with a viewpoint that Turkey and Brazil have raised it to 33 percent and 37 percent, respectively, while ours is still around 9-10 percent which is very low. “It is the time that every income should be taxed,” he floated this idea to increase tax ratio, trim fiscal imbalance and to promote development. Former Commerce Minister Humayun Akhtar Khan said the government should eliminate the energy crisis, improve governance and bring the agriculture sector into the tax-net. He said the government had diverted Rs4 trillion towards the rural economy through support price increase and commodity operations, but the agriculture sector was yet to be taxed.
“We talk about sovereignty, but we do not talk about Rs3 trillion worth money of the developed countries’ taxpayers that is given to Pakistan by the donors every year,” he said. “The money is misused and nobody talks about that money, but much hue and cry is raised for the sovereignty of the country,” he said The government should create a business friendly environment, make electricity, gas and other facilities available so as to put the economy back on track, Akhtar added. He regretted that the massive borrowings of the government were depriving the private sector of getting credit from the banks. Availability of credit for the private sector is essential for the revival and growth of the economy, industry and business, he said. Akhtar also pointed out that industrial sectors were contributing 65 percent of the tax revenues while the agriculture and services sectors were not contributing any significant tax revenue to the state kitty. The government should take difficult decisions to improve tax-base, revive economy, overcome energy crisis and to promote business and development in the country, he said.
