By M Jahangir Hayat
Pakistan needs to take tough economic decisions amid pandemic as it has lost over $6 billion in trade with China, US and EU alone during the COVID-19 crisis besides there are many other countries that are doing trade with Pakistan.
The economic impact of COVID-19 will be long lasting as a large number of employees has been rendered unemployed and in order to contain unemployment, some remedial measures needed to be taken.
The 11 percent policy rate in the country is one of the highest in the region in the course of the lockdown-like situation which is no way logical.
If we compare the policy rate with our competitors, there is a huge difference.
The government should also disburse interest-free soft loans to the SMEs and small traders enabling them to restart their businesses.
The loans should be disbursed at zero percent interest rate if the government wants to revive the economy besides every kind of investment either it is white or gray should be allowed as people do not have capital money.
These views were expressed by LCCI President Irfan Iqbal Sheikh here the other day.
Daily The Business had an opportunity to have his insight on the current COVID19 pandemic and the lockdown. Following are some excerpts from the interview:
The Business: How has the COVID-19 and lockdown affected trade and industry?
Irfan Iqbal Sheikh: The COVID-19 has not only affected Pakistan but the economy of whole world. The world economy has been ditched into an unprecedented recession.
We have been doing a big part of the business with three countries, including China, European Union and the US. We have $14.5 billion import and $1.8 billion export annually with China and if the figure is divided into 12 months the total monthly trade with China comes to $1.3 billion.
In two-and-a-half months alone from January to April excluding February, the Chinese holidays due to their New Year, we have suffered from over $3billion losses with China alone.
Then there comes the European Union. We have over $1 billion trade with the EU annually and for the last three months, the whole EU is shutdown and God knows when it will be opened.
Then there comes the US. We have over $3.8 billion exports and $2.9 billion import with the USA which is around $6.7 billion annually.
This is way, we have lost over $1.65 billion in the COVID-19 crisis.
This can be calculated roughly as over $6 billion with these three countries in three months.
There are many other countries that are doing trade with Pakistan. This is what we are talking about is Pakistan’s international trade.
Now, we come to the local business activity. We have $300 billion economy of which $24 billion is export while remaining $276 billion economy is inoperative.
How will the losses be covered when the COVID-19 crisis ends?
Ans: Things are not that easy. We have to take tough economic decisions amid COVID-19 to move forward. We are passing through a very critical situation presently.
Even the developed world has failed to contain the coronavirus. On daily basis hundreds of people are getting affected. We are with the government during COVID-19 lockdown but we also have to take up the economy on priority basis for our survival.
In order to strengthen the economy and cover the losses we have to open business places systematically under the SOPs.
SOPs should be made for the sectors to open them.
What should the government do in the present crisis?
Ans: Things are very difficult ahead. The 11 percent policy rate in the country is one of the highest in the region in the course of the lockdown-like situation which is no way logical.
If we compare the policy rate with our competitors there is a huge difference. The markup rate in Malaysia is 2.75 percent, China 4.35 percent, Bangladesh 5 percent, 5.1 percent and Sri Lanka 6.50 percent.
In such conditions we cannot survive with 11 percent markup rate.
The government must have to bring down the interest rate enabling the business to work.
Further, the government should not charge interest on loans for two to three months minimum, payments of utility bills should also be differed upto 50 percent for two to three months so the entrepreneurs could restart their business by not being affected by the shortage of cash and capital.
One the other hand, the government should also disburse interest-free soft loans to the SMEs and small traders enabling them to restart their business.
This is very obvious that capital money with them has been spent on day-to-day needs during the lockdown.
For example, Bangladesh has introduced a wonderful bailout package where they will pay all the wages and utilities for the next three months and the mill owners will be repaying the loans to the banks in two years.
The State Bank of Pakistan (SBP) has introduced loans on four to five percent markup rate but that is not feasible in the prevailing situation.
The loans should be disbursed on zero percent interest rate, if the government wants to revive the economy besides every kind of investment, either it is white or gray, should be allowed as people do not have capital money.
All that money must be allowed to pour into the system at least for the upcoming two years enabling the money to circulate into the system strengthening the economy.
The government has taken a very good step for the construction industry where it has been announced that the investors in construction would not be questioned about their investment.
In the similar manner, the government should not ask for the money trail and let the people do business freely.
Have you set up any COVID-19 lockdown committee that is maintaining data of trade and industry during the crisis?
Ans: Yes, we have R&D section which is making reports on daily basis.
The facts and figures are being maintained on regular basis about the trade and industry.
All the collected facts and figures are being regularly communicated to both federal as well as the provincial government, enabling them to be able to better understand the crisis and take measures in accordance with the requirements.
How much time will the economy be taking to get normalise after the lockdown?
Ans: Well, the economy cannot be normalised unless it is opened. Everything is closed. We have to open various sector systematically to make routes towards normalisation of the economy.
LCCI has been working on how to open the economy and the papers we have prepared will be shared with government.
We need to take big decisions in the current situation and if we don’t take these hard decisions, things will move from bad to worse which we cannot afford.
What is your estimate about the GDP losses amid the crisis?
Ans: This is a big blow to the economy amid the lockdown. This is not an ordinary thing. We have moved from bad to the worst. The economic growth rate has come down to 1.5 percent and if the crisis continues, the very rate is estimated to fall to – 2.2 percent. We have to be very careful while dealing with the challenging conditions.
What will be impact of COVID-19 on the employment rate?
Ans: Yes, the impact of COVID-19 will be long lasting a large number of employees have been rendered unemployed and in order to contain unemployment we have to open all the sector under their SOPs and if we don’t do that unemployment will shoot up which will trigger criminal activities and the situation will be difficult to control by the government and it is, therefore, the government should start opening various sectors ensuring the SOPs to be able to overcome the challenging situation. All the stakeholders, including trade organisations, associations and the chambers should be taken on board in this regard. We want the government to discuss with us in adopting a comprehensive strategy for the future.
Importers have been complaining about the exorbitant demurrages and detention charges being charged by the private terminal.
Why are the port and shipping companies not following direction of extension in free days and defying orders of government?
Ans: Yes, demurrages and detentions have become a major issue during the crisis. We are cognizant of the fact that the shipping companies are minting money in the difficult times which is not good. We persuaded Federal Board of Revenue (FBR) in this regard and the board has directed them to further increase 15 free days but most of the shipping companies are defying the directions. It is not understandable as to why the companies are not action upon on the direction. On the other hand, these shipping companies have allowed free time to India while in case of Pakistan, they are reluctant to do that. However, we are persuading the issue and hope that it will be addressed soon.
Irfan Iqbal Sheikh, Lahore Chamber of Commerce President is owner/Director & CEO of Al-Fatah Departmental Store. This firm is also importer of various items i.e. crockery, food products, fitness equipment, cosmetics, etc,. He is General Secretary of All Pakistan Retailers Association and also President of trade Body Lahore.
For the acknowledgement of its dedicated and devoted social services, Al-Fatah has been bestowed with various awards and credits at various levels. We are very grateful to Almighty Allah for enabling us to serve humanity in the best possible ways. The detail of some of the key acknowledgements is given below, not to hum the songs of Al-Fatah but to encourage the well-off of the society to come up and serve humanity devotedly.
Al-Fatah is the leading departmental store of the land of pure, Pakistan. Serving since 1941, Al-Fatah has been offering an assortment of products to its precious customers. From grocery to crockery, garments to jewellery, toys to kids wear, kitchenware to ornaments, electronic gadgets to fitness equipments,Al-Fatah is the leading departmental store of the land of pure beauty products to health care accessories our valuable customers find each and every product of the best quality under one roof. Around thousands of customers per day quench their thirst of shopping from this landmark that has been their trustworthy shopping mall for more than seven decades now. Currently three spacious branches of Al-Fatah are providing services in Lahore and Faisalabad. The mega project of Al-Fatah Store is under construction in Lahore that would be accomplished in the near future inshaAllah. The prospects of Al-Fatah are quite bright as we plan to expand our chain of stores not only in Lahore but in other parts of the country, including Islamabad, Karachi and Peshawar, etc.
The journey of success began in 1941, when Al-Hamra Store was established in Tolington Market at Mall Road Lahore. Al-Fatah Store – the prestigious super store of that era, it was refurbished to Al-Fatah Store, the prestigious super store of that era, in 1958. In 1974, the second branch of Al-Fatah was established in Liberty Market, Lahore. Owing to renovation and rehabilitation process of historical places of Lahore by the government of Punjab, Tolington Market Branch had to be shifted to Shadman Lahore in 1990. The duration of 1985 to 1998 was quite significant in the history of Al-Fatah. In order to meet the compatibility of the modern era, many significant changes were made in Al-Fatah Store. Buildings were extended, departmentalization took place, and in order to meet the demand of increasing numbers of customers, warehouses were extended. Al-Fatah kept on with its dedicated services, resultantly, in 2009 and new milestone was achieved with the inaugural of two branches, one in DHA Lahore and the other one in Faisalabad. This brought a tremendous response from our valuable customers that encouraged us a lot. Therefore, we plan to increase our chain of stores in future. The mega project of Al-Fatah Store, Hussain Chowk, Lahore is in its final stages and meets with all of the international standard requirements for a mega store. That, indeed, would be a feather in Al-Fatah’s cap. This is merely a beginning. With the help of Almighty Allah, we humbly plan to develop a chain of stores in entire country and play our key role in the development of our society.