Spinning the stats to save their face

LAHORE: The beating suffered by most of the industrial sectors in past two years has brought most of them to their knees. Regaining past productivity requires capital which they do not have.

This government is very quick in hyping insignificant 'good news' but withholds negative economic statistics for long periods. For instance the surge in exports in the month of July has been released by the Pakistan Bureau of Statistics in the first week of August. However the performance of large-scale manufacturing (LSM) sector has not been disclosed even for the month of June 2020. These statistics reveal how healthy different manufacturing sectors are. The statistics released for the first eleven months of last fiscal depict a very gloomy overall figure. These statistics show if there are any real chances of a turnaround in the economy. The statistics for July-May 2019-20 showed an overall decline of over 10 percent in the productivity.

This fall should be seen in the context of over 6 percent decline in LSM growth in fiscal year 2018-19 –the first year of this government in power. The overall decline from the peak achieved in 2017-18 is over 20 percent.

During July-May FY20 production of sugar declined 7 percent, cigarettes 30 percent, cloth 11 percent, yarn 11 percent, jute 3.83 percent, caustic soda 15 percent, and manufacturing of glass plates shrank 10.19 percent. The production of steel billets declined 19 percent, H/C.R. sheets/strips 15.30 percent, tractors 38 percent, trucks 52 percent, buses 44 percent, jeeps and cars 54 percent, light commercial vehicles 51 percent, and motor cycles 26 percent, chlorine 5 percent, sulphuric and hydrochloric acid 17 and 13 percent respectively. In the pharmaceuticals the production of tablets declined 2 percent, syrups 10 percent, and injections 3 percent.

The above statistics show that the industrial sector is generally not in a good shape. The condition of the vendors that supply inputs to large scale manufacturers is even worse. These vendors are small scale industries, service providers, or suppliers that operate with minimum capital. Many have closed their shops as in the absence of orders they could not pull on. The large manufacturers mostly have their installed capacity intact but after two years of operating at much below their capacities they are in financial trouble. The inefficient amongst them have closed for good. These include many spinning units, artificial leather manufacturers, steel melters, and chemical manufacturers. Since steel is imported the cost has gone very high forcing small builders of homes to compromise on its optimum use.

This is a ground reality. Now if for instance the car production increases by 10 percent, tractor, bus, light commercial vehicles also increase by 10 percent. The increase in number of units would be far below the production achieved in previous two years. For instance the decline in car production in first 11 months of last fiscal was 52 percent.

That means against 100 cars produced in the preceding yea, the car production in the fiscal year ending on June 30 was 48 units (52 percent decline). Now a 10 percent increase means that 5.2 more units produced this fiscal. We will call it a growth of 10 percent. But in reality the production would still be only 53.2 units when compared with 2019-20. This is the way we calculate growth and celebrate it.

In most industries we are producing much below the peak productions achieved by them. In textiles for instance as far as quantity is concerned we are almost 30 percent below the peak we achieved in the last two years of Musharraf regime.

The car production during Musharraf era reached 275,000 units and then declined to around 142,000 units during the next Pakistan People’s Party government. It achieved its peak of 285,000 units in the last year of Pakistan Muslim League-Nawaz government. Now the overall car production is hardly 100,000 units. To go back to its peak would require huge improvement in economy.

Barring construction that has the potential to create huge jobs mainly for the unskilled, all other industries would first have to operate at their installed capacities before going for expansion. This means there are very slim chances of further investment in most sectors. We have ruined some promising sectors like pharmaceuticals and poultry through inept policies. Our rulers are playing to gallery instead of making meaningful reforms.