Karachi not particularly amused by budget announcement

As expected the democratically-elected PPP-led coalition government’s fifth consecutive fiscal plan for Financial Year 2012-13 dismayed the traders, industrialists and the businessmen in this commercial capital of the country. The stock brokers and analysts, however, seemed positive about the new budget saying its impact on the bourses would range from “neutral to positive”. Most critical were the small traders of this violence metropolis who termed the budget as “traditional and political” in nature.
The industrialists also condemned the federal government’s decision to impose an infrastructure tax on the already ailing industries saying the move would increase the cost of doing business in the country. Sensing, perhaps, such feelings some analysts and businessmen claimed the government would find it hard to achieve its ambitious budgetary targets for FY13.
“The budget is not as per expectations,” said Mian Abrar Ahmed, President Karachi Chamber of Commerce and Industry (KCCI). Dubbing the budget targets as “unrealistic”, the trader said some new taxes in the budget were unexpected.
Seeing some “indirect” benefits of the budget incentives, the KCCI chief doubted that the allocated Rs 183 billion were enough to plug the huge 4000MW energy shortfall. “The post-budget wave would be the final thing to be seen,” he remarked.
In a joint statement, Chief Patron Korangi Association of Trade and Industry, S M Muneer, Chairman Ehtesham Uddin, President, All Karachi Industrial Alliance, Mian Zahid Hussain, Vice Chairmen, Hasham A Razzak, Tariq Malik and Chairman Media Standing Committee on Press and Media, Syed Johar Ali Qandhari condemned the new budget that lacked any incentives for the industry. Instead, they said, the document overburdened the industrialists with the imposition of infrastructure tax on CNG and natural gas that would bring another wave of spiral in the cost of doing business. “No commitment has been fulfilled,” the industrialists said.
They said the export sector had not received any incentive, something that would render the country’s exports uncompetitive. The industrialists were not sure without levying the long-awaited agri tax the government would be able to meet its revenue targets. Chairman All Karachi Tajir Ittehad (AKTI) Atiq Mir termed the budget as “traditional and political” saying the proposed fiscal plan had nothing to offer to the small traders and business who were worst hit by a poor law and order situation, specially in this violence-hit metropolis.
“The budget offers no remedy for the problems of SMEs which are suffering from a poor law and order, load-shedding etc.,” said chief of the AKTI, the representative body of over 300 market associations.
Advisor to Sindh Chief Minister Zubair Motiwala said the 10-minute budget speech was not enough there were things that were hidden in the budget documents. “We have to focus the Afro-American and European countries which are very important for Pakistani exporters,” he added. The government should provide more relief to the exporters like our competing countries like India, Bangladesh, Vietnam and Sri Lanka who have give special incentives to the industry that has significantly reduced the coast of doing business in those countries. “The government included the KCCI’s proposals in the budget; which is a good sign for business community,” Motiwala said.
Terming the energy crises a big issue for the country’s trade and industry, the advisor said the government should take immediate measures to resolve the crises as without energy the export targets could not be achieved. Calling for the curtailment of government’s current expenditures, Chairman Businessmen Group BMG Siraj Qasi Teli said the government in the new budget announced a lot of things that were not practicable given the present state of country’s economy. “In few months they would come up with a mini budget,” he viewed.
Unsatisfied with the reduction of GST to 16 percent, Teli said the government should further bring down the tax rate. “We need two or three-day time for analyzing the new budget as this budget speech was incomplete,” the businessman said.
Acting President KCCI Younus Bashir said in current fiscal year the country’s exports shrank to $ 24 billion from the targeted $ 25 billion which was not a good sign for the trade and industry.
Demanding the government of incentives on the utilities front, the trader said local industry was breathing hard under acute energy shortages like that of electricity, gas and water. He also called for the government’s action to curb its huge bank borrowings that he said was leaving little or no cash with the banks for the growth-oriented private borrowers.
Former President KCCI Anjum Nisar commented that there was nothing in the budget for this metropolis. Government announced the packages and subsidies for the industry. Nisar was also concerned about the energy crises that he quoted the federal finance minister as saying that had cut the country’s GDP growth by two percent. In 2004, the foreign investment ratio in Pakistan was over 24 percent which, in current fiscal year, had decreased to 12.5 percent. “This is a negative sign for country,” he warned. The analysts at stock market said “few demands met, few not,” by the government in the new budget.
Muhammad Sohail, a senior analyst and chief executive of Topline Securities told Profit that the government had done in the the Finance Bill the Capital Gains Tax part as well as reduction in the turnover tax. While the Federal Excise Duty on cement sector was also decreased.
Asked about the possible impact on the equity market, Sohail said it would range from “neutral to positive”. Khurram Schehzad, head of research at the InvestCap, said the abolishment of FED on Asset Management Companies (AMCs) and increase in tax exemption limits to stock market would attract investors to the bourses.
“The abolishment of FED on AMCs and increase in limits to stock market both are positives for the investors,” he told Profit. Mazhar A. Sabir and Abdul Azeem, analysts at InvestCap Research, said better equity performance was expected after the budget announcement as the investors were not expecting new taxes. They said the budget target for FY13 would set the direction of the equity market going forward.