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No MFN Status for India: Farooq Afzal - Analysis of Financial Statements

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Highlights - Corporate News

Prominent industrialist asserts liberalised trade with India could prove deadly for local industry and employment  Granting most favoured nation status to India will deal a fatal blow to Pakistan s industries  contended prominent industrialist, Farooq Afzal.  

In a recent exclusive interview with BR Research, the Chief Executive of Integrated Textiles Network (ITN) and Chairman, Economic Co-operation Organisation Friendship Forum raised concerns over the implications of liberalised trade with India.

Afzal highlighted that at present,  India is exporting goods worth more than $4 billion to Pakistan through direct and indirect means while Pakistan s exports to the country are only about $300 million .  He added that this skew shows that Indian industries are much better poised to dominate local markets because of their scale and expertise.

 Given this state of affairs, what do you think will happen to Pakistan s industries if we were to open up our markets completely for Indian products?  he questioned rhetorically.  While admitting that many products will be available at relatively cheaper rates for Pakistanis, Afzal contended that the trade off will cost the country dearly as  local industries will be run out of business by much bigger Indian competitors that have the ability to dominate the local market .

The ardent opponent of liberal trade ties with India alleged that  those business leaders and policymakers who support the granting of MFN status to India will benefit from this arrangement by simply becoming marketing and distribution agents for Indian companies in Pakistan but their personal benefits will run contrary to Pakistan s interests of nurturing and expanding its industrial base as well as generating employment for the booming youth population .

Sour over SAARC

Farooq Afzal is equally unimpressed by the SAARC chamber which is constituted by Pakistan, India, Bangladesh, Sri Lanka, Bhutan, Maldives, Nepal and Afghanistan.  He asserted that  among the member countries, some of the members are very small populations and their markets are completely dominated by Indian products .  He said that Bhutan and Maldives are  literally in India s pocket  while based on geographical proximity and historical relations, Sri Lanka and Bangladesh  are also more inclined to trade with India .

Besides,  even companies like Sapphire and Nishat are no match in terms of scale compared to their Indian competitors  he added.  Afzal claimed that due to rapid advancements, Indian firms are now challenging Pakistani companies even in areas such as home textiles which have long been considered Pakistan s strongest areas of manufacturing .

 If Bangladesh and India are so keen on developing trade in the region and in helping us expand our industry, then why is it that these countries are the most vocal and staunch opponents to Pakistan being granted concessions on textile exports to the European Union?  questioned Afzal.

Referring to the expected announcement of the Trade Policy FY12, he urged policymakers to take a leaf out of reforms introduced by Asian tigers such as Vietnam and consider national economic interests before taking steps that determine the future of the country s industries and commerce.

Solid trade with BRIC

 We must move towards the BRIC nations as conventional markets of Europe and North America are largely saturated and at the same time we are contending with tariffs and non-tariff barriers there  said the Chief Executive of ITN, adding that within these markets, Russia and China can prove to be especially lucrative for local exporters.

He dispelled the notion that Russian and Central Asian economies are loath to doing business with Pakistan.  Afzal contended that since the Cold War, Pakistan has historically leaned in favour of the United States and limited its diplomatic ties with Russia.   But this has not been our own choice, rather it is a condition that has been imposed on us  said Afzal.  He stressed the urgent need for developing the country s foreign policy on an independent basis that promotes cordial relations with all nations of the world.

 We have to expand our reach to a broader spectrum of buyers and that will work well for the entire industry  he said adding that  when trade expands, it drives diplomatic relations towards better co-operation and harmony as well .

Destination: Central Asia

 Azerbaijan, Turkey, Iran, Tajikistan, Uzbekistan, Kyrgyzstan and Afghanistan are all countries that are readily accessible from Pakistan and we can really capitalise on export opportunities in these countries  said Afzal.  But the biggest trade avenues lie in Russia, according to the industrialist.

He explained that during his tenure as an office bearer of a committee of the Federation of Chambers of Commerce and Industries (FPCCI), Afzal visited Siberia, Tajikistan and many regions of Russia multiple times.  He claimed that this exposure revealed to him the scale of the markets in that region.

 Russia s textiles market is worth more than $72 billion while just the home textiles market in Russia and its surrounding states is worth more than $25 billion  he said pointing out that at present China and Turkey are dominating this market with  Chinese textile exports valuing over $15 billion while Turkey s exports stand around $8 billion .  By comparison, Pakistan s textile exports to the region stand at a dismally low $80 million.  But Afzal asserted that even this quantum is an improvement that has come about after 2004.

Being a huge and geographically diverse market, Russia also has the capacity of absorbing exports in other sectors.   They have a market worth $5. 7 billion for fruits  said Afzal adding that Pakistan s oranges, kinnows, potatoes and other edibles would be well received there.  He highlighted that  last year Pakistan sent 2600 containers of kinnows to Russia but the potential is much more than this and other products such as potatoes are also in very high demand there .

Changing perceptions

Decades of little state-level interaction and a foreign policy which is fixated with the West, has created many artificial psychological barriers among local business owners about doing business in Russia, according to the Chairman of the Friendship Forum.  He claimed that for this reason, the country s policymakers are able to overlook Central Asian states when allocating contracts even when these countries are in a position to provide more cost-effective solutions.

 Russia can help Pakistan overcome the energy crisis.  They have mobile power plants that would be lot cheaper than similar technology which we have currently obtained from Turkey  asserted Afzal.  He also pointed out that  Russia installed Pakistan Steel Mills, yet our policymakers are now allotting the repair contract to China even though the technology is all from Russia .

Pakistan should consider implementing preferential trade agreements with Russia and other Central Asian states which identify specific products so that the country gains from such a deal.  Then the government should subsidise the export of these products while also creating awareness among local business about each of the 80 regions of Russia.

However Farooq Afzal is not putting all his eggs in the government s basket.   Members of the private sector should itself look for business themselves.  Once this process gathers pace, the policymakers will have no choice but to create a further enabling environment for local businesses  he asserted.  He said that some business owners have ventured to that region in recent times and these players have found lucrative markets awaiting them.

Drawing focus to the ensuing economic crises in Europe and the Americas, Afzal contended that Central Asian countries are relatively insulated from the repercussions of these problems.   Add to this, the fact that they have vast untapped reserves of natural resources as well as huge markets that have not been catered sufficiently as yet and you can see that the future lies in this region  Afzal summed up.

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All information and data used are from reliable source(s) and subjected to extensive research after diligent and reasonable efforts to determine the soundness of the source(s).  This analysis is not for the benefit of or discredit to any person, scrip or tradable instrument.  The content(s) of this analysis shall not be construed as an advice or recommendation to trade.  No relationship of client will be created between Business Recorder and user of this information.  Professional advice must be taken by the reader before making investment/trading decisions.  BR disclaims any liability for investment(s) made or liability accrued on basis of this analysis.  The content(s) including all opinion(s), statement(s) and information are subject to change without prior notice and/or intimation.

COURTESY: Economics and Finance Department, Institute of Business Administration, Karachi, prepared this analytical report for Business Recorder.

DISCLAIMER: No reliance should be placed on the [above information] by any one for making any financial, investment and business decision.  The [above information] is general in nature and has not been prepared for any specific decision making process.  [The newspaper] has not independently verified all of the [above information] and has relied on sources that have been deemed reliable in the past.  Accordingly, the newspaper or any its staff or sources of information do not bear any liability or responsibility of any consequences for decisions or actions based on the [above information].

 

Courtesy: Business Recorder


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