Making businesses resilient

LAHORE: Businesses in Pakistan can build resilience to overcome economic uncertainty through strategic planning, financial discipline and operational flexibility. Some industries have shown resilience by adapting to challenges, while others have struggled.

Our economic landscape is marked by high inflation, currency depreciation, rising energy costs and political instability. For developing resilience, businesses must diversify revenue streams instead of relying on a single product and increase market size. They should maintain strong cash flow and reduce debt dependency. Import-dependent businesses must hedge against currency risks.

Reducing reliance on imported raw materials can shield businesses from currency fluctuations and global supply chain disruption. Automation, energy-efficient processes and better inventory management can help reduce costs without compromising quality. They should invest in employee productivity, expand export capabilities leverage e-commerce and advocate with the government for business-friendly policies.

In the past, industries that showed resilience changed strategies with change in circumstances. Our agriculture and agro-based industries have shown remarkable resilience. One reason is that food is a necessity, ensuring steady demand. Another is that farmers have no other option but to find ways to grow more. Hybrid seed development and import of high yielding seeds facilitated farmers. Moreover, the export potential of certain agricultural commodities attract foreign buyers. These commodities include rice, citrus and mangoes. Challenges faced by this sector include climate change and water shortages. A lack of mechanisation is also a drawback.

IT and software services have also shown remarkable resilience. IT services players earn foreign exchange from their services and constantly benefit from rupee depreciation. Freelancing and remote work have grown despite domestic economic issues. Government incentives and tax exemptions have supported growth. The challenges faced by this sector include political uncertainty that affects investor confidence. The lack of IT infrastructure outside major cities is also limiting our IT potential

Pharmaceuticals and healthcare continued to grow because essential nature of medicine ensures stable demand. Some firms benefit from exports and foreign collaborations and Pakistan’s growing population guarantees a long-term market. The growth continues despite challenges like dependence on imported raw materials and price controls that affect profitability.

Textile and apparel has shown mixed resilience as being the major export industry it used to enjoy government incentives. The rupee depreciation has made exports cheaper, and large labour force keeps production costs competitive. Some subsectors of textiles are struggling currently due to high energy costs and supply disruptions. Low value-addition in our textile exports is another reason as focus of current players remains on raw textiles rather than finished garments.

Fast-moving consumer goods maintain robust growth due to constant increase in population. Daily essentials like soap, toothpaste and packaged food have stable demand, irrespective of economic conditions. Most companies pass inflation costs to consumers. E-commerce growth has also supported sales. FMCG faces the challenge of heavy dependence on imported ingredients and declining purchasing power of consumers.

Industries that struggled include automobile due to high car prices increased because of rupee depreciation and import restrictions on parts. Declining consumer purchasing power has also led to lower demand. High-interest rates have made auto financing costly. Many leading companies, have observed production halts.

Construction and real estate are struggling due to high raw material costs (steel, cement tiles) and also because of currency depreciation. The government’s crackdown on undocumented real estate investments has also impacted growth. There is also a slump in housing projects due to inflation. This has affected jobs in cement, steel and tiles.

Travel and tourism is another casualty as domestic tourism has been affected by inflation and security concerns, while expensive airfare and travel restrictions reduced international tourist inflow. Floods and natural disasters also disrupted local tourism. Resultantly, hotels and airlines have seen reduced business.

Retail and small businesses are struggling due to declining consumer purchasing power, especially for non-essential goods. High shop rents and energy costs have squeezed small retailers. And e-commerce competition is affecting traditional stores. Many small shops are shutting down or shifting to online sales.