Not winning in recession makes sense, but losing during growth doesn’t

Comment

By Mansoor Ahmad

LAHORE: Every economic boom or bust has its winners and losers and going down struggling with recession makes sense; however being unable to ride the tide of across-the-board growth does not.

Losing, while winning is at its easiest given the well-disposed circumstances, simply means a business is either incompetent or obsolete.

Across the world the export-centric industries are the most upgraded, whereas domestic market players are the least.

This was the case with Pakistani industries at the start of the twenty-first century. At that time, the cement industry was producing the construction material from wet process that consumes high energy.

The sugar mills were operating without distillation apparatus and the auto industry was driving on nascent technology.

The textile mills, on the other hand, were regularly upgrading their spindles and handlooms were being replaced by power looms. They were upgrading stitching equipment regularly on top of establishing processing industries.

The domestic suppliers thus were inefficient and surviving on the government protections. In comparison the exporting industries were becoming more and more efficient, growing regularly on the global markets on the strength of their efficiencies.

When the domestic markets of local industries were threatened by imported products only then they realised that it would be impossible to survive without improving efficiencies and technologies.

The cement sector today is one of the most efficient cement industries in the world. They are adding modern lines on a regular basis and abandoning older technologies.

Their capacities have quadrupled in two decades and cement is being exported as well.

The fertiliser industry is now a force to reckon with and is posting high profits.

The car industry is booming and some producers have commissioned robots like those in most developed economies to improve quality and efficiency. The sugar industry is now using most of its waste. For example, they are using molasses to make ethanol instead of exporting it. The milk processors are operating on most modern technologies and even the domestic producers are competing head on with the multinationals. Plastic industry has matured and is the main supplier of plastic products and components replacing the imported products.

The domestic industries catering to the local markets are still facing competition from the imports but they are coping with the challenge by improving their efficiencies. They do complain of corruption and high power/energy rates but have learnt to live with these ills through better management and efficient processes. porting industries are surprisingly in dire straits. They have not only been unable to secure their foreign markets but are also losing share at home to imports.

A little pondering over this debacle would show the exporters were pampered for long by our policy planners. All facilitations in the past four decades were showered on them. They got low-rate concessional export refinance, bailout packages, rebates, and subsidies to help them at least retain their foreign markets, but they never get tired of calling on the government to do more.

Time has come to tell the exporters that government would do no more and they have to put their house in order. All economists agree that subsidies and concessions make industries inefficient and dependent on dole-outs. The exporters would have to take cue from the domestic manufacturers catering to local markets and upgrade their technologies.

No government concession or subsidy would be able to revive over one hundred spinning mills that have been closed down. Their equipment was so obsolete that they are selling it as scrap.

The surviving industries would meet the same fate if they do not improve.

Some have taken the plunge and are in the growth mode, while the rest are still waiting for some miracle to help them survive without investing in the upgrade of their defunct technologies.