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Last week, a versatile group of businessmen met with army chief in a five-and-a-half-hour long meeting. The GHQ's message was clear - the present government will complete its tenure so strategize accordingly. Now this week, sentiment is fast changing - bond yields are falling and stock market is rising - the voices, which were all for bears, are now all for bulls. Is it a coincidence?

Anyhow, some say that high interest rates environment is the biggest problem - but that does not hold true for all those who went to see the army chief. There was a bank owner who is beneficiary of this high rate scenario, and there were textile tycoons who have access to subsidized financing for exports and are becoming competitive due to currency correction, and a few others are cash rich.

A very few amongst those are highly leveraged groups, and are facing the rate hike brunt. Anyways, short-term hike is not killer for big boys, it does impact SMEs - and most of the SMES have access to informal credit which is kind of insulated to discount rate. And if borrowing is an issue, there are $7 billion plus FE25 deposits, on which foreign currency loan can be fetched at much lower rates - big groups have access to international finance, if they wish to use these.

Two big groups are fed up with the NAB, when they meet at breakfast, instead of discussing mega projects to be started in the country, they match notes on NAB notices. It is so unfortunate that how energies of those who can bring thousands of jobs are looking for safe havens. The good part is these are given comfort that NAB will not unduly disturb them, and there are talks of forming committee of top banking professionals and well reputed businessmen to evaluate the business community cases in NAB.

A few of the participants had issues with delays in approval and operational problems like axle load limit revision on transportation of goods which is increasing cost of transportation by 70-80 percent for cement and other companies. But the economic return on axle load revision is higher than commercial cost incurred by these - virtually the whole world is following it, and the cost of wear and tear of roads and trucks is higher, and not to mention chances of accidents increases because of overload. The argument of business community has weight that such changes should come in a staged manner and there should be preparation time for market.

Then there are dubious issues arising due to documentation efforts. Part of Pakistan business community actually prospered on rent seeking. There are people in areas like Faisalabad who have invented flying invoices and have prospered on making dubious claims - fake claims of refunds are created and in the process, genuine exporter or trader claims are being compromised. Last week, the FBR unearthed a fake and flying invoices scam in Faisalabad. Such malpractices should not be spared.

There were some genuine problems and there were some people who shed crocodile tears. Some may come out happy while others disgruntled. But sentiments are changing which could be a coincidence, tables are turning. Caution is the word to follow - do not be too optimistic as there was no rationale for kind of pessimism expressed earlier. The issues are scattered and are to be resolved in due course of time.

The government is also trying to revisit the job creation swaying way from traditional government development spending. A real estate tycoon was seen amongst the group that met the CoAS. The establishment and economic team recently attempted to change the economic growth model - to replace private sector construction from government run brick and mortar development programme. There are talks of no questions asked about the source of income of the money routing in real estate development. That is a smart way to kick start the economy.

However, the documentation efforts are to continue on retail and trade sectors. And it is adversely affecting all the businesses in the short-term. Someone from the economic tycoons wisely said that economies are not run by producers, rather by markets where transactions take place - the sudden slowdown in markets like Jodia bazaar, Suttar mandi, Akbari mandi and all are hurting the whole economic chain.

Businesses of FMCGs automobile assemblers and a host of others within the economic chain has slowed down due to documentation spree. But once things are reset and new systems are evolved, the untapped potential is huge. In modern day world, digitization of economies is the way to go, and documentation will help achieve this purpose.

Copyright Business Recorder, 2019

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Ali Khizar

Ali Khizar is the Head of Research at Business Recorder. His Twitter handle is @AliKhizar


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