KARACHI: Pakistan Businesses Forum (PBF) Vice President/ CEO Ahmad Jawad has said that the government should immediately engage industrialists in policy discussion and try to minimise their problems to ensure at least a moderate growth in large-scale manufacturing during the current fiscal year.
It is true that in some areas — like energy pricing — there is little that the government can do to facilitate exporters except to allow subsidies to continue for a short run. The reason is the International Monetary Fund’s (IMF) conditions that do not leave any room for this, he said.
Continued political and economic unrest in Pakistan has disillusioned entrepreneurs increasingly about the future prospects of their businesses. According to a Gallup Pakistan survey conducted in the last quarter of 2022 for the Gallup Business Confidence Index, 65% of business owners believe their businesses are struggling.
Similarly he believes, government needs to focus on the basic requirements of the entrepreneurs, namely affordable energy, regular supply of raw materials, finance at single digit mark-up, efficient logistics, marketing support for exports, filling of the technological gap and increasing the agricultural yield per acre.
Jawad said Pakistan currently needs to reset its export sector and do it fast. Curbing most imports in the short run, as the country has done, is understandable in the short run, but in the long run, it hurts the economy.
A World Bank report of October 2021 has highlighted several weaknesses in our export sector. The most obvious finding of the report is that “the country has struggled to diversify its exports, falling behind the rest of the world in terms of both products and destinations.”
The report reveals that the number of export product varieties has fallen over the past decade “from an average of 3,167 in 2007-2009 to an average of 2,894 in 2017-2019.”
The report also highlights that in terms of export market diversification, Pakistan has made a negligible achievements. “In 2019, Pakistan reached 8pc of the pool of potential importers, up from 7.4pc observed a decade ago, and while it has made progress, it is still far from countries such as Vietnam (13.2pc), Malaysia (13.1pc) or Indonesia (12.8pc).”
As per the State Bank of Pakistan in FY22, total exports grew by 27% which contributed to LSM growth. The exports to GDP ratio also improved to 10% as compared to the 9% achieved in FY21. Geographically, the US and Europe contributed 55% to Pakistan’s total exports, he said.
But Unfortunately Pakistan’s dependency on a few countries and little or no geographical export diversification poses a dire risk of economic volatility, he added. Simulating the US and EU’s projected decline in growth rates to analyse the impact on Pakistan’s economy envisages a drop of 8.5% in exports and 3.65% in imports. IMF has projected Pakistan’s GDP growth to be around 3.5% in 2022 without considering the flood impact.
The government has projected GDP growth in FY23 to be around 2% after incorporating infrastructure and agriculture production losses. Nevertheless, by taking into account the impact of the global recession, Pakistan’s GDP in FY23 is projected to remain within a range of 2.2% to 1.8%, PBF VP added.
However, PBF Sindh Executive Committee Member Beena Amin says the important question remains the same what impedes provincial governments, particularly in Sindh, from improving civic infrastructure around the industrial estates? And why can’t the provincial government improve the law-and-order situation in Karachi, Pakistan’s economic and commercial hub? Despite the fact if Karachi is stabilised the economic cycle will improve substantially.
PBF Sindh Chairman Mir Murad Ali Talpur, quoting a recent study, said that 23pc Karachiites aged between 16 years and 55 “have directly suffered and lost belongings to street criminals” in the recent past. This high level of street crime prevents growth in business activities.
The dilapidated conditions of road networks around Sindh Industrial Trading Estate (SITE), Korangi and North Karachi industrial areas show how much interest the Sindh government is taking in promoting industrial activity in Karachi. Factories and businesses in these and other industrial areas have long met their water requirements through paid water tankers.
In which part of the world do industrialists do this? What happened to water supply networks in industrial areas? Can we expect that big industry that big industry will grow and SMEs will work efficiently amidst such circumstances? The answer is no, he added.
Copyright Business Recorder, 2022
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