Haunting economic underperformance
LAHORE: Businessmen need clarity on economic issues to define their future plans. Those who are committed to staying in their beloved country no matter what, would plan a different strategy if they have a clear roadmap of government policies.
Pakistan lacks the resources to embark on an ambitious development agenda or to address the concerns of manufacturers, traders, the service sector or agriculture.
The solutions are simple, however; the state must guarantee full compliance with the rules and regulations in force. However, the political implications of this approach are very serious.
The government cannot afford to open all fronts because it lacks both the resources and the manpower to deal with all the problems. The application of discipline in any sector would cause temporary difficulties for the population.
It should start with the manufacturing sector. Dialogue on economic issues is needed among all stakeholders, as businesses need clear policies, especially in these dark times, while government needs to understand the issues that hamper growth.
Many government policies need to be changed or adjusted. Planners should formulate a policy that is in the best interests of the nation.
They should realize that fixing the problems of one manufacturing sub-sector could create problems for another sub-sector. Maintaining the status quo would not improve matters. Clear, stable and long-term policies for each sector must be announced and implemented. Based on these policies, investors would assess whether it is viable to invest in the industry or go for a more lucrative commodities business. They might also be tempted to invest in the service sector where profit margins are higher.
In today’s uncertain times, businessmen are holding back investments due to uncertainty. They do not know if the government will ever be able to balance its budget or fix the governance problems.
Last but not least; entrepreneurs aren’t sure what will happen in the next 45 days. The government seems indifferent to the demographic bomb that threatens to explode into anarchy if three million jobs are not created each year over the next decade.
The current state of affairs has created doubts in the minds of majority entrepreneurs about our ability to become a developed country. What we need is investment in labor intensive industries.
It is futile to welcome foreign investment into lucrative concessions from motorcycle manufacturers, when we are already producing bicycles more than our demand. Such investments do not reduce unemployment and as bicycles are marketed in the country, investors start to collect profits at home as soon as production starts.
The government of Pakistan is expected to attract foreign investment in the garment sector which creates a higher number of jobs per million dollars of investment than a mega-industry which creates one billion dollars investment. In addition, almost all major industries meet only domestic needs, while the clothing sector, even with a small investment, is the largest textile exporting sub-sector. The share of this sector in government subsidies on electricity and energy and the profit margin are also nominal compared to spinning mills.
The clothing sector has the potential to take our exports to new heights. Government planners must show clarity in the management of the textile sector. There are sub-sector specific trade bodies in the textile sector. The entire Pakistan Textile Factory Association includes spinning, weaving and processing factories. The Pakistan Hosiery Manufacturers Association (PHMA) has all knitwear manufacturers among its members.
Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) represents garment producers in the country. Then there is an association representing exporters of towels and another which includes exporters of bed clothes.
PHMA President Shahzad Azam Khan and PRGMEA Chief Coordinator Ejaz Khokhar urged economic planners to deal with the problems of each sub-sector only with the specific association. They demand that state planners silence either of these associations if they come up with suggestions and plans for promoting another sub-sector.
This will help planners to develop a better strategy for the promotion of each sub-sector. While other associations are allowed to encroach on the domain of the other, there is no need for specific sector associations.
Real entrepreneurs know that public debt and its huge appetite for loans crowd out credit to the private sector. Inflation is a scourge that can only be brought under control through prudent fiscal management.
The trend to reduce annual development spending is straining already crumbling infrastructure. The taxpayer entrepreneur would always remain on his nerves if the non-paying parliament continued to decide on the levy and use of taxes without taxpayer representation.
Despite these drawbacks, they simply want the state to consume its meager resources to create jobs in the country.
The immediate problem for the government is to resolve the impasse with the International Monetary Fund (IMF) without increasing the burden of additional taxes.
The shock of Covid-19 devastated our economy which survived the pandemic on foreign loans and the debt moratorium. But the debt must be repaid. Unfortunately, we live on edge and have not done any planning to absorb or withstand economic shocks.