Pakistan unveils $54bn budget amid opposition protests

Pakistan’s finance adviser, Abdul Hafeez Sheikh said President Imran Khan has committed to permanently correcting economic imbalances. (AFP)
Updated 12 June 2019

Pakistan unveils $54bn budget amid opposition protests

  • Pakistan has struggled for decades to collect taxes
  • Only around one percent of the 200-million strong population filed a return in 2018, according to estimates

KARACHI: Pakistan’s government on Tuesday presented its federal budget for the next fiscal year, with a total outlay of 8.2 trillion rupees ($54 billion) — 38.9 percent higher than the size of the budget for this year.

Hammad Azhar, the country’s minister for revenue, proposed the budgetary measures for the upcoming year amid protests from opposition parties.

Pakistan’s total debt had reached 31 trillion rupees due to high-interest loans taken out by the previous government. Foreign exchange reserves had dropped below $10 billion and the current account deficit had reached $20 billion with the trade deficit at a staggering $32 billion, Azhar said.

He also outlined government measures to sustain the economy. “We have reduced trade deficit, while remittances saw an increase of $2 billion. The current account deficit dropped by $4 billion,” Azhar said.

Pakistan has allocated 1.86 trillion rupees for public sector development projects. Tax collection targets have been set at 5.55 trillion rupees, 12.6 percent of the tax to gross domestic product (GDP) ratio, while tax revenue targets have been set at 5.8 billion rupees.

The federal government will transfer 3.25 trillion rupees to the country’s four provinces under the National Finance Commission. The fund transfer reflects a 32 percent increase compared with the last fiscal year.

 

Government spending has been reduced from 460 billion rupees to 437 billion, said Azhar, adding that the defense budget would remain the same as last year at 1.15 billion rupees. “There will be no compromise on the efficiency of the armed forces,” he said.

The minimum wage has been set at 17,500 rupees, the minister added, announcing a 10 percent cut in the salaries of members of the Cabinet and federal ministers.

With corporate tax fixed at 29 percent for the next two years, Azhar announced that the minimum taxable income would be reduced to 600,000 rupees per annum — the previous government had increased it to 1.2 million per annum.

Meanwhile, over 40 billion rupees in subsidies are to be handed out for electricity and gas, resulting in a 12 billion rupees monthly decrease in circular debt in the energy sector.

“Financial mismanagement resulted in a 2.26 billion rupees deficit, and the circular debt in the energy sector reached 1.2 billion,” Azhar said.

General sales tax remains unchanged at 17 percent, with an increased duty on luxury items. Sales taxes on sugar, fish, meat, and chicken have been increased to 17 percent.

The duties on liquefied natural gas were reduced from 7 percent to 5 percent.

The minister proposed to allocate 20 billion rupees and 15 billion rupees for the Diamer-Bhasha and Mohmand dams, to cater to Pakistan’s growing water scarcity.

The government has formed a new ministry to eliminate poverty, which will introduce programs for social safety. People who will benefit from the “Ehsaas” program include the poor, orphaned, homeless and disabled. It also announced a ration card scheme, whereby 80,000 people will benefit from interest-free loans, while 60,000 women will be given access to mobile phones.

Pakistan’s economy grew by 3.3 percent this fiscal year, its lowest in nine years, compared with 5.5 percent the previous year and a six-year average GDP growth of 4.5 percent, according to the Economic Survey of Pakistan issued on Monday.

FASTFACTS

3.3% - Growth in Pakistan’s economy this fiscal year.


INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

Updated 18 August 2019

INTERVIEW: Philip Morris International mideast chief on using hi-tech to progress toward a smoke-free future

  • Tarkan Demirbas tells Arab News how smart technology will woo 9 million Gulf smokers and reduce risk

Alongside politics and religion, there is one other dinner party subject virtually guaranteed to push people to opposing extremes: Smoking.

In much of the world — especially the West but increasingly in the Middle East and other emerging markets — tobacco has been marginalized to the point where smokers feel shunned and lonely in many social environments, banished to pavements or poorly ventilated kiosks in airports.

After a series of multi-billion dollar lawsuits around the globe for the undoubted bad effects smoking has on health, Big Tobacco — the giant multinational companies that made billions out of the nicotine habit but neglected to say exactly how bad it was — is nowhere near as big as it once was.

All of which leaves Tarkan Demirbas with something of a challenge. He is vice president for the Middle East of one of the biggest tobacco companies, Philip Morris International (PMI).
Think Lucky Strike and the Marlboro Cowboy, legends of the industry and of marketing before grim, litigious reality overtook
the business.

BIO

BORN • 1968, Erzurum, Turkey.

EDUCATION • Bogazici University BSc Industrial engineering. • University of West Georgia, MBA.

CAREER  • Senior management positions at PMI in Hungary, Colombia, Malaysia, Singapore, Switzerland. • Vice President Middle East.

Demirbas is on message for the new anti-tobacco era. “There is no doubt that the best way to reduce the risks of smoking is to not smoke or use any nicotine product at all,” he said recently at an event in Dubai’s Capital Club, an oasis of tobacco-friendliness in the anti-smoking desert of the Dubai International Financial Centre.

On the surface, that seems a strange line from somebody who for the past 15 years has been promoting PMI’s products around the world, from southeast Asia through Budapest and on to Bogota with a stint at PMI’s Swiss HQ along the way.

But it coincides with a new direction PMI has taken. The new buzz-phrase in the company is “a smoke-free future.”

PMI launched the initiative with a “commitment and ambition to replace cigarettes as soon as possible with better alternatives to smoking for the millions of men and women who would otherwise continue to smoke.”

That might sound like turkeys voting for Christmas, but there is a sound business logic, as Demirbas explained. “The reality is that the vast majority of smokers simply do not quit. Even the World Health Organization’s own predictions forecast that there will continue to be more than 1 billion smokers by the year 2025,” he said.

“This is why a growing number of experts believe that public health policies should not be based solely on discouraging initiation and encouraging cessation, but need to leverage the potential of scientifically substantiated smoke-free products for the benefit of smokers and public health,” he added.

Technology is key to the campaign, and the product that PMI has come up with is IQOS. The Dubai event marked its regional launch. Imagine a slim mobile phone with a stubby cigarette sucking out of one end, encased it in a stylish carrying case-cum-charger, and you have an idea of IQOS.

Unlike other electronic smoking devices which vaporize nicotine juice, avoiding the harmful effects of the pathogens produced by burning tobacco, IQOS stays with the weed but does not burn it.

By heating tobacco sticks — called Heets — that look like mini-cigarettes to 350 degrees Celsius, the nicotine that smokers crave is released, but the tobacco is not burnt. Demirbas cites respected scientific sources as well as PMI’s own research indicating that 95 percent of the harmful by-products of tobacco are avoided.

Amid jokes that the Marlboro Cowboy would find it hard to use IQOS and ride his horse at the same time, nicotine-hooked cigarette smokers at the event said the result was pretty close to the “real thing.”

There is potentially a big market to go for, globally as well as regionally. Worldwide, some 150 million people use PMI’s tobacco products, still overwhelmingly traditional cigarettes. By 2025, he aims to get 40 million of those onto heated tobacco products like IQOS.

“This year, our priority is to go deeper into existing launch markets. We are encouraged by the results to date, including that there approximately 8 million smokers who have completely abandoned cigarettes and switched to IQOS. Japan is the best example of IQOS’ success, where we have achieved nearly 17 percent of the national share of the market,” he said.

IQOS is currently in nearly 50 markets, including Japan, Korea, Canada, a number of European countries such as Germany, the UK and Spain, as well as Russia, Ukraine and Colombia.

PMI passed a significant milestone in its campaign to go global with IQOS when the American Federal Drug Administration authorized IQOS and other variants. It will market its products in the US in partnership with Altria, the big investor which has made a commitment to the “smoke-free future” with multibillion dollar funding of Juul, the market leader in the worldwide vaping craze.

 “There are 40 million American men and women who smoke. Some of them will quit, but most won’t, and for them IQOS offers a smoke-free alternative to continued smoking,” Demirbas said.

Progress towards smoke freedom remains elusive in China, the world’s biggest market, where PMI markets Marlboro and in turn promotes traditional Chinese tobacco brands around the world.

The UAE joined the list of countries heading smoke-free last year when an IQOS stand appeared in Dubai International Airport’s duty free section. The UAE was ambivalent about the value of trying to lure smokers off tobacco and onto safer products, with the Emirates’ health authorities warning against the use of e-cigarettes and vaping devices. 

But the IQOS airport stand was a sign of a change of heart, and was followed by public pronouncements that vaping would also be made legal. Users in the UAE had previously resorted to some pretty furtive measures to get their nicotine fix, but non-tobacco nicotine products appeared to be here to stay, judged by the large numbers of people seen sucking on devices in many outdoor public places.

After the UAE launch, non-cigarette nicotine is going mainstream. The Heet sticks will be on sale for around DH20 (SR20) per pack — roughly the same as a pack of Marlboro — in most traditional smoking shops, while the devices — retailing at around Dh250 — will be sold in Carrefour supermarkets and, eventually, branded flagship stores.

Demirbas sees the UAE as a testing ground for expansion into other Middle Eastern markets, with Saudi Arabia high on the list of targets. PMI already knows there is an appetite for its device in the Kingdom from the large numbers of Saudi citizens buying them at Dubai airport.

At the airport, they have to present national ID cards or passports as proof of age — 18 is commonly the age limit for buying tobacco products in the Gulf region — as well as making a declaration that they are already smokers who wish to quit cigarettes. “I stress that we are trying to convert existing smokers, not trying to get anybody started on nicotine,” Demirbas said.

“From a public health standpoint, we see great potential for reduced risk products in Saudi Arabia. In our view, it is important to set the right regulatory framework to ensure companies adhere to best practices and comply with local legislation with the adult consumers of these products in mind, particularly as alternative forms of nicotine consumption are being recognized in leading global markets, including Saudi Arabia,” he said.

“Our ultimate goal is to convert all the 9 million adult smokers across the GCC, who would not otherwise quit, to IQOS,” he added.

PMI faces significant competition in its mission. Juul, the trendy but controversial device that has grabbed a big slice of the global market as the “iPhone of the vaping business.” Several other vaping products already have a foothold and a cachet that could be challenging for PMI.

At the Capital Club, the test audience for the IQOS launch was a mixed band of cigarette and vape users who gave the new product serious consideration. Some were sold on it straight away, others said they would give it a try and were gifted samples by PMI. The stylish look of the new product was a big selling point for the tech-style savvy consumers.

Others were put off by the charging process that has to be carried everywhere and used between smokes. One complained that the taste was simply too similar to the cigarettes he had been trying to kick for years.

As Big Tobacco seeks to reposition itself in the new anti-smoking age, the multibillion dollar nicotine industry will always be controversial. Maybe IQOS will be the hi-tech product that helps millions finally kick the smoking habit. Demirbas hopes so.

“We’ve invested $6 billion in it. It’s the most advanced technology there is,” he said.