‘Brace for a long jobless growth ahead’

LAHORE: The constant shrinking of economy is accompanied with regular job losses and the process has accelerated in the last six months as manufacturers, wary of the existing economic situation, are sitting on huge unutilised capacities.

Revival of growth is expected after another two years but without job creation. The public should prepare itself to live in a long jobless growth. Four main manufacturing sectors that are on decline include textiles, cement, automobile and leather producers. Between them they have shed about a million jobs in last one year. Construction sector is another causality of ongoing recession. Around 40 industries move in tandem with the construction activities; these industries are in trouble because the decline in construction activities was substantial.

When growth returns after a long recession, the surviving industries first start utilising their idle capacities. During long recession they become accustomed to operate with minimum and efficient workforce. It will take a year or two after the start of growth for these industries to wipe out the idle capacities.During this period there would be fewer jobs that will be created.

Car production, for instance, has declined by over 40 percent and is still counting. Instead of expanding the capacities the carmakers were planning two years back they are reducing their normal operations and firing workers.

The turnaround would be gradual and slow after two years. That means the industry would be operating on full capacity of 300,000 cars a year even in 2022. The dream of increasing the capacities to 500,000 units has been shattered. The downstream industries making auto parts for the manufacturers are in bigger trouble. One never knows what technological changes the global car industries undergo in the next four years but we would be forced to operate on the old technology.

As far as the industries connected with the construction sector are concerned there is a strong possibility that some might fall sick because of the lack of demand. Cement for instance is a capital-intensive industry and many units are in the process of servicing their project loans. With demand going down some may default. The new units that are in the process of installation would be in real trouble. The steel industry is facing similar problems.

There is a lull in housing and infrastructure projects and it impacts both steel and cement sector more severely than most other related industries. The use of paints and polish for instance may decline but its recurring use in millions of existing homes will continue though at a slower pace. The cable industry would be devastated as cables like cement and steel are mostly consumed in new projects. The demand for lights and other electric devices like fans would also fade.

The combined effect of this decline in demand would have a severe impact on jobs. The daily wagers would be affected the most. Two years back it was an uphill task to find a capable mason or painter from the labour markets (daily-wagers gather at particular spots in major construction avenues). Now we see scores of labourers sitting in the markets awaiting customers. Very few land a job each day.

Textile sector is the main provider of manufacturing jobs in Pakistan. This industry has been on decline for the last six years. During the last regime the jobs regularly shed by textiles were absorbed by the booming construction sector. Now both these sectors are under pressure. Over 125 textile mills have closed down in 6 years. The surviving mills are mostly in bad shape. They lack new technology and thus efficiency.

The chances for growth in this sector are dim unless new technology is inducted. The most depressing aspect is that we are not adding machines in our value-added apparel sector as well. The stitching equipment is extremely cheaper than spindles or power looms. The value-added industry is not scaling up because the fabric we produce has limited global market.

The import of quality fabric from which higher value-addition could be achieved is subject to high tariff. The argument that exportable inputs are allowed to be imported free of duties under some schemes is not valid. The small apparel exporters lack the capability to fulfill the cumbersome procedures for duty free imports. Unless they are facilitated through easy and transparent schemes the value-added exports would continue to grow at snail’s pace. The apparel sector is the most labour-intensive sector of textiles. So the prospects of job creation would remain dim even if growth is revived unless the apparel exporters are properly facilitated.