KARACHI, July 29: The after-shocks of corporate failures in the United States are being felt in Pakistan, where exporters are bracing for a drop in trade.
The President of the Karachi Chamber of Commerce and Industry (KCCI), Haroon Bari, said Pakistan’s exports would fall because of the erosion of business confidence in the United States following the accounting scandals.
KCCI, the largest trade body in the country, is gearing to meet a shortfall in sales to the United States, which is one of Pakistan’s biggest markets.
“We are consulting with our members and considering visiting the US,” Bari said. “We hope we can avert the losses.”
Industry analysts here said the US corporate failures had weakened international stock markets and contributed to the fall of the dollar, taking away the price advantage countries such as Pakistan.
Trade Minister Abdul Razak Dawood said last week the fall of the dollar was causing concern, but expressed the hope that the exchange rate would soon become stable. The rupee gained by nearly half a point last week.
“I am fairly confident that the rupee will stabilize within a narrow band we have seen before,” Dawood said.
The loss of confidence in the United States has come at a bad time for Pakistan, which unveiled a new trade policy last week that aims to raise exports by 13.4 per cent to 10.4 billion dollars in the financial year ending June 2003.
However, there is a more optimistic school of thought in Pakistan that includes Bari’s predecessor as KCCI predecessor, Zubair Motiwala.
“We will remain unharmed as most of the US corporate failures belong to the IT or energy sectors and we do not have much business and growth in these two sectors,” Motiwala said.
He said the country’s primary exports to the United States were clothing worth about 1.9 billion dollars, a very small fraction of total US imports.
Pakistani Finance Minister Shaukat Aziz is also upbeat that the country has been spared any fall out from the accounting scandals.
Aziz believes that reforms introduced by the military regime of General Pervez Musharraf are beginning to pay dividends.
“We excessively worked for improving accounting standards and corporate governance and there was some resistance (initially) because people said you are being too tough,” Aziz told AFP.
“But, it turns out that Pakistan’s stringent corporate regulations were on the right track.”
A code of corporate governance promulgated in December 2001 made it mandatory for listed companies to publish their financial results quarterly instead of once in six months or a year.
Pakistani auditing firms have also been banned from acting as “corporate consultants” for their clients.
“It is fair to say that Pakistan is in the leading edge of countries where governance and accounting reforms have... taken (place) well before the current (US) crisis,” Aziz said.
However, he stressed the need to build a global system of corporate and accounting standards.
“I think this is the area where the whole world has to work together,” he said.—AFP