Govt to shore up economy through ‘out-of-box solutions’

ISLAMABAD: With a view to boosting jobs, ensuring upswing in exports and making economy sound in the next three years — the remaining period of the incumbent regime – the government has decided to invoke ‘out of box solutions’ by abandoning the ‘business as usual’ approach.

The government has made up its mind to double exports in the next five years for which the input cost for the export industry needs to be tackled for the next five years. And to this effect, the government will step up its focus on ‘out-of-box solutions’ as has been desired by Prime Minister Imran Khan to realise the target of increasing jobs by improving the outlook of exports and economy.

This has been disclosed in the summary titled ‘strategy to boost jobs, economy and exports in next three years to be pitched by Ministry of Industries and Production in the ECC meeting.

Pakistan needs to capitalize on its best trait to grab the post-COVID-19 opportunities and that is textiles, cereal and leather. The export industry can make Pakistan's economy turn around on a fast track basis and bring massive employment and foreign exchange in near future and years to come to match the targets of the prime minister.

Already in the international export arena the countries (especially competitors of Pakistan) are going out of way to grab lost markets and exploring new markets. Export oriented countries are subsidizing, reducing utility (power & gas) expenditure to position themselves into the international markets, especially the US, Europe. Pakistani textile like other countries got a heavy jolt during that last 6 months with cancellation of large orders. The summary says that now is the time for Pakistan to take back the market share and that can only be done on fast track basis by the textile industry. And it is now or never situation to get the market share which cannot be achieved without the intervention of the cabinet.’

The industries ministry has asked for fixing the gas tariff for export industrial sector at Rs450 ($ 2.65)per MMBTU inclusive of GIDC (gas infrastructure development cess) for financial years 2020-21, 2021-22 &2022-23, including its power generation plants, which may be part of the same concern or incorporated separately; as far as the power produced is input for export oriented only.

And to achieve the targets, Pakistan needs to take new initiatives in the Export sector, such as BMR, Artificial Intelligence, worldwide international marketing through E-Commerce, association with companies like Amazon, Alibaba.’

As many as 10 sectors and sub-sectors, the official said, make about 80 percent of total exports of which Textile is 52percent and Cotton is 8% followed by Cereal (6%) and Leather (3.5%). Although Textiles is Pakistan’s forte, yet it is nowhere on the world map of Ready Made Garments (RMG), which is the most value added commodity.

“Since exports are declining, therefore it is incumbent on the government decision and policy makers to bring back the Export forte and strength back to Pakistan.” The summary mentions the alarming dwindling trend in exports saying that in 2011 Pakistan’s total exports stood at $24.439billion whereas exports of Bangladesh were at $25.383 billion in the same year. However in 2018, Pakistan exports tumbled to $23.485 billion whereas exports of Bangladesh massively surged to $39.252 billion. And to arrest this declining trend in exports, Pakistan needs to go for out of box solutions instead of keeping business as usual.

The industries ministry in the summary built its arguments saying that although in this era of COVID-19, lockdowns and meltdowns, exports have fallen and jobs disappeared, yet infrastructure stands in waiting to be restarted.

The Ministry of Industry has discussed with experts to assess and resolve that a large number of industries can be immediately started, especially the export industry.

The export-oriented industries are mostly hi-tech and well kept due to international competition and inspections by international clients. Benefits of Exports are multi-facet for the present government to show-case its achievements in next three years by generating jobs at all levels, livelihood sustainability, increasing in foreign exchange reserves, increasing revenue for the government, strengthening the economy, improving quality of life of the masses, and strengthening the government.

Pakistan, as per the summary, needs to capitalize on its own gas, hydel, hardworking HR, innovative designers, infrastructure and alike yet it is lagging other countries; this needs to be addressed immediately. In the export industry, the input cost needs to be tackled for the next 5 years to double the Exports.

Pakistan exports may be suffering due to the high cost of gas compared to the competition countries. In FY 2020-21, SSGCL has proposed further increase in gas price to the Export Oriented industry, which will almost annihilate jobs, FEX and the economy. This will give advantage to other competing countries, thus putting Pakistan into a severe economic crisis and may in fact weaken the national security, which needs to be mitigated by the cabinet. It is requested to take cognizant of the situation and fix the gas prescribed price at Rs450/mmbtu for FY 2020-21, FY 2021-22 & FY 202-23.

The Ministry of Industries intends to bring a number of mechanisms to boost jobs and export in the next couple of months. This summary is focusing on Prescribed Gas Price and Wellhead Gas Price. Other causes of high gas consumer prices are Unaccounted for Gas (losses, pilferage) and accounting practices approved by Ogra.

In the Petroleum Policy (PP) 2012, the then government gave a very high incentive by increasing the wellhead gas prices to oil & gas exploration & production companies to attract FDI and to increase indigenous production of Gas. Information deduced from the Energy Year Book and Annual reports of the companies give a grim situation of indigenous gas production since the approval PP-2012, see Annex-A with Tables 1, 2, & 3.

Gas production has slightly decreased instead of some quantum jump, but in FY 2019-20 there has been a drastic decrease. Despite generous subsidy to the companies it may be noted that future indigenous gas production scenario presented by Petroleum Institute of Pakistan is very bleak, See Annex-B.

The indigenous gas production has not increased, despite of heavy incentives/subsidy of billions of Rs/$ provided to the companies for the last 8 years. However, the dividend payouts have increased substantially. Furthermore, the trend of decreasing gas production is expected as per Petroleum Institute of Pakistan and DG Petroleum Concession. It may be noted that during the last 8 years a number of foreign companies have left Pakistan.