Materialise the motto

August 22, 2019

LAHORE: The hype, created by the incumbent regime, for making Pakistan corruption-free after last year’s elections died an embarrassing death as had that motto materialised, the cost of doing...

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LAHORE: The hype, created by the incumbent regime, for making Pakistan corruption-free after last year’s elections died an embarrassing death as had that motto materialised, the cost of doing business would have eased enormously, spurring overall economic activities, instead of going through the roof.

This has resulted in a slowdown in industrial sector that has not only eliminated new job opportunities but has added to the unemployment pool as the decline in production is accompanied with layoffs of workers.

There should be no sympathy for the entrepreneurs that failed to prepare themselves for hard times due to incompetence and inefficiencies but the increased pruning of jobs in the production sectors should be a matter of extreme concern for the government.

This government assumed power with a manifesto that was supposed to address all the social and economic ills of the country. Its leaders are still highlighting the past governments’ mistakes. Instead of brooding on the past mistakes they should formulate a comprehensive industrial policy to facilitate local production by reducing cost of doing business and improving efficiencies.

The government has taken some steps to facilitate the exporters that have also been benefited by the high devaluation of rupee. However planners must realise the industries catering to local needs are doing even worse.

It is indeed regrettable the government has not unveiled its industrial revival plan. The exercise would require input from industry (both domestic and export-oriented) economists and bureaucracy. This would require some time.

In the meantime, the government needs to take some measures urgently to ensure sustainable growth and increase employment opportunities. The electricity and energy cost for the industry has jumped substantially.

Reducing tariffs immediately may not be feasible for the government but no meaningful efforts have been made to reduce the inefficiencies in the power distribution system. On the other hand the energy wastages in most of the industries range from 10-25 percent due to improper factory layout, inefficient motors, absence of proper ventilation.

In addition to that the equipment installed in most industries is outdated and inefficient, consuming 40 percent more power. Industrialists parked money elsewhere when the going was good and government was subsidising power and energy supplies.

Still some large-scale industries that got their energy audit conducted and invested Rs1-10 million managed to save up to Rs1.8 million per month (Rs60000/day). This saving covered their entire investment in one to six months. Similar savings were achieved when some industries replaced their inefficient gas appliances with global standard burners.

The government should come up with detailed programs in this regard on official electronic media to create awareness among the industrialists. Small and medium entrepreneurs would particularly benefit from this awareness and informative campaign that should be hammered two to three times a day.

We need efficient and responsible government, efficient, and modern equipment, and dedicated and forward-looking entrepreneurs. The state should realise small and medium industries are the backbone of any economy. In developing economies the smaller units are the main drivers of exports.

Many small garment exporting units have closed down as they could not afford to install water treatment plants, a precondition of foreign buyers under social compliance concept. The federal and provincial governments should install common effluent treatment plants in all industrial estates and recover the cost by charging the industries monthly usage rent that all exporters could afford.

The installation should be quick as various governments have wasted over two decades wasted paying lip service to this issue. This would revive a large number of closed exporting units as the government is already subsidising their power and gas bills to bring them at par with regional tariffs.

The high markup is eating the competitiveness of the local industry. The state should subsidise markup for domestic suppler industries on the pattern of export refinance. There should be a strict check through prudent regulation that this facility is not misused by domestic manufacturers as some exporters did in the past. This will spur industrial activities. Economy will continue to languish in limbo without broad-based industrial revival plan and its execution on war-footing.

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