A Strategic Thinker

KARACHI: The entire world is going through a recession and one cannot predict how long it will last. And this ongoing global recession is directly impacting Pakistan’s exports, which unfortunately is on a downward trajectory, said Tariq Yousuf, president of the Karachi Chamber of Commerce and Industry (KCCI).

Post-Covid, the Western economies resorted to over-buying. Besides, the government accorded excessive subsidies, which triggered the demand in the short run but over a period of time the demand has settled, he added.

Of course, the global economic slowdown has impacted Pakistan but it is not that big of an issue since our exports are merely $30 billion. Even a 10 per cent variation amounts to only $3 billion. The more pressing issue is the deteriorating situation locally. The industry has come to a standstill.

The KCCI is the premier chamber of the country, representing the mainstream of economic activities by virtue of its location in the main industrial and commercial hub of the country.

It was formed in 1959 through the amalgamation of four trade bodies in Karachi at that time, the Pakistan Merchants’ Association, Buyers and Shippers’ Chamber, Chamber of Commerce Pakistan and All Pakistan Chamber of Commerce and Industry.

It was registered under the Trade Organisation Ordinance 1961, which regulates the working of the trade bodies in the country.

The KCCI represents the business and industrial community of Karachi, contributing more than 65 per cent revenue to the national exchequer and a city of more than 22 million dwellers.

Experienced with 45 plus years of proven expertise in the textile industry in research and development, production, project management, quality control, quality assurance, regulatory affairs and general management, Yousuf created new products and oversaw the above departments for the growth of the companies he worked for.

A strong strategic thinker and team builder, he seeks challenging environments to create lasting change. Presently, he is serving as the chief executive of Sanaulla Woollen Industries since 2001.

In this exclusive talk with the BOL News, Yousuf talks about the country’s economic situation and challenges the business community of Karachi is confronted with.

How did the shortage of foreign exchange impact the industry?

Let’s look at the reasons for this dollar shortage. The first mistake was to artificially hold the currency value at a certain level. It promoted the black market and the spread between official and unofficial rates increased significantly. Subsequently, the foreign exchange reserves started declining. And when the rupee was left free, it instantly depreciated by over 15 per cent, which was even detrimental.

We booked our import consignments when the dollar was at Rs190 each, and now that these consignments are going to be cleared, the dollar has reached Rs270. This jump of over 30 per cent in the cost of imports is seriously affecting the inflation in the country.

How do you see Pakistan’s economic growth in the current fiscal year?

The situation is bad and I do not think we would be able to post even 2 per cent GDP growth for the year. Discussions are in progress with the International Monetary Fund (IMF). Their conditions are harsh and, as of now, we cannot calculate the repercussions on the country’s manufacturing sector. We do not know the impact on the cost of doing things and it would definitely reflect in the selling price of the products.

Higher production cost would render our products uncompetitive in the international market. As far as the local market is concerned, the higher product prices will fuel inflation.

Inflation is only one aspect. If the raw materials are not imported, the industry would close, resulting in unemployment and the revenue loss to the government.

What are the challenges the business community is facing in Karachi?

There is a long range of issues. First of all, there is a chronic shortage of gas, electricity and water. Besides, the industrial land prices are uncontrollable. At this point of time, if any industrialist wants to set up a new unit, the price of land makes the entire project unviable. To tell you the truth, the businessmen in Karachi are mostly traders and industrialists. They do not do anything else.

The federal and provincial governments need to make serious and sincere efforts to facilitate industrialisation. Primarily, the governments should ensure that the industrialists get affordable land with access to the city and ports.

What is the status of excessive demurrage and detention imposed on imports?

Despite commitment made by the representatives of the shipping lines and terminal operators at a meeting held at the Karachi Port Trust (KPT) two weeks ago in the presence of maritime, commerce ministers, commerce secretary, KPT chairman and the representatives of the State Bank of Pakistan (SBP), no announcement has been made regarding relief on demurrage and detention charges, triggering a lot of anxiety among the members of the business and industrial community.

The cost of imported consignments has risen sharply due to extraordinary demurrage and detention charges to such an extent that they have surpassed the actual value of the goods inside the containers in many cases; hence, no importer finds it feasible to get the consignments cleared.

The manufacturing sector is under immense pressure, as all of the inventories have exhausted and no imported raw material is available for carrying out further production. The traders are almost out of business.

Around 5,630 containers remain stuck for the last three months, which means that the shipping companies and terminal operators have a windfall profitability of around 5,000 per cent or even more and they have been refusing to waive the unusual demurrage and detention charges.

The government of Pakistan should play a role in real terms and stop this windfall profiteering for the shipping companies and terminal operators, as they would have never earned such an exorbitant profit in normal circumstances.

Although the inflation is due to the rupee/dollar parity, another major reason for the skyrocketing inflation is the delayed release of containers of pulses, grains and many other commodities, creating shortage of these products and further nurturing the inflation.

Moreover, the limited production activities and export-oriented industries due to unavailability of raw materials, which also remains stuck at the port, is another key reason for inflation.

How are the foreign business partners reacting to this situation?

The State Bank of Pakistan has assured clearance of the containers, whose payments had been arranged from sources outside Pakistan, but, unfortunately, the commercial banks are creating unnecessary hindrances, which has intensified the hardships of the perturbed members of the business and industrial community. They may soon become bankrupt if this serious issue remains unresolved.

Delays in the release of payments to the suppliers is fetching a bad reputation for Pakistan, because in this scenario, no supplier wants to carry out any deals with the Pakistani importers, as the payments to the suppliers have been delayed for a longer period.

What is the future outlook?

The business sentiment is at its lowest ebb. All eyes are on the IMF deal and the repercussions thereof, including higher utility prices, weaker currency and higher inflation. Unless the deal is finalised with the donor and terms and conditions are made public, nothing can be predicted.