‘Re­vival of sick in­dus­tries can cat­a­pult Pak­istan’s eco­nomic growth.’

Dr. Mirza Ikhtiar Baig, Chair­man, PAK-UAE Busi­ness Coun­cil, talks to En­ter­prise in this ex­clu­sive in­ter­view.

Enterprise - - Interview -

How do you view the UAE as a for­eign in­vestor in Pak­istan?

Un­til a few years back, the UAE was the sin­gle largest in­vestor in Pak­istan. It was a sur­pris­ing state­ment but when I checked it closely, I found that the UAE is the largest in­vestor in Pak­istan be­sides Europe and US. I have writ­ten an ar­ti­cle on the UAE groups that have in­vested in Pak­istan. The Abu Dhabi group takes the lead as it owns Bank Al­falah, CNBC, Al Warid, Al Wa­teen and also holds some shares in UBL. The group is headed by His High­ness Sheikh Nahyan bin Mubarak Al Nahyan.

The UAE sends the sec­ond largest re­mit­tances from over­seas Pak­ista­nis. Dubai is the sec­ond largest des­ti­na­tion in the world for ex­ports and trad­ing. Us­ing Dubai as a hub, we can have a good share of in­di­rect trade with coun­tries with which we do not trade di­rectly, such as In­dia. So, Dubai not only of­fers di­rect im­port and ex­port fa­cil­i­ties but also acts as a re­gional hub for trans-ship­ment and re-ex­port. For ex­am­ple, while we have a di­rect rice ex­port ar­range­ment with Ye­men, the same rice is also go­ing to Ye­men through in­ter­na­tional traders via Dubai. There­fore it is a very im­por­tant mar­ket for Pak­istan. Then, about 1.2 mil­lion Pak­ista­nis are re­sid­ing in the UAE. There are var­i­ous pro­fes­sion­als, bankers, top notch peo­ple work­ing in telecom­mu­ni­ca­tions and the oil and gas in­dus­try. Our peo­ple are all con­tribut­ing greatly. I re­mem­ber, when I went to the UAE for the first time in 1977, it was just sand. And now Dubai can be com­pared to Man­hat­tan. Pak­istani work­ers and pro­fes­sion­als have played a very im­por­tant role in this trans­for­ma­tion. The UAE ac­knowl­edges this con­tri­bu­tion to­wards their eco­nomic growth.

How suc­cess­ful has been the re­vival of sick in­dus­tries in Pak­istan?

A sick in­dus­try is a project where plant ma­chin­ery has been in­stalled, water and electricity has been con­nected, but due to mis­man­age­ment, short­age of cap­i­tal, or due to cir­cum­stan­tial de­fault­ers or ha­bit­ual de­fault­ers, also called will­ful de­fault­ers, or for any other rea­son, the in­dus­try be­comes sick. If you re­vive this in­dus­try, it would not cost you more cap­i­tal in­vest­ment in plant and ma­chin­ery and will pro­vide a in­fra­struc­ture and al­low you to pro­vide jobs to peo­ple, be­sides earn­ing for­eign ex­change for the coun­try and will also re­ha­bil­i­tate

your deal­ings with the banks. The bank is the main sick el­e­ment in this sce­nario as, due to de­fault, the in­dus­try could not pay the bank.

I re­al­ized that re­vival of sick in­dus­tries can cat­a­pult Pak­istan’s eco­nomic growth, which was also the ti­tle of my Doc­tor­ate the­sis. We worked on it with a num­ber of case stud­ies and had a re­gional com­par­i­son of how In­dia had been able to re­vive sick in­dus­tries. I am very happy to say that about 12,000 in­dus­tries have been re­vived. I was the Chair­man of Bank­ing Credit and Fi­nance Com­mit­tee in the State Bank. The sick in­dus­tries were ei­ther trans­ferred to the new man­age­ment at mar­ket rates and not at the book value which com­prises mark-up, pe­nal in­ter­est, mark-up on mark-up, etc. The con­cept of mar­ket value was thus in­tro­duced by me. Re­vival of in­dus­try is very es­sen­tial for our coun­try, for of­fer­ing jobs to peo­ple, trad­ing with other coun­tries and reg­u­lar­iz­ing our bank­ing sec­tor and non­per­form­ing sec­tors.

As Chair­man of Pak-UAE Busi­ness Coun­cil, what is your ac­tion plan for 2012?

There were few de­ci­sions made at the AIM Con­fer­ence. The fu­ture growth will come from Asia and South Asia, where the ma­jor coun­tries are China, In­dia and emerg­ing mar­kets like Pak­istan, pro­vided we have po­lit­i­cal sta­bil­ity, law and or­der and a so­lu­tion to the en­ergy cri­sis. So it is the Asian re­gion which is go­ing to dom­i­nate the world’s econ­omy. Se­condly, the GCC coun­tries have high spend­ing power with both the gov­ern­ment and peo­ple spend­ing a lot of money, so it is a very lu­cra­tive mar­ket to sell our prod­ucts there. There­fore, we should fo­cus on our needs as well as the needs of the Gulf coun­tries, that why should they buy from Pak­istan and not Bangladesh or Sri Lanka, which are equally af­ford­able.

Im­por­tantly, food se­cu­rity

is at the top of the GCC coun­tries’ agenda. The GCC is wor­ried as the world pop­u­la­tion is grow­ing, the mid­dle class is com­ing up, buy­ing power is in­creas­ing and more and more food will be con­sumed. They do not have the land, water and their own work­ers even. The no­tion of food se­cu­rity has emerged to pre­vent the Arab coun­tries from get­ting stuck in food short­fall.

All the GCC coun­tries are sit­ting with their heads down and ex­am­in­ing the is­sues that must be dealt with on pri­or­ity ba­sis. Pak­istan be­ing the clos­est to the UAE, we have of­fered them fer­tile land, cheap labour and the best ir­ri­ga­tion sys­tem in the world. I have pro­posed to them to take our land on long lease of 30 to 35 years or en­ter into joint ven­tures. They need as­sur­ance that 50 per­cent of grains will be ex­ported even in case of short­fall. This is a sen­si­tive is­sue, but af­ter reach­ing a con­sen­sus with the Prime Min­is­ter and Food Min­is­ter, we have al­lowed them. This is break­ing news - that I have al­ready got them land in Sindh and they are pro­duc­ing high pro­tein an­i­mal feed called Al­falfa. So this is our main agenda - to pro­mote ex­por­to­ri­ented cor­po­rate farm­ing.

How suc­cess­ful was AIM 2012 in di­rect­ing at­ten­tion to­wards the in­vest­ment po­ten­tial in Pak­istan?

The forum pro­vided in­ter­ac­tion be­tween dif­fer­ent coun­tries present there, to ex­plain them the in­vest­ment po­ten­tial and at­tract ma­jor in­vest­ments. Each coun­try pre­sented their projects. Pak­istan took the Thar Coal project and the wind­mill project. I took the Tex­tile City project and there were a num­ber of other en­tre­pre­neur­ial projects as well. Thar Coal was the ma­jor fo­cus to at­tract in­vest­ment and was con­sid­er­able in­ter­est was gen­er­ate.

Sheikh Mo­hammed Bin Rashid Al Mak­toum, the Deputy Ruler of Dubai, spent the max­i­mum time at our stall. In our pre­sen­ta­tion on Pak­istan, we gave a num­ber of fea­si­bil­i­ties re­gard­ing the in­vest­ment re­turns, tax ex­emp­tions and profit po­ten­tial. We also gave a pre­sen­ta­tion on Ex­port Pro­cess­ing Zone, which of­fers the en­tire re­quired in­fra­struc­ture un­der one roof, re­mov­ing all the reg­u­la­tory has­sles and pro­vid­ing cheaper labour. As part of an in­te­grated ap­proach, I pre­sented the Tex­tile City project in Bin Qasim area, where it is a clus­ter of value added tex­tiles. We all also listed Pak­istan’s rank­ings and the world rank­ings of Pak­istani prod­ucts. Achiev­ing suc­cess­ful rank­ings in a num­ber of Pak­istani prod­ucts, we of­fered them food se­cu­rity so­lu­tions.

Pak­istan’s cot­ton and tex­tile in­dus­try has been ren­dered a big dent as a re­sult of the en­ergy cri­sis. Is there any hope for the fu­ture of this sec­tor?

This is very true that the en­ergy cri­sis has greatly af­fected our pro­duc­tion but apart from these cir­cum­stances, last year Pak­istan achieved a record ex­port of $25 bil­lion, out of which $13.8 bil­lion of tex­tile ex­ports were achieved. This year also, I can as­sure you that we are go­ing to achieve the same tar­get. Our ex­porters are very re­silient and hard­work­ing in find­ing their way out and still stick to the tar­get.

Is there a pos­si­bil­ity of Pak­istan en­ter­ing into a re­gional bloc with the Gulf coun­tries?

Our re­gional bloc is SAARC, while GCC is an­other bloc. But as GCC is quite rich, they are look­ing to­wards us due to the Asian growth po­ten­tial. Asia is a good buyer of Gulf oil, which is in­creas­ing by 4.4 per­cent per year. Other than that, as the global re­ces­sion has af­fected the US, EU, and economies like Greece, it is our re­gion which is of sig­nif­i­cant im­por­tance to the Gulf coun­tries. Now, in the world, the emerg­ing mar­kets have con­trol of more than 40 per­cent. We are work­ing on long and short term mea­sures, which in­cludes the shale gas in Sindh. I have asked Poland, which has world-class ex­per­tise in shale gas, to ex­plore the re­serves in Sindh. We are work­ing on long term ba­sis on the Iran-Pak­istan gas pipe­line and Turk­menistan gas pipe­line. We are also work­ing to­wards big­ger and smaller dams. I hope these mea­sures will ma­te­ri­al­ize. If there is peace in Afghanistan, there will be im­mense pos­i­tive op­por­tu­ni­ties in this re­gion, as we are work­ing on mak­ing Pak­istan a re­gional en­ergy cor­ri­dor to reach the im­por­tant re­gion of Cen­tral Asian coun­tries. So, it is all about re­gion and re­gion and re­gion. You need to un­der­stand the gov­ern­ment’s fo­cus on re­gional trade and in­vest­ment.

What should be the key ar­eas of fo­cus for Pak­istan in the in­dus­trial and com­mer­cial sec­tors?

The first and fore­most is the en­ergy cri­sis. We have to pro­vide power, we have to take ra­tio­nal de­ci­sions and we have to re­duce trans­mis­sion and dis­tri­bu­tion losses, which af­ter 8 or 9 per­cent, is a theft. Se­condly, we have to con­trol the law and or­der sit­u­a­tion which is di­rectly linked to re­gional peace. As you can see, the re­vival of trade re­la­tions with In­dia is a re­sult of such en­deav­ours. Also, as it is the elec­tion year, with the new gov­ern­ment ahead we ex­pect to see cer­tain po­lit­i­cal sta­bil­ity. We have taken a very ag­gres­sive ap­proach in terms of lib­er­al­iza­tion of trade, re­mov­ing the neg­a­tive list with In­dia, sign­ing of Pref­er­en­tial Trade Agree­ment with Turkey and a sim­i­lar strat­egy with China and EU.

Do you see the bank­ing sec­tor in Pak­istan serv­ing as a gate­way for for­eign in­vest­ment?

Any coun­try which is will­ing to drive big in­vest­ments must have a strong bank­ing sec­tor. Pak­istan has the most strin­gent bank­ing rules and not a bank has de­faulted. The Far East re­gion has seen a de­fault is­sue be­cause of the cur­rency there, the Amer­i­can and EU mort­gage de­fault hap­pened and then there was the Dubai col­lapse of real es­tate prop­erty, but Pak­istan’s bank­ing sec­tor re­mained in­tact. It is well-reg­u­lated and well-mon­i­tored. We are also ex­pand­ing our bank­ing net­work to Cen­tral Asia and In­dia, while In­dia also in­tends to open its banks in Pak­istan. Our sound bank­ing sys­tem is good enough to gain in­vestors’ con­fi­dence and pro­vide hope for invit­ing big­ger in­vest­ments in the coun­try.

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