KARACHI: Prominent industrialist Arif Habib expressed on Saturday his full support for the “hybrid system” of governance to keep politicians on the “right track”.

Speaking at a seminar organised by the Habib Public School Alumni Association (HPSAA), the chairman of one of the largest Pakistani conglomerates with substantial stakes in over a dozen sectors of the economy said the military establishment shouldn’t stay neutral when it comes to economic matters.

“The hybrid model is practical. Heads of friendly states meet the army chief [instead of elected leaders]. This model may not be desirable, but it works,” he said while highlighting many instances from the recent past when direct intervention from the military chief helped the country secure bailouts and economic concessions from global institutions and friendly nations.

Welcoming the formation of the military-backed Special Investment Facilitation Council (SIFC), a body set up to attract investment from Gulf nations, Mr Habib said the foreign exchange inflow to mining, agriculture, information technology (IT) and construction can be a game changer for the economy.

The CEO of Arif Habib Corporation Ltd said Pakistan has lost its competitive advantage against regional players because of high tax rates, rising utility prices and a steep cost of funds.

The country should have a negative interest rate — meaning the benchmark interest rate being lower than the rate of inflation — in order to save up to Rs2.5 trillion a year in terms of debt servicing, he said. The excess cash should then be used for targeted subsidies.

Commenting on the impending political change in Islamabad, Mr Habib warned that the transition from one government to another always entails fiscal excesses by the outgoing regime to garner electoral support.

He also used harsh words for the National Finance Commission (NFC) award, a formula last notified in 2010 for distributing national funds between Islamabad and the provinces as well as among the provinces.

The last award increased the share of the provinces in the divisible pool to 57.5pc from 47.5pc while reducing the share of the federal government by 10 percentage points to 42.5pc — an arrangement that provides the provinces with “free money,” he said.

He also criticised the Temporary Economic Refinance Facility (TERF), a Covid-19–era scheme for subsidised loans of $3 billion meant mainly for machinery imports.

Cement players borrowed subsidised funds for expanding production even though one-fourth of the installed capacity in the cement industry remained idle, something that’s reflective of the poor execution of TERF, he said.

Speaking on the occasion, Topline Securities CEO Mohammed Sohail blamed social media for portraying a bad economic situation in an even worse light.

He said the economy was in poorer shape back in 1999 when dollar accounts were frozen and Pakistan faced a default-like situation.

He referred to recent developments like an improved credit rating, stock market rally, uptick in the business confidence index, favourable movements in dollar-denominated sovereign bonds and higher direct and portfolio investments as reasons to be optimistic about the economic future.

Published in Dawn, August 6th, 2023