Haunting economic underperformance

Mansoor Ahmad
Sunday, Oct 10, 2021

LAHORE: Businessmen need clarity on economic issues to chalk out their future plans. Those committed to stay in their beloved country no matter what comes, would plan a different strategy if they have a clear roadmap of government policies.

Pakistan lacks resources to embark on any ambitious development programme or to address the concerns of manufacturers, traders, service sector or agriculture.

The solutions though are simple; the state has to ensure full compliance with existing rules and regulations. However, political repercussions of this approach are very severe.

The government cannot afford to open all fronts as it lacks both resources and manpower to handle all issues. Enforcing discipline in any sector would bring temporary hardships for the people.

It should start with the manufacturing sector. There is a need for dialogue on economic issues between all stakeholders as the businesses need clarity of policies, particularly in the present murky times, while the government needs to understand the issues impeding growth.

Many government policies need change or fine tuning. The planners would have to formulate a policy that is in supreme national interest.

They should realise that addressing the issues of one sub sector of manufacturing could create problems for another subsector. Still maintaining the status quo would not improve things. Clear, stable and long-term policies for each sector should be announced and implemented. On the basis of these policies, the investors would evaluate whether it is viable to invest in industry or go for a more lucrative commodity business. They might as well be tempted to invest in the services sector where the profit margins are higher.

In the present uncertain times, businessmen are holding back investment due to uncertainty. They do not know if the government will ever be able to balance its budget or resolve the governance issues.

Last but not the least; the entrepreneurs are not certain as to what will happen in the next 45 days. The government seems indifferent to the demographic bomb that may explode into anarchy if three million jobs are not created every year in the next decade.

Present state of affairs has created doubts in the minds of majority entrepreneurs in our ability to become a developed country. What we need is investment in labour intensive industries.

It is futile to welcome foreign investment on lucrative concessions from motorbike manufacturers, when we are already producing bikes more than our demand. Such investments do not make a dent in unemployment and since the bikes are marketed domestically, the investors start taking profit back home as soon as the production starts.

The government of Pakistan should attract foreign investment in the apparel sector that creates a higher number of jobs per million-dollar investment than a mega industry that creates an investment of $1 billion. Moreover, almost all the big industries cater to domestic needs only, whereas the apparel sector, even with a small investment, is the largest exporting subsector of textiles. The share of this sector in government subsidies on power and energy and mark-up are also nominal compared with the spinning mills.

The apparel sector has the potential to take our exports to new heights. Government planners should show clarity in handling the textile sector. There are sub-sector specific trade bodies in the textile sector. All Pakistan Textile Mills Association comprises spinning, weaving and processing mills. The Pakistan Hosiery Manufacturers Association (PHMA) has all knitwear manufacturers as its members.

Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) represents the garment producers of the country. Then there is an association representing towel exporters and another that comprises bed wear exporters.

The chairman of PHMA Shahzad Azam Khan and chief coordinator PRGMEA Ejaz Khokhar have urged the economic planners to deal with issues of each sub sector with the specific association only. They demand that state planners should give a shut-up call to any of these associations if they put forward suggestions and plans for the promotion of another subsector.

This will help planners to come up with a better strategy for the promotion of each subsector. If the other associations are permitted to encroach on the domain of the other, there is no need for sector specific associations.

Genuine entrepreneurs know that government debt and its huge appetite for loans is crowding out credit for the private sector. Inflation is a scourge that can only be controlled through prudent fiscal management.

The tendency to reduce annual development expenditure is taxing the already ruined infrastructure. The taxpaying entrepreneur would always remain on edge if the nontax paying parliament continues to decide on the levy and use of taxes without representation of taxpayers.

Despite these drawbacks, they simply want the state to consume its meagre resources to create jobs in the country.

The immediate issue for the government is to get the impasse with the International Monetary Fund (IMF) resolved without burdening the masses with additional taxes.

The Covid-19 shock has devastated our economy that survived the pandemic on foreign loans and moratorium on debt. But the debt has to be paid back. Sadly, we are living on edge and have made no planning to absorb or withstand the economic shocks.