Large-Scale Manufacturing (LSM) and export-oriented industry are stressed as never before. They present a depressing picture of closures, layoffs and loss of market share in export business. The plight of the industry is understandable.
It is confronted with the cumulative challenge of rising utility tariffs, withdrawal of subsidies, hike in fuel prices, rupee slide and scarcity of US dollars that is impeding import of raw material for industry plus the unworkable bank lending rates.
With this onslaught, the LSM finds it unfeasible to operate. These factors, in other words, have rendered export industry un-competitive. On top of all these unthinkables is the political uncertainty, leading to money transactions drying out in the market along with a massive decline in consumer demand. Investors and businesses have pulled out their cash from the market and are holding on to it.
These ground realities indicate that the situation is not likely to get any better soon enough. It could worsen on account of foreseen scarcity of foreign exchange to retire mounting debt during the year, a big shortfall in revenue, restrictions on imports and decline in exports.
The International Monetary Fund (IMF) is well aware of the fact that the conditions it has imposed on Pakistan shall stunt the country’s growth. An economic slowdown will certainly hit revenue generation in a meaningful manner. Therefore, a lethal combination of rising inflation, unemployment and cuts on expenditure on public spending will be pushing more people below the poverty line. The IMF seems to be sitting on the fence as it appears reluctant to lend its name when chances of further deterioration are high.
The government appears lost. Sitting back or letting things slip by is not an option. Pakistan’s economy is big enough and there are segments which are not much affected by the said negative factors and can be prompted up. What come out suddenly or forcefully first are the IT industry, agriculture and real estate.
The IT sector basically needs brain power, a work station, WiFi connectivity and a bit of electricity in order to emerge as a formidable industry. With these four in place an entrepreneur is all set to create wealth, job opportunities and items for exports.
Interestingly, this sector could be a one-man show with one workstation or a mega show with multiple workstations and global outreach.
Notably, e-Commerce is one of the great equalizers in online opportunities today. According to a report, currently, approximately 100,000 sellers are registered on the platform from all over Pakistan.
In the last three years, the average income of sellers has increased by 70%, with increasing penetration of smart phones and faster internet performance.
The encouraging part is that all segments of entrepreneurs—singular or plural, poor or rich, urban or rural, all being equally savvy in IT—can venture into this segment of wealth generation.
Agriculture is another sector, which is not much influenced with the said deterrents. Here the requirement is the manpower, seeds, fertilisers and water. Many farmers have moved from the national grid to home- engineered solar systems for tube-well water pumping and other needs.
The only support needed by the farmer from the government is the timely availability of seeds and fertilisers at reasonable prices. In times to come food security would be one of the major challenges for the governments - if not the biggest challenge.
Real estate transactions and construction constitute one sector, which is capable of instant business transactions, thereby generating revenue for the government and kick-starting the construction industry and trading.
Investors and entrepreneurs in real estate have been hounded out of business on account of the fear generated by FBR (federal board of revenue). In the process, the real estate transactions ceased and so did the collection of federal and provincial taxes payable on each transaction.
In the process, the government lost more in taxes and revenue than it gained by attempting to bring the real estate industry into the tax net.
The government must bring this state of fear to an end, woo the investors and entrepreneurs back and work for a bigger objective of money movement in the market. There are more of similar venues of businesses and sources of revenue generation, which are not much influenced by the said disincentives and can be mobilised into action in the aid of country’s struggling economy and fiscal vulnerability.
As per standard business practices, if revenue and profits are low then costs and wastage have to be brought down. Loss-making public sector enterprises continue to make losses and circular debt continues to rise. These losses and debts are made good by the government.
The issue in both the cases is governance on account of incompetence and vested interests at play. The circular debt as of April 2023 is Rs 2.67 trillion, whereas, the debt and liabilities of public sector enterprises stand at over Rs 2.2 trillion. A total waste of nearly Rs 5 trillion is contrary to reason or common sense.
Copyright Business Recorder, 2023
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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