By Razi Ahsan
NEW ECONOMIC WORLD ORDER AND OUR BUDGET 2020-21 We are on the verge of a new Economic World Order. The Survival of the fittest! The Dollar has lost its subsistence with the USA seeking opportunities for revive its worth and for that they need to acquire assets, they have adopted the tested model of East India Company i.e. they are trying to get hold on assets and resources in other regions. To enter in other regions initially they are ready to give loans, support package vide IMF, its worth mentioning that USA is the major donor of IMF and holds its 17.5% shares and donates $17 Bn annually, the appointment of the President of World Bank cannot be finalize without the consent of USA. Recently to control the oil reserves in Venezuela international player’s staged revolts, protests, strikes between the leftes vs righties. The strategy is to create economic difficulties and when the countries become bankrupt provide them huge loans, financial support and finally take over there assets and resources for next 50 or 100 years! The currencies GBP, Euro are on a down slide. The major change on economic horizon is the induction of the Chinese currency in IMF. That has seriously damaged the Dollar’s exclusivity and its dominance. In last decade Chain was force to stop while they were digging for copper in Afghanistan now US has offered them a partnership to jointly takeover the assets in Afghanistan, Africa and Central Asia. Whoever jointly or separately hold these resources will rule the world. Our Budget 2020-21, in the current scenario should not be a traditional budget, it has to be a customize budget. The sole objective should be to assure survival of our Large and SME units OR we might burden our self with heavy loans and would end up by mortgaging National Assets for 50 plus years. Pakistan a land of abundant resources having a population of over 220 million the 6th largest (around 3% ) of the world and 33rd largest having an area of 881,913 Km2 (around 0.59%) of Earth size. Two-thirds of Pakistanis aged below 35 years (Avg age 22.5 Years), a declared and accepted Nuclear State. If we are planning to finalize the Budget 2020-21 where we can compare the last year standards e.g. Real GDP Growth @3.3%, Fiscal Deficit PKR 3.1 Trillion, Inflation 7%, Tax to GDP Ratio 13.9%, FBR Revenue Target Rs 5.5 Trillion, Net Public debt to GDP Ratio 74.2% then the new investment is out of question rather the investors may withdraw their current investments as well. This is unfortunate that Government is planning to finalize the budget without taking all stakeholders on board and by mere discussing with so called experts. Implementing some marginal amendments in previous budget will lead to economic collapse. The upcoming budget should reflect the emergency measures taken by the Federal and Provincial governments. The focus should be to ensure survival of Businesses. If FBR is of the opinion that they could achieve the recovery Targets by enforcing New Taxes or through undue Audits they are extremely wrong. The Global approach is to support the businesses by providing them relief. In the United States Internal Revenue Service (IRS) announced Tax relief have suspended installment Payments, enforcement for delinquent return filling for Tax debts and have extended tax deadlines etc. UK announced the tax relief which includes but not limited to deferral of Taxes. Dubai government announced an economic package to enhance liquidity, which includes refund of 20% of the customs fee imposed on imported products sold in Dubai, 90% reduction of fees imposed on submission of customs documents, “freeze” on 2.5% market fees levied on all facilities operating in Dubai, Reduction of “municipality fees” imposed on sales at hotels from 7% to 3.5%, freeze on “fees” charged for the sale of tickets, issuance of permits and other government fees related to entertainment and business events, reduction in water and electricity bills by 10% and reduction in deposits paid for water and electricity connections by 10% They have also relaxed the bank guarantees and cash requirement rules. The Government should seriously consider Tax relief package because the lockdown and health issues already created substantial economic shock. Fixed Cost and Taxes that require regular payments are impacting the liquidity of businesses. The governments should consider special relief package as per sector, the Tax relief should be broad-based, should reflect long-term policy to minimize the impact of distorting markets which may undermine the long-term recovery. The policymakers should also fix the distortive tax policies that could impede recovery efforts. In Pakistan the SMEs generally run on low liquidity, retail outlets usually maintain their businesses not on stable cash flow but on their enterprising skills. They use to manage the credit cycle with their suppliers. With new taxes survival of such these Businesses is doubtful, they are facing difficulties in paying regular salaries, electric bills, rents and other fixed cost. The Industrial sector (Including medium and large) have no exception they don’t have unlimited and inexhaustible Cash flow. Businesses depends on the circulation of money in the current scenario the major industrial undertakings may have to opt for lay-offs Experts are of the opinion that now survival of Businesses will depend on the Business Model they adopt. At present the sustainability of business is under question. The Pandemic has changed the entire equation. At present the main issue is reliable Supply Chain, population, consumption, product demand is almost the same but the availability of product, the mode to access that product and off course its payment and the E-Commerce management is doubtful. According to an experts, at national level there is no funding Issues, loans, supporting funds are available recently we have received around $1.4 Bn, from IMF to address the economic fallout of coronavirus outbreak. IMF is willing to reschedule and for some countries granting waver of loans. The G20 Countries are also rescheduling there loans, China is providing accessories, equipment’s and otherwise support infect international loans are not an Issue. I recall Ambassador Alice Wells in November 2019 at Wilson Center where she referred projects amounting to $27 Trillion in Maldives, a country of less than half a million people, but now they are facing an enormous debt that constrains the next generation of Maldivians and half of this external debt is owed to Chinese lenders but such investments and loans have agenda there is no free lunch. It’s highly probable that WTO will re-write their standards. The Tariff will likely to increase, reduction in Imports is expected will restrict to the most essential items, Anti-Dumping Clause needs revision. Britain who is considered as the mother land of democracy has changed their policies, people will surely remember Margaret Thatcher a prominent leader of conservative party, who put all her efforts to ensure minimum state’s involvement in the life’s of common citizens, they supported the theory that State is the facilitator and the Market forces will shape the economy. But Boris Johnson has different approach infact he attempted to suspend the parliament and tried to send them on force leave. He appointed selected people to run the committee on covid19 issues, these people are not elected and are not answerable before the parliament, when his minister Sajid Javid Chancellor of the Exchequer showed reservations with his policies he fire him and on very next day appointed Rishi Sunak. What can anyone expect from the queasy Democracy like ours? Across the globe the populous governments are expected to come forward to support the Indigenous material and products, we also need government support. Now we need to play it by ear, have to act spontaneously and according to the situation. No fixed game plan is feasible. Communication and supper active new business models is the need of the day, could anybody have imagined that the biggest Car manufacturer in the USA is now manufacturing Ventilators. Year 2020-21 The Buzz Words is Health Care and now this will be the mode to penetrate in poor countries having resources, whoever take that over either China, USA or Europe will rule for next 50 to 100 years. That is the New Economic World Order. The government has to seriously engage into a Problem solving discussion with the Business community and with all stake holders to find answers. They must look into the options of revising our Tax structure, policies and its enforcing mechanism, otherwise businesses will either completely shut down or will opt partial layoff, resulting in No or very nominal tax collection, Unemployment, high crime rate, losing of our National assets. Razi Ahsan Advocate High Court & Tax Consultant A.K. Shamim & Co – Law Firm
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