The devil within

LAHORE: Pakistani entrepreneurs are generally optimistic and proved their resilience to bounce back after each economic shock caused by state incompetence. But it does not seem so any more as despair is seen in their eyes instead of hope.

Around two dozen industrialists gather every Friday at the office of the ghee mill located at the Quaid-e-Azam Industrial Estate Lahore. After offering Friday prayers in the Mosque located in the premises, they lunch together and discuss their respective issues.

This has been going on for decades. This scribe attends this launch meeting once in a while to get the pulse of what is going on in different sectors of the economy.

All participants are progressive businessmen from different sectors including, auto vendors, spinners, garment exporters, chemical manufacturers, medicine manufacturers, edible oil producers, plastic products manufacturers, LPG distributors and importers.

Pakistan has passed through numerous painful economic cycles in the last two decades. But this particular group always remained positive.

Their basic contention always used to be that with a young population holding majority in Pakistan, the need for more goods and services to cater to their growing needs would always be there, as the youth the world over, are the largest consumers. They always discussed plans for expansion of their capacities even in recession. Most of the regular participants continued to grow at a compound annual growth rate of 20-30 percent.

This Friday this scribe saw disappointment on their faces. They are at a loss as to how they can get through the current period of total madness, where government writ is extremely low.

They have seen the rupee hammered in the past as well, but never saw the currency going through constant volatility. They still believe that the demands of all products would rise further, but the young consumers have no resources to buy even half of their requirements.

Industries are sitting on huge unsold stocks. Prices have gone mad. Spinners produced yarn from cotton brought at high prices, but there are no buyers.

Garment producers have produced export consignments, but the foreign buyers have asked them to hold the shipments. Fresh apparel orders have almost dried.

Market is completely dry for the chemicals manufactured locally as industries are operating at truncated capacities.

Some auto-vendors that never laid off their staff have been forced to give marching orders to at least 30 percent of their workforce.

Medicine manufactures cannot produce numerous drugs because of price issues. Ghee and edible production is down as the uptake has declined by 30 percent due to massive increases in rates in the last two years.

The economy has not slowed down, it is crawling according to the industrialists. They said the biggest blow to production was because of the denial in the opening of the letters of credit. The government in fact decreed that each industry could import only half the quantity of inputs that it imported a year earlier.

This has automatically slashed industrial production by up to 50 percent because of dependence on imports. The small and medium enterprises that act as vendors for the manufacturing sector saw their orders truncated by 50 percent.

The SMEs cannot survive on such massive cuts in orders. Some have closed and most have laid off 30-50 percent staff.

The lunch participants pointed out that the economy would not move in top gear even if all restrictions are removed immediately.

The foreign supply chains have redirected the orders cancelled by Pakistani importers to other destinations as there is more demand for components or accessories globally due to supply chain disruptions. Moreover, the closed SMEs would need finances to restart which they do not have.

All in all, the industrialists paint a gloomy picture of business prospects, as well as the overall economy, with consumers holding extremely low buying power.