Entrepreneurs advised to prepare for open market

LAHORE: All creditable global agencies have said that the economy is moving upwards, but the local entrepreneurs from the textile, automobile, cement, sugar and home appliance sectors see productivity as going downwards, experts said on Monday.
They feel that both government and private sector is responsible for the obscurity that encompasses these sectors.
Market analyst Benish Toor said the mindset of the businessmen has not changed from the licensing, permit and protective regimes introduced four to five decades back when the planners were trying to establish an industrial base in the country.
The entrepreneurs that accumulated wealth from that period are now the main stakeholders in all major sectors, she said, adding that even though second and in some cases third generation has entered these businesses, the companies still want the same guaranteed profits that they enjoyed in the earlier days of permits and licenses.
“These big businesses are not prepared for the open market economy and still want protection for any product that they produce in the country,” the analyst said. The government, on the other side, is burdened with a stubborn bureaucracy that was served, pampered and obeyed by the permit or license holders. “These permits guaranteed high profits and were issued to few privileged only,” she said, adding that in the free market regime the bureaucrats have lost the leverage of doling out licenses and permits.
“To maintain their hold on the businesses, they armed the bureaucracy with powers like assessing the value of imported goods, delaying the inspection of goods meant for export or withholding the sales tax and income tax refunds,” she said.
Toor said any businessman that fails to come to terms with bureaucracy, finds going very tough. The permits and licenses were means of minting money from the businessmen in the past, which has now been replaced by under-invoicing or wrong declaration of goods that may deprive the government of revenues but serves the bureaucracy well to earn some extra though illegal gratification.
A senior Market analyst Dr Shahid Zia said, “Every industrial sector we analyzed would reveal reluctance to invest despite high earnings.”
He said the automobile sector has revealed that of the three major car producers in the country, two largest are operating on their full installed capacity or even more. The smaller car manufacturers have closed the shop but Honda, Suzuki and Toyota are very much in the market and their balance sheets show hefty profits.
“Suzuki the largest manufacturer, as far as number of vehicles is concerned is operating at full capacity and its balance sheet shows large profits,” he said. Similarly, Indus Motors is operating at much above its installed capacity - the additional production coming from operating almost half of the additional shift. The company is not enhancing its capacity despite stable high growth and huge profits. He said the car makers complain of inconsistencies in government policies and failure to announce auto industry development program.
“The fault on the government side cannot be overlooked either,” he said, adding that an industry that is growing for the last three years despite unstable policies ought to increase its capacities or it would provide an excuse to the government to further liberalise import of used cars.
Economist Naveed Anwar Khan said the textile sector is complaining of high costs when compared with regional economies. The spinning sector conveniently ignores the fact that there were periods in last decade when spinners minted money. “Still, they failed to upgrade their technology,” he regretted. Khan said replacing 10 percent machines with latest technology every year would have kept the industry competitive globally. “New machines require 50 percent less human resource and consume 60 percent less energy but produce double the quantity of yarn,” he added. “The government also cannot be absolved as it increased wages without linking it to productivity and kept power rates at the same level as they were when oil prices were more than double,” he added. A sugar technologist Kaleemullah said the sugar rates globally are at their lowest in seven years. Moreover, to protect the sugar industry the government has slapped regulatory duty above the productive duty already in vogue.
He wondered how come sugar, a finished product cannot be under invoiced and is slapped with regulatory duty as well while under invoicing is freely allowed on import of artificial leather, tyres and tubes and auto parts.
He said perhaps because these sectors have no representation in the assemblies.