‘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.
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.