Uncertain policies

LAHORE: Even in times of political stability, our economic policies remain uncertain. Clarity of policies is the only thing that investors want. We need clear economic policies that cannot be altered at the whims of individuals.

For instance, we continue to promise the textile sector that the government is trying to find a solution to their high power and gas tariffs. The caretaker government ruled for over five months, and the head of Commerce and Textiles was a textile tycoon.

He knew that under current circumstances, no special tariff could be announced for the textile sector only. But he kept their hopes high by promising that the government would come up with some package. The textile millers exerted all their energies to get a special package instead of improving their efficiencies.

Now that it looks clear that no special package will come until we are engaged with the IMF, the entrepreneurs are looking for efficient options to remain relevant in the global textile market.

Experts say that if spinners improve their technology by gradually replacing inefficient spindles with efficient ones, the energy saved would be much more than the concessions they are demanding now. By giving them hopes, the state has delayed the modernization of our spinning industry. The big guns in the textile sector continued to upgrade their spinning technology and minted money on concessions announced for the entire sector.

It is true that our power and gas sectors are highly inefficient and loaded with corruption and incompetence, and it has increased the tariffs in these sectors above global levels. The government sells power in accordance with the cost. The contention that spinning units with dedicated grids should not be charged for line losses is wrong.

The seller looks at the overall cost. Moreover, wheeling charges of the supplier are Rs12 per unit. All consumers, including domestic consumers, pay these high charges, and the textile sector cannot be an exemption (realized by the government after the IMF put its foot down).

An interesting point in this regard is that the textile exports have been on the rise for the last three months (after tariffs were increased). The increase in textile exports was not due to the efforts of the caretaker government that actually increased the cost of production. The major reason is that global buyers have reentered the textile market.

The Bangladesh textile sector has crossed the $5 billion barrier in the last three months. Indian textile exports have picked up appreciably after a dull 2023. Vietnam has also reported a hefty increase in textile exports in the past two months.

An interesting coincidence in this regard is that spinning industries in all these economies suffered a lot and operated at 50 percent capacity last year.

Spinning is still in trouble in all these economies because the global demand is still less than the total spinning capacities in each country, and the margins are low for all spinners in these countries. Those having updated efficient spinning machines are relatively better off.

Textile is not the only sector where investment stagnated due to unclear policies of the government. In the auto sector, investments have stalled as the state tinkered with all auto-policies announced in consultations with all stakeholders.

The result is that in the last six months, the import of used cars has increased by a massive 658 percent. By the way, the import regime on used cars is designed in a way that instead of current C&F prices, the government has fixed a lower C&F value for the determination of duties and, on top of it, a concession of a percent per month up to three years is provided on that lowly fixed C&F.