FinMin admits some firms leaving Pakistan amid high taxes, expensive energy

• 20 new foreign investors entered Pakistan's market: FinMin.
• Says investors include Google, Aramco, Wafi Energy, Turkish Petroleum.
• Adds nearly Rs 1 trillion wasted annually due to inefficiency in state firms.

Finance Minister Muhammad Aurangzeb on Wednesday admitted that some firms are leaving the country due to high taxes and expensive energy, stressing that the government is fully aware of the challenges facing the economy.

However, the finance minister said there are 20 new foreign investors, including Google, Aramco, Wafi Energy, Turkish Petroleum, and others entered the Pakistani market in the last 18 months.

“There are firms which are also leaving that is true..if the taxation is high or the energy cost is high or its financing cost is always moving in the right direction, those have been real issues,” he said while addressing the Pakistan Policy Dialogue in Islamabad. 

The finance minister said that high taxes and high energy cost remain "real problem for businesses," adding that the government has begun reforms to reduce the burden on the national exchequer and bring economic stability.

FinMin Auragzeb also pointed out the business models of firms leaving the country. “But those firms which have been able to look at business models..because it takes two to tango, what the government has to do, and what the private sector has to do, and if you have wedged into their business models for the last 50 years it's not going to work in the New World Order.”

The finance minister said some of the multinational firms switched to local sourcing "because of that their margins are fine [and] they are now able to export, therefore they stay."

“And If another firm has not been able to do that, then that’s something we know they need to think through,” he added.

Aurangzeb said that structural reforms are underway across the country and that the transformation process of the Federal Board of Revenue (FBR) is continuing.

"Compliance and enforcement are essential to ensure implementation of tax laws," he added.

The minister said that the tax policy is now with the Ministry of Finance, adding that the FBR's role is limited to collecting tax revenues.

Regarding state-owned enterprises, the minister said that nearly Rs 1 trillion is wasted annually due to the inefficiency of some state-owned institutions.

"According to a report, we are losing close to a trillion rupees every single year, and we can put it to much better use as we go forward," he added.

Aurangzeb said that as part of cost-cutting measures, Utility Stores, PWD, and PASCO have been closed due to "corruption" in the subsidies. He said that 24 organisations have been handed over to the Privatisation Commission, adding that Pakistan International Airlines (PIA) privatisation saw participation from local investors.

Addressing public debt, he said that interest payments remain the largest expenditure and that a Debt Management Office has been established to improve efficiency.

"Last year, Rs85 billion was saved on interest payments, and similar savings are expected in the current fiscal year."