The GST on goods with a higher rate of 17 percent is the economy killer that hampers the manufacturing sectors outspread, a report on economy launched on Saturday said. "There is no much happiness in the report I am presenting," Dr Kaiser Bengali, Dean Management Sciences, SZABIST told a seminar held at the auditorium of the institution during presenting his report titled "State of Economy 1990-2015; Economy on a Roller Coaster - And Stuck in the Mud!".
The report proposes curbs on imports to spare foreign exchange with "ban on all non-essential consumer imports," which it says, will reduce the need for borrowing. It also sees rehabilitation of railways sector as a factor to help reduce oil fuel consumption, which stands the country's largest imports. "Trains are more fuel efficient transportation than trucks by one third", Bengali said.
The report also showed ways to increase electricity output with reducing imports bill of different categories of fuel oil. "Adopt policy of to generate electricity almost exclusively from hydel, domestic coal and off-grid solar," it says, adding that creating an integrated inter-city goods transportation system with employing railways for long-destination cargo supplies and truck for short-routes.
"Form a Holding Company to include Pakistan Railways and NLC," it proposes. The report also floats an idea for adaption of pro-manufacturing macroeconomic, fiscal and trade regime, seeking a drastic reduction in the GST rate on goods to five percent from existing higher 17 percent, which Dr Bengali called "killer" of the economy.
It proposes curbs on speculative investments in stock market by stepping up capital gains tax measures to "discourage short-term trading". Restrictions, the report also points out, on investment in the real estate market by placing a rule 'Right of First Purchase' in land and property transactions.
On expenditure measures: It says that "abolish spurious Administrative Divisions, bringing the number down to 1970 level. Also abolish/ merge Departments attached to the Divisions to be abolished". Reducing non-combat defense spending by 20 percent, the report says, will build up the economy. "Without strong economy war cannot be fought, let alone winning," Dr Bengali said.
All indirect subsidies should be ended, it says, except for targeted ones meant for lower income class of the society and underdeveloped districts to reduce the government's spending. "Include only those development schemes in ADP that impact across provinces and have approved bankable feasibilities," it adds suggestions to scale up revenues including fixing of gasoline price equivalent to $150 a barrel on long-term.
It also advocates for increasing the price of nature gas threefold for all of the consumer categories, equally, saying that "reintroduce wealth tax. Add land and motor vehicle ownership to existing bases. The tax on land motor vehicles be charged on per acre/ per square yard/per square feet basis".
Highlighting the report, Dr Bengali said that it is a "warning what is perhaps coming". He said that the country's labor force grows at 3.5 percent with 2.5 percent population growth. "Commodity producing growth is 5-6 percent but needs sustainability," he told the seminar participants that "growth rate is very low with a huge volatility".
He said that the electricity generation should be from domestic coal to help reduce import bill of the fuel oil. "We have a choice between domestic coal and import of furnace oil," he suggested, saying that there is a political resistance barring the use of coal for electric power production.
He said that the privation drive never helped the country attract investments to the manufacturing sectors that hurt the economy. He blamed the country's powerful elite for the poor economy, saying "they are senseless" with no realization of it. They have another passport in hands that keep them panicles, he added.
Discussing the report, Dr Farrukh Iqbal, Dean & Director, IBA Karachi showed concerns over the country's falling reserves despite witnessing a high-growth rate of 5.5 percent phase spanner for 10 years. The country's export to the GDP, he called, "not good", observing that the shaky economy depicts that "we are not competitive economy".
He observed that the country's manufacturing sectors failed to attract investment especially by the private sector. He said that the private sector's investment share to the GDP stands at 10 percent over the past 25 years unlike India, which received 20 percent during the same period.
"Our public investment ratio is very small," Dr Farrukh told the seminar.
He said that the country even failed to bring a single transformation to its agriculture sector sticking to only four annual crops including cotton, sugarcane, wheat and rice only because of the 'complex' support price. He pointed out that the foreign investments other than manufacturing will not help the country improve its economy, reduce poverty. Syed Shabbar Zaidi, Senior Partner at A.F. Ferguson & Co urged on strengthening tax culture among the general public.
He said that the country's total trade deficit stands at $300 billion since 1947 with $ $35 billion in 2018 alone. He said that the total tax filers in the country are 1.5 million comparing to India with 45 million. Pakistan's tax to the GDP is 12 percent, he said, adding that people from the country send $5 billion a year to buy property in Dubai and that is a monetary transaction practice for the last 30 years. The country's economy is in tatter, he said, because none of the governments prioritize it their policies.
The other factor, he believed to have pulled down the economy, is political considerations that have been behind the economic policies.
He proposed that the planning and commission should be revived to help the economy rejuvenate, but effectively. He said that the government has to redefine the country's economic priorities.
He also proposed a concrete effort to spread out industrialization with a tag "Make in Pakistan", besides stress on revamping of banking sector with "saving/investment Vs commercialization". He said that the privatization drive was "wrongly" used that killed the country's economy.
About railways, Shabbar said that its condition is far low in 2018 to that of 1985, suffering a loss of Rs 40 billion in 2018. Earlier, Dr Muhammad Kashif, Head of Department, Management Sciences gave a welcome address and latter, Shahnaz Wazir Ali, President SZABIST delivered closing remarks.
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