Two Years of PTI-Led Government: No clear-cut export strategy two years later

ARTICLE: The second full year of the PTI Government has come to an end. While the government is lauding its achievements the people are still wondering what happened? Most do not perceive themselves as better off in the last two years, many feel much worse off. The fact is that the search is still on for a path out of poverty that over whelms our country. Where is that magical path, and who knows how to take us there? The PTI Government is not clear at all. Does this path lye in the hands of our rich friends in the Middle East, who will bakhsheesh us into wealth? Or could our hard working well wishers from over the Himalayas build us a Naya Pakistan? Then present it to us as a fabulous gift and meekly go back to the other side of the Himalayas? Or could it be the rulers of the modern western world, they also hold the purses of multilateral aid agencies? They will once again take our finger and lead us into fresh restructuring programs which will unleash such an amazing economic recovery that we will join the ranks of the successful? We run back and forth, from one to the other, but find no way out of our current morass. Then Covid-19 struck, eclipsing all other activity, and now we are back again, at square one.

Like all other countries that have developed over the last fifty years, we have to rely upon our own ingenuity and our own resources, to find our own solutions. Others can only assist; they will not do our work for us. If we can promote our exports particularly value added textiles, leather, foot wear, sports goods and most of all value added agricultural products, we have a good chance to ignite the engine of growth in the economy and create fresh jobs and earn foreign exchange. Before the Nawaz Sharif era our exports were growing at a reasonable pace despite the over valuation of the Pakistan Rupee. Then Mian Sahibs desire to make the rupee exceptionally strong, and overvalued. The object was price stability at any cost as this buys popularity. So imports became cheap, and exports were discouraged for the ten years of his reign. Our new masters have put in an independent Governor at the State Bank who maintains that the value of the Rupees will reflect the market. As the rupees were "freed" a massive devaluation took place and lo and behold exports are feasible again. Just when a bewildered export industry was getting its house in order to win back lost customers the government imposed a 17 percent Sales tax across the board. Knowing fully well how difficult it is to get back sales tax refunds from the government the industry despaired. Only those with deep pockets could carry on. The new Government said that they will fix it and export refunds will be processed within 72 hours! As expected the FBR could not get its act together and by October 2019 the situation was desperate. The industry was on its knees pleading for a life line. A Towel Manufacturers Association study in November 2019 showed that only fifteen percent of the refunds applied for had been paid. Regarding the rest: there was no news. Even worse 30 percent of the towel manufacturers had not even applied, hoping to apply once the path had been cleared by the "Big Boys."

The result at least in the towel industry was a blood bath. Most of the small scale manufacturers went bust, many of the medium scale ones could only keep going partially and even the big boys were suffering. Islamabad was full of frustrated industry representatives begging and pleading for the sales tax refunds the government had promised in 72 hours. Then in mid-January this year a miracle occurred! The Government changed course and decided to start paying the refunds due to the exporters. The applications were suddenly processed and payments sent off to the exporters: just as promised but six months later. Nobody could believe their luck! So those who had survived really revved up their engines and started exporting aggressively. Those who had died got a present to ameliorate their pains. Then, wonder of all wonders the export refunds and incentives promised by the previous government also started getting paid!

Unfortunately all these efforts were put on hold by Covid-19 and now we are backing again to square one.

Fortunately there are two positive developments over this summer. The State Bank has generously funded the Covid-19 affected factories to pay their wages with soft loans. This has worked and many factories that would otherwise have gone for massive layoffs have not done that. Such factories are in a far better shape to restart production and exports as demand builds up again. Perhaps this explains the burst of exports in June and July. Possibly firms in other countries took much longer to restart than we did. The effects of Covid-19 in Pakistan have been less severe as well than in our direct competitors, India, Bangladesh and even Turkey. Now as they restart, the going will get tougher.

The effects of incentives, especially on exports are not immediate. It takes months to put mothballed machinery back into shape, get the old workers together or to get extra shift work. Most important the foreign buyers are loathing shifting suppliers frequently. So if they are to shift they have to be convinced that we are there for a period, and this is not just another whimsical measure of the Pakistanis. Unfortunately we do not enjoy a very good reputation in the world markets as reliable suppliers.

If the government can hold its promises to the exporting industry to allow it a level playing field as compared to our competitors we will find a space in the world trading pattern for Pakistan.

The PTI Government had promised us

1) Quick and fair sales tax refunds without heavy speed money,

2) Inputs of energy at regional prices,

3) As much energy as we need and no winter rationing for industry,

4) A price of cotton and other inputs which should reflect world prices: and not above that.

All these are not pro export policies these are just neutral policies.

Gas Infrastructure Development Cess

It has been decided that this will be levied on the industry. The Supreme Court has validated the decision. It is not for us to question the basic principle, but just to remind the Government not to burden the exporting industry with extra levies in one guise or the other. The price of our energy, be it gas or electric, must be similar to what our competitors are paying. It must not be jacked up by extra levies.

In fact most Governments promote their exporting industries. The intentions of all Pakistani Governments, except a handful, have also been the same. In actual practice these intentions remain lip service and no measures except cosmetic ones are ever implemented. Pro export policies can be short term and long term and that is a separate debate. At the moment all that we exporters are asking for is just a continuation of the measures that the PTI Government started implementing in February this year. Not much to ask?

2 Yeas of Performance From Burden to Self-Reliance! USC: A Flourishing Entity

Utility Stores Corporation of Pakistan Private Limited (USC) was established in July, 1971 by taking over 20 retail outlets from the Staff Welfare Organization. USC is registered as a Private Limited Company under Companies Act, 1913 subsequently called Companies Ordinance 1984 (now called Companies Act, 2017).

One of the main objectives of USC is to provide basic food items to the public at controlled rates under one roof to eradicate illicit profiteering and hoarding.

To accomplish its prime objectives, to ensure transparency and accountability, to make the Corporation a profitable entity and to protect real income of the people of Pakistan, USC always procures commodities in compliance with Public Procurement Regulatory Authority (PPRA) rules to ensure availability of ample supply of all food items at the Utility Stores.

In the year 2017-18, USC was a loss making entity as it had a total inventory of Rs.5.64 billion in its warehouses and stores. With such a low inventory, USC was not able to achieve its break-even.

If we compare performance of USC in this government with its performance in previous era, it would be evident that due to negligence and political hiring in past, USC was a loss making entity and a burden on national exchequer.

As USC is the largest chain of retail stores network across the country and has always responded quickly in providing relief to the people of Pakistan, ensuring food security, the Prime Minister, on seeing potential in the Corporation launched the Prime Minister's Relief Package on January 8, 2020.

In this Relief Package, a special grant of Rs. 5 billion was provided for purchase of goods and Rs. 1 billion was granted in terms of subsidy to be delivered to common people. From the awarded subsidy, not only people got relief, the performance of USC also improved significantly.

The proof of improved performance is supported by facts as USC had monthly sales of Rs. 300 million in the previous years and now it has started selling more than Rs. 8 billion a month and the debt owed by the corporation has also been settled gradually. Moreover, the Corporation is now self-sufficient in paying salaries of Rs. 570 million approximately to its over 12,000 employees since January, 2020 along with paying a yearly increment to all employees during the month of Ramadan.

In the first phase of the Prime Minister's Relief Package, the federal government announced subsidies on five basic food items namely sugar, ghee, wheat flour, pulses and rice, which continued till April 17, 2020.

The federal government expanded the scope of the Prime Minister's Relief Package during the month of Ramadan by announcing subsidy on 19 products including five basic items (sugar, wheat flour, ghee, pulses and rice).

Two Years of PTI-Led Government: USC achieved benchmark of Rs. 22 Billion Sales, highest in its history

During the month of Ramadan, under the Ramadan Relief Package, USC achieved benchmark of Rs.22 billion sales, highest in its history. PTI led Government not only provided relief to the people through Ehsaas Program but also gave relief through USC by providing subsidy on staple food items.

Also, USC served 35.18 million households during this tenure. The stocks inventory of the Corporation has also increased from Rs.5.6 billion as on June 30, 2018 to Rs.15 billion as on May 30, 2020 whereas sale of the USC has increased from Rs.9 billion in FY 2018-19 to Rs.50.832 billion in FY 2019-20.

Now, USC is one of the largest tax payer entity and during the period from July 2019 to May 2020, USC has contributed Rs.7.09 billion tax to the national exchequer.

While there is still room for improvement, the way USC management and workers have ensured food supplies to the public since the beginning of this year, regardless of the spread of Covid-19, is admirable.

Implementation of Essential Services Act

On seeing positive role of USC, the Government of Pakistan imposed Pakistan Maintenance of Essential Services Act 1952 in USC for a period of six months initially to ensure food security in all areas of Pakistan and to keep on supplying staple food items at a subsidized rate.

USC Responsiveness on Covid-19

Despite outbreak of Covid-19, over 4,881 retail outlets of Utility Stores remain open for the public to maintain continued supplies of food items at prices lower than open market. While maintaining supplies and fulfilling demands, apart from the challenge of spread of Covid-19, USC management and workers faced various challenges including non-availability of suppliers, transporters and curtailed working hours.

Future Endeavors

Future endeavors of USC includes but not limited to Corporate Governance, Human resource Development - Training, Development and Performance Evaluation, Digitalization - Automation of USC, Operational Efficiency - Market Penetration and Joint Ventures, Financial Benefits - Rationalization of Operational Expenses and enhancing Profitability, Amendment in Service Rules and Management, Own Brand and Consignment Based Supply Chain Model, Commercial Basis of Business, Creation of Job Opportunities, Network Expansion and Distribution of Ration Cards, etc.

Tahir Jahangir Chairman, Towel Manufacturers' Association of Pakistan (Tripos in Economics from the University of Cambridge, England)

Copyright Business Recorder, 2020