INTERVIEW WITH QAISER AHMED SHAIKH, FORMER PRESIDENT KCCI.
Family is in business since 1883.
Parliamentarian: Member of National Assembly of Pakistan (1997-1999) Chairman, independent group members of National Assembly of Pakistan (1997-1999)President, Karachi Chambers of Commerce and Industry (1987-88) and Aiwan-e-Tijarat - o-Sanat Hospital Trust (1998-99)
Board of Governors of Foundation for Advancement of Science and Technology (FAST).
Board of trustees National University of Computer and Engineering Sciences.
Board of Governors of Mahboob-ul-Haq Human Development Centre (HDC) for South Asia.
Board of trustees Chiniot Anjuman Islamia Managing Committee Karachi Chambers of Commerce and industry (1979-83) and (1985-87).
Managing Committee Federation of Pakistan Chambers of Commerce and Industry (1982-1987) Tax reforms Committee of the Govt. of Pakistan 1990-1991.
National Assembly Standing Committee, on Population Welfare (1997-1999).
Chief Executive Officer Established joint ventures with 50:50 foreign equity investment Qaiser LG Petrochemicals (Pvt.) Ltd., a chemical manufacturing company, in collaboration with LG group, a multinational conglomerate of South Korea.
Qaiser Noman Bernas (Pvt.) Ltd. with Bernas of Malaysia, a semi government company having exclusive right to import rice in Malaysia.
Qaiser Noman Bernas (Pvt.) Ltd., received export trophies awards from president of Pakistan/Prime Minister of Pakistan for Five consecutive years from 2000 to 2004.
LG and Bernas were motivated to bring foreign investments to establish chemicals and rice plants in Pakistan.
QAISER BROTHERS (PVT.) LTD.
GADOON INDUSTRIES (PVT.) LTD.
PAGE: WHAT IS YOUR TAKE ON BANK FINANCING TO BUSINESS COMMUNITY?
QAISER AHMED SHAIKH: The banks have not provided sufficient financing to business community. Most of the financing goes to government. Private sector has to complete cumbersome procedures and provide collaterals to get funding for even viable industrial, agriculture and commercial ventures.
PAGE: WHAT COULD BE THE REASONS FOR NON-PERFORMING LOANS?
QAISER AHMED SHAIKH: There are number of reasons for non-performing loans:
A) Loans are provided in collusion with business people and banks officers on fake unviable ventures. From the very first day, these loans are obtained with wrong intentions.
B) Very high rates of mark up, expensive rates and short supply of electricity and gas made the projects unviable.
C) Wide fluctuations in prices of commodities during last 3 years. The prices of crude oil went up to $147 per barrel and then reduced to as low as $38. Similarly, copper prices went up to $9000 PMT and went down to $4000 PMT. Other commodities like cotton, rice, rubber, tin, and sugar witnessed similar fluctuations and due to so wide, abrupt up and down in prices of various commodities many businesses suffered huge losses.
D) Due to adverse law and order situation, businesses suffered losses.
PAGE: WHAT WOULD YOU SAY ABOUT FINANCING RATE IN PAKISTAN?
QAISER AHMED SHAIKH: Financing rate in Pakistan is too high. It is much higher than our competing countries in this region.
PAGE: WHAT WOULD YOU SAY ABOUT BANKING SECTOR PERFORMANCE IN PAKISTAN?
QAISER AHMED SHAIKH: Banking sector has not shown good performance. Loans are mainly given to traditional sectors and to limited number of parties. There was time when banks used to advance mainly on the reference and business background of the family. There were minimum non-performing loans at that time. Presently banks advance loans mainly on the basis of collaterals. Parties provided manipulated information regarding their balance sheets and collaterals to get huge funding in collaboration with bank executives, so there were defaults.
Borrowers' business backgrounds, reputations should be given preferences. Feasibility of the project should be assessed and evaluated with proper care by the trained and qualified executives of the banks specialised in this field. Banking executives should be well versed with business trends, price fluctuations, and market information including technological changes. Misdeclaration of values of pledged machineries, properties and inventories in the shape of over or under valuation must be carefully visualised and discouraged.
At present spread of mark up between lending and borrowing rates is too high. It is much more than neighboring countries like China, India, and Bangladesh. Businesses are badly suffering due to high rate of spread, which must be brought down. Large banks are earning huge profit at the cost of businesses and depositors because of this spread. It is high time that incentive in private sector business entrepreneurs should be restored by reducing the spread.
The present laws are in favour of banks. It has become common by the banks to auction the clients' property and assets after pursuing the matter in the courts. Why should entrepreneurs take such a big risk to invest in the scenario of high mark ups at the time of huge fluctuation of commodity prices and adverse law and order situation and scarcity of expensive gas and electricity.
In case of legitimate business losses also, which are so common, nowadays, there are enough chances to lose the precious properties and collaterals provided to the banks. The private sector is reluctant to provide their personal guarantees and mortgage of properties and pledge of inventories in such circumstances, and prefer to get reduced funding from the bank. It is also hurting new investments and overall business atmosphere.
Banks are gaining huge profits at the cost of business and industry. The government must realise hardship being faced by the private sector. This is the reason of reduced inflow of foreign investment and lower recovery of taxes. Banks should minimise their administrative expenses and reduce procedures to advance loans. Banks should facilitate businesses rather than penalising and pursuing legal cases.
PAGE: WHAT WOULD YOU SAY ABOUT THE STRENGTH OF THE COUNTRY'S FINANCIAL SYSTEM?
QAISER AHMED SHAIKH: Pakistani banks have the strength of young, educated, competent English speaking human resource. The network of branches of main banks is widespread in towns. Even in rural areas many branches of banks work. The modern internet and communication system has facilitated business in such far-off places.