Turkey was not admitted to the European Union (EU) mainly because of the fact that the union is inherently a grouping of predominantly white Christian countries. Turks have learned many lessons after that event. However, the ground reality is that the economic conditions of Turkey are not as strong now as before. We can rely on many conspiracy theories with regard to the expected reason for Financial Action Task Force’s (FATF’s) action; however it is a fact that in the recent past Turkey has liberalized many regulatory compliances for foreign investors, including those dealing in bullion. These are not unusual; these are, in fact, much more regulated in comparison to countries like the UAE. However, Turkey has been considered differently. I am more concerned about a Financial Times reporting on this matter. This is highly disturbing. It states, among other things, that:
But even small outflows could strike a blow to a country whose currency is under heavy pressure and whose foreign exchange reserves are already widely considered by analysts and investors to be too low. The sliding lira has led to spiralling inflation and an erosion of living standards that has sent public support for Erdogan’s ruling party to historic lows.
The comments of Indian media on this matter are very damaging and they are unnecessarily dragging Pakistan into this matter. It is about time Pakistan and Turkey sat down and worked together for the economic development of their peoples. These relations have to be totally based on economic considerations. There is an urgent need to revive the rail link from Karachi to Istanbul which can open up new avenues for regional development and road to Europe. Indians will never be able to connect themselves to Europe by rail unless there is cooperation from Pakistan. Same is the case for inter-state gas transportation through pipelines. It is high time to take advantage of this ground reality. The events including the one referred above are enough to demonstrate the partisan attitude of countries. They may be right for their economic-political considerations therefore we as a country should concentrate on our own considerations. Pakistan with over 2500 years of civilization in this area cannot be bracketed with Afghanistan. The whole concept of AFPAK is to be strongly resisted.
The third event is Pakistan’s option not to be the signatory to the OECD declaration and system whereby a certain minimum tax is to be imposed on companies operating on a multinational basis.
Pakistan’s reasons for not being the signatory to this declaration are not publicly announced; however one of main reasons, in my view, is wide ranging complete exemption from income tax for certain companies and companies from certain countries operating in Pakistan. These include some Chinese companies in Pakistan. Pakistan has taken the decision to exempt certain Chinese companies operating in Pakistan for its strategic reasons. I concur with this view. However, I, as a student of tax policy, do not favour using tax as a tool for economic development. This is a failed theory. All the entities should be equally taxed. If the state wants to extend certain incentives to a particular industry or an economic zone it can be done in some other manner like availability of land at cheap rates, easy access to financing, easy availability of infrastructure, etc. Providing en bloc exemption as we have done in the power and other sectors is a wrong policy. Pakistan should become part of the OECD declaration as soon as possible after settling the legal considerations with the companies, including Chinese companies, where such exemptions have been extended.
All these three events serve as the tipping point for the arrival of a new world economic order where India and its allies are emerging prominently. Pakistan at this juncture would have to reconstruct its priorities. There are around 200 million Muslims in India and they are loyal to their country. Pakistan has all the right to protest against human right violations of minorities, including Muslims, in India and the Indian Illegally Occupied Jammu and Kashmir (IIOJK), however that action should not divert our attention from economic issues to rhetoric. We don’t have resources nor are we required to be the sole spokesman for the entire Muslim world. Pakistan needs concentrated efforts of around two to three decades on the economic side to become a force to be reckoned with globally.
Copyright Business Recorder, 2021