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Tuesday November 30, 2021

The gone growth

October 17, 2020

LAHORE: Most of the sectors of economy are unhappy with the existing policies and never get tired of lobbying for concessions, claiming to be collapsing on one pretext or the other, only to do business on terms that suit them best, while deserving segments are actually falling one by one by the wayside.

Every Pakistani longs for economic stability. The survival of the people depends on the revival of economy. They badly need jobs that would come when economy starts growing at least at double the rate of population growth. There are certain sectors of economy that have not fully recovered from the pandemic effect.

Transport service for instance is not operating in top gear. Hotel industry is still licking its wounds as the occupancy rate has not exceeded 40 percent of their capacity. Airlines are in a tailspin. It is worth noting that most people now travel by road from Lahore to Karachi instead of air. The marriage halls have opened but going is not half as good as it was in pre COVID-19 days.

The pandemic has also impacted the lifestyle of public. Now families prefer to stay at home instead of going to restaurants. Most well-to-do families have learnt to cook their favorite food. The middle class has become more conservative when it comes to shopping. This is also impeding growth.

Textiles and agriculture are our main engines of growth. Textiles have survived on different facilitations and subsidies provided by the state. It performed at its peak in last two months on the strength of government concessions. However, with an increase in power tariff for five exporting industries the textile sector is likely to lose its competitive edge it managed on obsolete technology. The export potential of the textile sector with existing technology is not more than 10 percent.

We need our exports to go up by at least 50 percent which would only be possible through new investments in technology. The textile industry was informed beforehand that the government would supply power in the first quarter of this fiscal at 7.5 cent per unit. Thereafter the tariff would go up to 9 cents (which again cheaper than tariff for all other industries).

The textile millers accepted this policy. But when the tariff has been increased, they are protesting. They promised moon to the government in return for various concessions they demanded. Now they will use higher power tariff as an excuse for not fulfilling their promise to increase exports substantially. One can imagine the position of other industries when textiles are in trouble despite full support from the state.

In steel we largely depend on import of basic raw material. We also recycle the locally available steel junk to produce steel products mostly for construction sector. Steel cost has gone high because rupee has depreciated by 40 percent in two years. Steelmaking units are not operating at their full capacity. The sales are slow despite surge in construction activities. Steelmakers want reduction in duties and taxes. They also want power subsidy offered to the five exporting sectors.

Agriculture is the mainstay of our economy. Cotton provides oxygen to our textile industry. Cotton production has declined to 1990-level when our textile industry was small. Production is 4 million bales short of domestic consumption although the use of cotton has declined 2.5 million bales in last 7 years.

The industry is somehow surviving by importing cotton, but the cotton farmer is devastated. Low productivity has taxed their income. We are short of quality seeds for all crops, the price of fertilisers and pesticides have increased beyond the purchasing power of the farmers.

Despite these realities we do see some segments of society prospering. There is a rush to buy luxury cars although the prices have increased sharply. The middle class has been deprived of low-cost cars. The smallest car now costs over Rs1.3 million. Inequalities are on the rise. Wages in Pakistan are the lowest in the region in terms of dollar.

The cost of living has increased in line with the depreciation of rupee. The adviser on finance though has claimed that a floodgate of jobs would soon be opened. The jobs are created when the investment in manufacturing increases.

The data, to date, reveals that there has been a sharp decline in import of industrial machines. None of the businesses are happy with government policies be it traders or industrialists. This government will have to move heaven and earth to regain the confidence of Pakistani businessmen.