Traders see 2018 as a year of challenges, opportunities

KARACHI: Business community is optimistic about the prospects of economic growth in 2018, anticipating a high-octane spurt fueled by fairly large foreign investment pouring in into China-Pakistan Economic Corridor (CPEC) projects in the country.

The businessmen, however, flagged balance of payment issues as posing serious risks to economy during the next year, mostly citing ballooning deficits and erosion in foreign exchange reserves down the line.

The businessmen believe the year 2017 was a blend of successes and challenges in terms of economic activities.

Zubair Tufail, president Federation of Pakistan Chambers of Commerce and Industry (FPCCI), termed 2017 a year full of challenges as, according to him, some economic targets were hit and some missed, while trade and investment also continued to seesaw during the year.

“The first quarter of the outgoing year was stable. The government gave its undivided attention to the pursuance of key energy and infrastructure projects under the CPEC,” Tufail said. He added the government had announced it would overcome the energy shortages by 2018, but it could not succeed in living up to its claims. “Some of the energy projects were completed and load-shedding was reduced from 16 hours to 4 hours only, which is not enough,” he added. Tufail said the developments like import of liquefied natural gas (LNG) to improve the shortage of gas for industrial sector and the addition of a second LNG terminal at Port Qasim would go a long way in boosting the economy.

Moving ahead, Tufail, however pointed out that the gap between imports ($52 billion) and exports ($21 billion) was a matter of great concern. “The fragile state of external inflows was offset by foreign remittances as overseas Pakistani workers had sent $19 billion to improve the foreign exchange situation,” the FPCCI president stressed.

The chief of the apex chamber also expressed concerns over falling foreign exchange reserves during the outgoing year. “The foreign exchange reserves, which crossed $23 billion in first half of 2017, gradually declined to $18.77 billion in December 2017,” he said.

Moreover, the business community was dismayed over the political situation during 2017. However, sentiments improved with the smooth political transition involving the removal of Mian Nawaz Sharif as prime minister by Supreme Court of Pakistan and Shahid Khaqan Abbasi’s assuming his leader’s former’s office in August 2017 through a democratic process. On the other hand, Finance Minister Ishaq Dar, who is also facing court cases, left his office on medical grounds, a move that continues to raise a lot of questions.

Some of the sectors of economy like cement, automobile, steel etc performed well, whereas textiles, being the largest exporter, were under pressure and several mills were closed. Exports started picking up in the second half of 2017, increasing 11 percent and seen growing up to 20 percent in the first half of 2018. The high price of electricity and gas remained the biggest challenge to the economy in the year.

Tufail said the year was also important for the CPEC as Gwadar Port started operations, although presently a few vessels are docking at this port. “Once the CPEC projects are completed, more goods will be flowing from China to this port. Construction works of motorway between Kashgar and Gwadar are moving at a reasonable pace in this year,” he added.

The business community was quite happy with Army Chief General Jawed Qamar Bajwa’s speaking to the businessmen at a seminar titled “Interplay of Economy and Security.”

Muffasir Atta Malik, President, Karachi Chamber of Commerce and Industry (KCCI) criticised the government for measures taken during the outgoing year and termed those as counterproductive for the economy. “The government imposed regulatory duty with the aim of discouraging luxury and non-essential items to bridge trade deficit gap, but it also added those essential raw materials in the list of regulatory duty which are necessary for manufacturing and export sector,” Malik said adding it would mount pressure on the exports in future.

S M Muneer, another key business leader, complained that disbursement under government’s Rs180 billion textile policy was yet to materialise, adding though some refunds were issued with the start of current fiscal year a huge amount was still stuck with the government. “Refunds now again stand over Rs300 billion,” Muneer said. Besides, he said, Faisalabad’s industries were closing down because of the cost of doing business, thus the government should evolve a policy for industry/export by improving availability of low cost energy.

Mian Zahid Hussain, president, All Karachi Industrial Alliance, said the government was not paying attention to industrial growth. “The government during the outgoing year announced industrial package but it was not implemented,” Hussain said.

Senator Abdul Haseeb Khan, an industrialist, said Pakistani products had lost competitiveness in the regional markets due to high cost of production. “The government has not announced any investment policy for industrial growth, which is hampering the sector’s growth,” Khan added.

Overall, the business community is upbeat on the prospects of economic growth, but also expects the next year to be full of challenges. They argue the country requires paying $12 billion in first half of 2018 as per its liabilities. “Exports can grow by more than 20 percent in 2018 provided that government reduces energy prices reasonably with the consent of stakeholders,” a business leader said.

According to the FPCCI, construction industry across Pakistan will boom in 2018, creating a lot of jobs. “A new industrial policy is required so that people can freely invest for which announcements are necessary before the elections,” a top official of the chamber said.

The official said the apex trade body expected Pakistani investors would be given equal opportunities in the special economic zones of the CPEC.