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Ishrat promises trade to revive consultative bodies

RECORDER REPORT

KARACHI: Dr Ishrat Husain, Governor, State Bank of Pakistan, has promised to revive the consultative bodies for more interaction with the trade bodies.

He was replying to a point raised by Mahmood Ahmed, acting president, FPCCI, during a meeting with FPCCI managing committee and life members held on Wednesday at the Federation House here.

Mahmood, in his address of welcome, had said that FPCCI and other trade bodies had been deprived of whatsoever minimum contact they had with the State Bank through the advisory committees such as National Credit Consultative Council, Industrial Credit Advisory Committee, committee on overdue export cases etc.

He said that in on-going interactions for policy formulations instead of institutions, individuals are being invited, which practice has not yielded positive results.

Dr. Ishrat said that profit-making is an important incentive for indulging in any economy activity but it should be made within economic comparative environment instead of manipulation of taxation laws to the detriment of the society.

He called upon FPCCI and other trade bodies to strengthen their research work by engaging professionals, not only to guide the members of business community but also to help the economic planners, by identifying and analysing problems confronting the trade and industry.

He said that General Amjad, Chairman, National Accountability Bureau, had asked him to convey to the FPCCI members that honest and genuine businessmen and bankers have nothing to fear from the on-going process of accountability.

MARK-UP

As regards the demand for further reduction in mark-up rates, the SBP Governor said that the mark-up rate and return on national savings schemes were related to inflation rates in the country, and added that if the present inflation rates continued there would be room for further reduction in mark-up rates.

He said that the banks were concerned that the private sector credit was not picking up and, unless this happened, "we cannot have high growth rate", without which there would be a lot of social problems.

He called for induction of professional managers in the industrial set-ups so that they are able to work efficiently. He called for diversifying the economic base of the country and venturing into new areas of technology and service-related information technology and promotion of exports.

He said that if Pakistan secured one percent share of world exports its exports would increased from $8 billion to $40 billion. He said that the days of tariff protection to the local industries, which had become complacent with too much of protection, were over and the local industries would have to be competitive in order to survive.

EXPORT REFINANCE MISUSE

He expressed concern over misuse of export refinance and said that according to a study although exports have remained stagnant during 1994-99 the export finance has tripled. He called for suggestions to make the export refinance scheme beneficial to export promotion.

He called for expeditious repatriation of export proceeds so that the reserves level of forex may increase.

It was clarified by businessmen present that the increase in export finance during last few years was due to increase in export items coverage.

In reply to queries about the Shariat Court's judgement on Riba, he said that until new laws were formulated the present banking laws would continue. He said that the Shariat Court judgement has identified 16 laws which needed to be changed. Furthermore, the State Bank has constituted a commission to study and formulate recommendations how to comply with the injunctions of Sharia. He said that Islamisation of banking system would pose no problem in project financing as there would be some tangible assets against which borrowing would be made but the problem would arise for government borrowing through treasury bills and bonds.

Shaukat Tarin, President, Habib Bank, referring to the demand made by FPCCI acting president the State Bank should fix the maximum cap on the bank mark-up rates, said that the new mark-up rates declared by various banks are their maximum rates. For example, he said, his bank's maximum mark-up rate is 16.75 percent and added if any of his branches was charging a higher rate, the matter is reported to him.

Rashid Chaudhry, Allied Bank, President, said that the maximum rate charges by his bank was 16 percent.

Referring to the demand for implementation of bankers' committee on revival of sick units, he agreed that the matter has been held up on account of issuance of a circular by SBP that all cases of rescheduling of loans would require approval of State Bank, and said that he has taken up the matter with the Deputy Governor, SBP, and expressed hope that the matter would be resolved.

Khalid Nawaz Khwaja, MCB acting president, stressed the need for a focus on small industries sector and exports. He said that the banks have surplus liquidity as genuine investors are not coming forward.

M Naseem Malik, Deputy Managing Director, IDBP, Begum Akram Khatoon, President, First Women Bank, Mohammad Ali Sheikh of NDFC and Kumail Habib of Bank Al-Habib were also present.