It Is Not The Pakistani Businesses Hurting Pakistan As Much As The Multi Nationals When It Comes To Our Foreign Reserves.

Life Story - Bussiness - It Is Not The Pakistani Businesses Hurting Pakistan As Much As The Multi Nationals When It Comes To Our Foreign Reserves.

It is a fashion these days to blame the Pakistani businessmen for hurting our foreign reserves by being import dependent businesses. Every channel, every economic analyst, every genius Anchor keeps harping on how are dollar reserves are going down. How imports have increased tremendously during the previous 8 years. How an important dependent economy can is a double edged sword.

One, it depletes our foreign reserves. Two, it kills productivity locally. True. Very true. But the problem is not our imports alone. Imports can be curtailed with policy focus and some hard hitting taxes and the problem will be mostly controlled. The problem of imports only. Will our foreign reserves be safe then? Absolutely not.

The real culprit is the Multi-National Corporations, a Dragon dressed up as a cute kitten.

Did you know that a multi-national can send all its profits abroad every year, year upon year, to its parent company anywhere in the world by converting its rupee based dividend into dollars, for example.

If an MNC makes Rs 150 billion in net profits, it can declare it all as a dividend, convert it into dollars and send it back to its country of origin. One MNC can make up for what 2800 small corporations worth of damage when it comes to sending foreign reserves abroad.

Simple example, Unilever imports 75% of its raw material from overseas, according to its own CEO. Just imagine a behemoth like Unilever importing 75% of all the material for its products, hurting the foreign reserves right at the beginning of the process. Then selling it within Pakistan at exorbitant prices, making huge profits, declaring those profits as dividends and converting them into dollars and sending them abroad without a single amount restriction. The entire process is hurting Pakistan from the inception to the end.

Do not think for a second that I am singling out Unilever. I have no connection or beef with them. I am quoting its own CEO from an interview it gave to a local newspaper when it comes repatriation of profits and its raw material imports.

Every MNC without fail is doing the same thing.

So much so that car manufacturers are importing most of their raw material and parts from overseas. One small fluctuation in Dollar/Rupee parity and the prices of the locally “Assembled” not locally “Manufactured” cars go through the roof. Nowhere in the world does this happen. We might as well allow all cars to be imported from overseas. Except the people working at the auto assembly plants, how many other peripheral industries are created related to the auto assembling plants ? When the parts are imported, not many in my view.

Us Pakistanis and our governments are so hungry for Foreign Direct Investments since our inception that we forget what is good for our own economy when someone shows up with a $1 billion dollars. No country in this world has ever grown economically on FDI whilst forgetting the domestic economy. If you cannot protect your domestic economy plus your domestic financial markets while soliciting for foreign investments, then you are hunting in a swamp full of snakes without an anti-venom in sight.

Of course the dividends have to be repatriated to the foreign businesses who invest in Pakistan. Of course they have to make money when they invest. But of course Pakistan has to be protected as well. Its economy has to be protected as well. We need a framework where there are limitations as to how much can be sent back in profits each year, especially for the first 10 years of any foreigner investing in Pakistan.

We are so afraid to legislate laws that protect our own interests because we are more concerned about pleasing the foreigners or foreign investors. Unless and until a day comes when we become eager to please the domestic investors, pump up our domestic economy, give preference to our domestic businessmen, create a level playing ground for our domestic businessmen, create an absolute ease of doing business for our domestic investors,

Pakistani economy is not going to grow. Period.

Now to the solutions part. The solutions are many if the will is there to implement them. We cannot rock the boat either nor can we implement ad hoc policies.

We have to have two sets of policies. One for the new investors coming in with the FDI and one for the existing ones. Since the existing MNCs have been the biggest beneficiaries for decades, we need to have different set of rules for them. Perhaps only 40% of the dividends can be repatriated the first few years, certain percentage of retained dividends should be reinvested with a lower tax bracket and so on.

For the auto sector, the rule should be that if you establish a plant in Pakistan, within a certain number of years, you should also manufacture the parts locally under the supervision of the foreign parent company so more jobs are created within Pakistan and foreign currency fluctuations are not going to leave a negative impact on the prices.

I can write 50 solutions. And the ones in power know the solutions more than me and better than me.

The question here is not if the solutions are there. The question here is

Do They Want To Implement The Solutions ?

Comments (11)
Hamad naeem / September 23, 2019

Sir could you please write about other solutions as well?
I am a first timer here and your words have flowed like a symphony. Such simple and easy vocabulary. Please sustain.
Hamad from Peshawar.

uncle viner Electric wine opener gift set / October 1, 2019

Kudos, Excellent stuff.

URL / October 26, 2019

… [Trackback]

[…] Read More here: […]

Phillis / December 2, 2019

This is very interesting, You are a very skilled blogger.
I’ve joined your feed and look forward to seeking more
of your great post. Also, I have shared your site in my social networks!

Bev / December 6, 2019

I couldn’t refrain from commenting. Well written!

Tesha / December 18, 2019

Hi there, I log on to your blogs on a regular basis. Your
writing style is awesome, keep up the good work!

Buddy / December 18, 2019

Ahaa, its pleasant conversation regarding this
piece of writing here at
this web site

search engine optimization podcast / December 19, 2019

Great delivery. Solid arguments. Keep up the good

Mildred / December 20, 2019

I?ll immediately grab your rss feed as I can?t to find your e-mail subscription link or newsletter service.
Do you?ve any?
Please let me recognise so that I may subscribe.


Micheal / December 25, 2019

I am hoping to give something again and aid others such as you aided me.

Rosemary / December 27, 2019

Thanks for excellent
info I was looking for this info for my mission.


Leave A Comment