LCCI chief urges govt to follow China in facilitating businesspersons

Gwadar Pro

Lahore: President of the Lahore Chamber of Commerce and Industry (LCCI) Mian Nauman Kabir has urged the government to follow China in facilitating the businesspersons.

He believed that the increase of 2.5 percent raise in markup rate by the Pakistani government in the present economic scenario was a surprise as the business community was expecting a cut by the State Bank of Pakistan (SBP).

The LCCI President maintained that 2.5 percent increase would hit all sectors of economy hard. The State Bank of Pakistan should withdraw massive hike in mark up rates and bring it to single digit to encourage new investments, for revival of businesses and to give a jumpstart to the economy which is at standstill, he added.

In a statement, he mentioned that business grew in China as they facilitated the businesspersons. He contended that the increase in markup rate would have dire consequences on our economic growth rate.

“It will surely hinder the process of Industrialization and private sector growth. Pakistan should bring its markup rate at par with the regional rates which are much lower,” he opined.

Kabir said that being the premier business support organization of the country, LCCI was of the view that the Monetary Policy of the country should support Industrialization. Unfortunately in the past, the successive Governments used the policy of increasing interest rates to control inflation.

“This policy failed miserably. Instead of curbing inflation, this policy of increasing the interest rates resulted in rapid De-Industrialization in the country, resulting in negative GDP (Gross Domestic Product) growth rates,” he remarked.

He compared that the markup rate of 12.25% prevailing in Pakistan was considerably higher than other economies in the region – China 3.7%, India 4%, Bangladesh 4.75%, and Sri Lanka 5%.

“This essentially means that access to finance which is imperative for the growth of industry is already more expensive in Pakistan as compared to other economies in the region,” he underscored.

The credit availability to private sector in Pakistan is currently only 17% of GDP which is also the lowest in the region”, the LCCI President added.

He noted that since the government is the biggest borrower in Pakistan, any increase in interest rate also increases the borrowing cost of the government, resulting in worsening of fiscal deficit. The fiscal deficit in Pakistan is already in excess of 8% of GDP.

He mentioned that high markup rate is one of the biggest reasons of high input cost of the industrial sector. Resultantly, Pakistani merchandise facing hard competition in the international market, he stated.

The LCCI President claimed that high markup rate was no more sustainable. “It has been causing a great harm to economy and would continue to do so unless and until a realist approach is adopted,” he underlined.

The LCCI President observed that despite higher inflation all the major economies have either curtailed or are in the process of reducing high interest rates to protect their economies while countries like Japan, Switzerland and Denmark were maintaining markup rate under zero.