Fiscal, trade deficits big challenges: Abbasi

Wednesday, April 16, 2008
By our correspondent

KARACHI: Federal Minister for Commerce Shahid Khaqan Abbasi has said that the large fiscal deficit and the widening trade gap, besides power shortage, are major challenges for the coalition government which will be addressed on priority basis.

He said this while speaking at the inaugural session of a two-day South Asian Tax Conference organised by the Karachi Income Tax Bar Association (KITBA) in collaboration with Nutshell Forum here on Tuesday.

He said the job of the government was to provide a conducive environment where businessmen could do their business freely.

Regarding access for Pakistan’s products to other countries, he said, “we are trying to get greater access to markets of other countries through Free Trade Agreements (FTAs) and Bilateral Trade Agreements.”

He also felt the need for an increase in the tax base by reducing the number of taxes, saying a few years ago inter-district taxes were abolished during the second tenure of Nawaz Sharif’s government and stressed on the need for adopting e-taxation system. “We do not like to pay taxes but taxes are a legal responsibility.”

“It would be a great challenge to change the tax regime or the tax structure to allow the business community to do business,” the commerce minister said.

Earlier, Federal Board of Revenue Chairman Abdullah Yousuf said regional cooperation for development was an issue of great concern worldwide, particularly for developing economies of South Asia. He said the region showed growth rates of 4 to 5 per cent in the recent past but accelerating and sustaining economic growth of 8 to 10 per cent and ensuring that its benefits were shared with the poor was an enormous challenge.

“Trade liberalisation, fiscal and monetary policies, particularly tax policies, pose a serious challenge to regional cooperation,” he said and maintained trade liberalisation and regional cooperation under the SAARC provided a tremendous scope for member countries to grow and develop. He said complete elimination of tariffs under the South Asia Free Trade Agreement (SAFTA) might increase intra-regional trade by 1.6 times.

He said the intra-regional trade was 4 to 5 per cent of the world trade of SAARC countries compared to 60 per cent for East Asia and pointed out that Pakistan’s trade with SAARC countries was only 3.3 per cent of its total imports and 4.4 per cent of total exports in 2005-06.

He underlined that low trade complementariness among member countries together with absence of comparative advantage in capital-intensive and high value-added products, restrictive trade policies and high level of protection, lack of cross-border transit points and integrated transport networks, political conflicts as well as differences in economic perceptions were the major impediments in the way of intra-regional trade.

“Total informal trade in the region is estimated at about $3 billion, of which Pakistan alone accounts for 68 per cent,” Yousuf disclosed and said the value of informal trade between India and Pakistan stood at $0.5 to $2 billion.

Income Tax Bar Association Karachi President Abdul Qadir Memon said “we have gathered here at a time when the global economy is in crisis and its outlook is increasingly grim.” He said it was predicted that emerging economies like China and India were likely to post robust growth but, according to the Asian Development Bank, most of the South Asian countries might miss their Millennium Development Goals. He said according to the ADB the Asia-Pacific region would require a massive capital investment of $4.7 trillion.

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