KARACHI: President of the Karachi Chamber of Commerce and Industry (KCCI) Shamim Ahmed Firpo slammed State Bank’s decision to impose 100 percent cash margin on import of a number of consumer items.
He said that this imprudent move was likely to promote smuggling and inflate prices of many items, resulting in intensifying the hardships not only for the concerned traders but also for the general public.
In a statement issued, President KCCI noted that the requirement of 100 percent cash margin has been prescribed on items such as motor vehicles, mobile phones, jewelry, cosmetics, personal care, electrical and home appliances etc. “Except a few items in which 100 percent cash margin has been imposed, most of the items are used in almost every single household across Pakistan therefore, the State bank’s claim of having nominal impact on general public was completely baseless”, he added.
He said that the relevant importers and suppliers were forecasting a 60 percent drop in imports of these items which would obviously results in creating severe shortages and trigger inflation, having a deep impact on public.
Shamim Firpo particularly pointed out that 100 percent cash margin requirement on import of Mobile Phones would adversely affect all the mobile phone importers who have invested heavily in this industry and have contributed billions of rupees to the national exchequer during the past several years.
He said that with the same level of investment, the business would shrink by 60% and if the same rate of return on equity was maintained, the price will inflate significantly whereas those who are working with banks on different financing arrangements such as Finance Against Imported Merchandise (FIM), Murabaha and Running Finance etc. will not be able to do business at the same scale after this regulation.
This regulation will give ample opportunities to parallel economy to flourish and reduce government’s revenue as no rational businessman would double the investment in Mobile phone industry which has a history of fluctuating duty structure and inconsistent import policy, he added.
He was of the view that some major importers, who have substantial liquidity available with them, will stay afloat whereas majority of the small importers whose businesses were operating purely on the basis of credit, will be completely wiped out of the scenario.
President KCCI pointed out that although the State Bank claims to bridge an alarmingly high trade deficit through this move but instead of devising such discouraging and anti-business steps, the government should seriously focus on devising an effective strategy on war-footing basis to deal with Pakistan’s depleting exports.
It seem that the government has remained totally unsuccessful in all its attempt to improve the descending exports hence, they had no other option but to block the imports in order to deal with widening trade deficit and save foreign reserves to clear country huge debts, Shamim Firpo said, adding that instead of taking steps to reduce the cost of doing business which was the only way to improve Pakistan’s competitiveness and enhance exports share in the foreign markets around the world, the government decided to penalize the importers which was not the right solution and must be condemned.
He urged Federal Finance Minister and Governor State Bank to review the entire situation and immediately withdraw the unjust decision to impose 100 per cent cash margin on import of numerous consumer items, which would provide relief to perturbed traders and go in favor of the masses. He hoped that the decision makers would pay attention to this serious issue, hold consultations with stakeholders prior to implementing such decisions which directly affect trade & industry and take those steps which are in favor of the economy, businesses and the masses.
