The grim challenge of import addiction

We are addicted to foreign goods. As a child I remember hankering for foreign chocolates and toffees, as an adult I savour imported salmon, French apples and avocados from New Zealand.

As a nation, we have never been able to make our own bicycles, leave alone motor cars. We hanker for imported silk Bosky, expensive Italian suits, Revlon makeup and German-made cars.

If the car is so much as assembled in Pakistan it loses its value and appeal. The newspapers carry front-page advertisements for expensive Swiss watches, each costing lacs of rupees. The advertisement alone costs 70 lacs so those selling and buying must have crores to spare, and that too in US dollars to be able to import those expensive watches.

When we hit rock bottom six months ago, I thought all things imported will become rare. We were told that our foreign exchange reserves are at a dangerously low level and we may just default on our loan repayments. The newspapers and television carried stories of Sri Lanka where most activity had come to a halt as petrol and diesel were rationed by the government.

We were told that restaurants and hotels had shut down as foreign tourists had stopped arriving while local customers had no money. Even if they had money where would they find extra petrol for their cars to go to the hotels? I used to make a trip to Sri Lanka in the winters to see some friends. I called Gamini, my preferred taxi driver and guide. He told me he would try to buy some petrol on the black market and fetch me from the airport and then take me back there after a week! But nowhere else as petrol was very scarce and most places were closed anyway.

So, obviously, I cancelled my trip.

In Pakistan no such thing happened. Despite scare calls the country never ran out of petrol or diesel. At the height of the crises the government booked 80 new luxury cars for “protocol duties.” The imported blue berries, black berries and Haagen-Dazs ice cream kept flowing.

My fruit vendor informs me that this Ramazan they had a scare that there would be a shortage of dates that people usually break their fast with. Luckily, lots of them arrived from Iran, along with grapes and apples to adorn our Iftar tables. A lot of fruit was also imported from India despite Modi’s ban; it came through Dubai, he told me proudly.

Visit any reputable cash and carry supermarket and you will find their shelves full of imported food stuffs and other items of daily use. There are Swiss Toblerone chocolates, Dutch dark chocolates and expensive boxes of Belgian ones too.

On the grocery shelves there are six different brands of olives, some pitted, some green and some just preserved. There are pickled gherkins, beans and all manner of prepared pineapples and cherries.

As I grow mushrooms for sale I was always mystified by the large quantity of preserved mushrooms for sale. I researched the subject and found that there is a huge market for preserved mushrooms in Pakistan. Apparently, they are used by pizza makers as a standard offer. We may baulk at a chapati selling at fifteen rupees, but happily devour a pizza worth five hundred and fifty! My research was rewarded by astounding results and here they are:

Pakistan’s import statistics for the year July/June 21/22 show:

CAT 20031000 Preserved Mushrooms

QTY: 1488,552kgs, Value: Rs 202,144,000.

A simple division will reveal that the imports value as accepted by customs is Rs136/kg. I find this a bit strange as we are able to sell our fresh mushrooms at Rs800 to a thousand rupees per kilo. This covers our costs and leaves a modest profit. How can the Chinese, from where these mushrooms are mostly imported, not just grow the mushrooms but preserve them, pack them in tin cans, make a profit, ship and land them in Karachi at 15% of our cost?

When we researched a little more I found that those very cans imported at Rs137 were selling in the wholesale at Rs1800/ kg and retailing at Rs2000/ or more. Restaurants and pizza makers are happy to buy these because they can store them for days without refrigeration.

So, what is happening? Kindly draw your own conclusions.

Much the same is happening with most foodstuffs and luxury imports. To cap it all not just the import duties, but the sales tax and income tax are levied on the declared values so the government loses all the revenue on those too.

There is an interesting side-effect of such imports. As the exporter obviously wants his full value he has to be paid from “other sources” than the official remittance allowed by the State Bank of Pakistan. This may lessen the burden on the central bank’s foreign exchange reserves but it does enhance the demand for hundi/hawala money vastly. It appears that underreporting of import values is to the extent of billions of dollars.

The spread between the official interbank rate and open market rate widens, creating further speculative pressure on the rupee. Our domestic industry has been devastated by such imports.

The Pakistani manufacturer has to pay the full sales tax, labour levies, income tax and other charges. The importer escapes all such burdens and therefore supplies imported stuff at very attractive prices.

Coupled with our affection for all things “foreign” there is no hope for the small- to medium-sized manufacturer of any such consumer item. These small-scale workshops, specialist manufacturers are the training ground for modern industry. As a consequence, our small workshops of toys, footwears, electric goods ornaments, and others have been devastated in their “infancy.” These industries are not just training grounds for skilled workers but provide vast employment.

There is no way out of the present quagmire except to curtail all unnecessary imports for some time so that imports contract by about ten billion dollars a year. Informal measures by the State Bank of Pakistan by simply refusing to supply foreign exchange for “inessential imports” are already narrowing the foreign account deficit. This will still allow us to protect our domestic industry for its requirements of raw materials, parts and machinery. It will also allow us to import essential foodstuffs like wheat, pulses and tea at a reasonable cost.

If we do not, I am afraid the current devaluation spiral will choke off all industrial activity and create unbearable conditions for our populace.

Copyright Business Recorder, 2023