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Friday May 24, 2024

Industrial decline

By Mansoor Ahmad
April 21, 2024
A woman cooks food for her family at a camp in Sohbatpur, Jaffarabad district of Pakistans Balochistan province. — AFP/ File
A woman cooks food for her family at a camp in Sohbatpur, Jaffarabad district of Pakistan's Balochistan province. — AFP/ File

LAHORE: Rising poverty has reversed migration from urban to rural sectors, as workers deprived of jobs in cities are moving back to their native villages, where they share an already meager resource with their village-based families.

For decades, the rural population has moved from rural areas to cities that were rapidly developing both commercially and industrially. This was in line with historic global trends, as agricultural rural workers migrated to cities for a better future. Unfortunately, the share of industry as a percentage of GDP has been declining in Pakistan for the last many years.

This is the reason that urban poverty is on the rise, as the unemployment rate has reached its peak of 11.1 percent due to various factors, including a slowdown*in production, closure of many industries, and absence of new investments that used to be the main source of new employment opportunities.

Normally, job creation in established industries is limited to replacing the employees that leave for any reason; besides, in good times, many existing industries also upgrade their facilities, which creates fresh jobs. Persistent recession during the last six years has forced numerous industries to either close or curtail their production and reduce their workforce.

Most industries that are doing well have upgraded technology, which reduces the need for manpower.

Major avenues for new jobs are always the new industrial and services sector projects. These projects absorb the new labor force that enters the market every year.

The new projects are not being set up for various reasons, including the high cost of doing business due to corruption, high interest rates, reluctance of banks to provide finance to the private sector when the government is a major risk-free borrower. Bad law and order and energy shortages are other impediments.

The political instability and terror threats, apart from bad governance, are the main causes of the current economic stalemate. The macroeconomic indicators are not at a comfortable level because of flawed government policies.

The textile industry, for instance, is unable to exploit its competitive advantage because of the government's failure to implement its own textile and trade policies in letter and spirit. The cost of production has gone out of control. Textile is the largest provider of manufacturing employment in Pakistan, and this sector is particularly under stress and is not expanding.

The government should take measures for job creation. The government still tries to gain political mileage through public appeasing measures instead of formulating business-friendly policies.

Private sector credit has continued to decline during the last five years; in fact, at current high interest rates, it is not viable for many private sector entrepreneurs to seek loans.

This is the reason that there is a dearth of new private sector projects. The obsolete or older industries in Pakistan need fresh investment for balancing and modernization to improve productivity and reduce costs. Without fresh investment, Pakistan would lose a large chunk of its exports. Moreover, no new jobs would be created to accommodate the almost three million labor force that enters the Pakistani markets every year.