Former finance and prime minister Shaukat Aziz is not optimistic about a free trade agreement with the US saying that even when Congress was very friendly, they couldn’t get things through.
Even thing promised like Reconstruction Opportunity Zones in border areas of Pakistan did not happen, said Aziz in an interview with CNN Fortune.
The idea was to give duty-free access to the US market for any goods produced in tribal areas.
“Congress has approved other special market access programmes like this for Haiti and Jordan, and maybe others. It was promised by the US five or six years ago but nothing happened,” said Aziz.
Aziz, now 64, was elected prime minister in 2004 and was the first of 23 predecessors to serve out a full-term until 2007. He took up residence in London soon after and now serves on the board of the British hotel chain Millennium and Copthorne Hotels and as an adviser to the Blackstone Group.
“We really need to re-focus on these things so that when peace returns in the area, especially in border areas, people will have alternatives for making a living,” Aziz said.
“You’re talking about very small numbers for textile market, but symbolically it’s very important because it will give people hope,” Aziz added.
State of the economy
Despite regular eruptions of bad news, Aziz remains cautiously bullish about the country’s prospects.
Problems of world economy have obviously leaked to Pakistan, he said.
“Yes, investment is down, trade also, but in Pakistan’s case a lot of this is due to the security situation, war on terror,” he said.
“We have to pay a huge price in terms of damaging our investor confidence – both domestic and foreign,” Aziz said.
Foreign investment dropped 59% to $305.4 million in the first five months (July to November 2011) of fiscal year 2011-12, according to State Bank of Pakistan.
Being out of the IMF programme obviously reflects the desire of the government to have more flexibility to pursue its reforms, said Aziz.
IMF suspended the standby loan programme for Pakistan, as Islamabad failed to bring reforms in taxation and power sector. The programme was halted before the release of the final two tranches worth of $3.4 billion.
“IMF programme does bring with it certain macroeconomic discipline and that’s beneficial, but I also believe in economic sovereignty,” Aziz added.
Pakistan has to start paying back the $8 billion International Monetary Fund loan in early 2012.
“You need good governance and good management to succeed. What we need is growth and job creation, like every other country in the world,” said Aziz. Clearly, the country is facing a challenging situation financially, and tax reform has been an issue. “It’s true there is low tax compliance, but you have to look at political impact – not just economic impact – of taxes,” Aziz said.
“The pie has to get bigger for you to collect more taxes. You can’t squeeze the lemon if there’s no juice in it,” added Aziz.
Published in The Express Tribune, January 11th, 2012.