Econ­omy

she flip side of the coin

Enterprise - - Contents - By Af­shan Subohi

In­dus­trial stag­na­tion in the coun­try does not ap­pear to be tran­sient. It would, there­fore, be un­re­al­is­tic to as­sume auto cor­rec­tion. The trend re­ver­sal will re­quire re­ori­en­ta­tion of both the pol­icy frame­work and a change in busi­ness mind­set.

Sadly the gov­ern­ment is too pre­oc­cu­pied cel­e­brat­ing its achieve­ments in fi­nan­cial man­age­ment and the CPEC to worry about the per­sis­tently erod­ing in­dus­trial base in Pak­istan.

While the re­cent out­cry by in­dus­try in cen­tral Pun­jab cre­ated some rip­ples, peo­ple in the know said the is­sue has been viewed through a po­lit­i­cal lens in Is­lam­abad and not much should be ex­pected till the is­sue, some­how, meta­mor­phoses into a full blown cri­sis.

The good news is that the cor­po­rate sec­tor has taken no­tice and has started look­ing at ways to re­move the sys­temic hur­dles in in­dus­tri­al­i­sa­tion.

It wants the cap­i­tal to start flow­ing into ven­tures in or­der to cap­i­talise on the coun­try’s in­her­ent ad­van­tages in men and ma­te­rial along with the grow­ing size of the do­mes­tic mar­ket.

Ghu­lam Mur­taza Ja­toi, Fed­eral In­dus­tries Min­is­ter, was not par­tic­u­larly happy with the sit­u­a­tion.

His discomfort, how­ever, ap­peared to be rooted more in his own weak po­si­tion in the power cor­ri­dors rather than in the slow pace of in­dus­trial growth or its pre­ma­ture shrink­ing share in the coun­try’s GDP.

“What pol­icy? The sta­tus of this min­istry has been re­duced to a post of­fice that re­ceives and for­wards de­mands of the in­dus­try to the rel­e­vant de­part­ments and min­istries”, Ja­toi re­torted.

“For this min­istry to de­liver, it needs to be em­pow­ered”, he in­sisted with­out com­ing up with a so­lu­tion, if any, to pro­mote in­dus­try.

“No in­dus­trial pol­icy is on the cards”, con­firmed Khizar Hayat Gon­dal, fed­eral sec­re­tary in­dus­tries.

“It is not our place to di­rect busi­ness­men. We are com­mit­ted to a free mar­ket. We are fa­cil­i­tat­ing those con­cerned all we can. The gov­ern­ment has given in­cen­tives on the im­port of ma­chin­ery, of­fered tax breaks in many sec­tors and ded­i­cated in­dus­trial zones. If the pri­vate sec­tor is still not in­clined to com­mit cap­i­tal to in­dus­try and prefers other busi­nesses, it is their choice”, he ex­plained.

“Af­ter the 18th Amend­ment pro­vin­cial gov­ern­ments have as­sumed a big­ger role in man­ag­ing their re­spect­ing the economies; this also in­cludes in­dus­trial devel­op­ment.

“At least Pun­jab and Sindh have been ac­tive in this re­gard”, he added men­tion­ing some in­dus­trial zones.

Com­ment­ing on the large-scale man­u­fac­tur­ing (LSM) data in the first quar­terly re­port of the State Bank, he said, the clo­sure of the Pak­istan Steel Mills, fall in trac­tor, pa­per/board and cig­a­rettes con­trib­uted to the slow down and that they were look­ing into it.

Eh­san Ma­lik, CEO, Pak­istan Busi­ness Coun­cil, shared a pa­per on pre­ma­ture ero­sion of the in­dus­trial base.

The write-up that he said will soon be cir­cu­lated con­tained his­tor­i­cal data de­pict­ing the in­dus­trial slow­down and fall­ing share of in­dus­try in the GDP.

He con­sid­ers the coun­try’s fis­cal pol­icy anti-cap­i­tal that scut­tles the ca­pac­ity of the cor­po­rate sec­tor to re-plough earn­ings in BMR and ex­pan­sion. He says the FBR, in­stead of broad­en­ing the base, squeezes more from tax com­pli­ant seg­ments.

“We have ar­tic­u­lated our per­cep­tion in an eight-point agenda fo­cus­ing on jobs, ex­ports and taxes. We made a case for a strong do­mes­tic in­dus­try.

“The first point of the agenda touches on the mis­placed lib­er­al­i­sa­tion pol­icy. We have pleaded that a tem­po­rary mora­to­rium be im­posed on FTA’s and PTA’s and that the old ones be pos­si­bly rene­go­ti­ated.

“We now have suf­fi­cient stud­ies that sub­stan­ti­ate the view that these pacts are hurt­ing more than help­ing Pak­istan”, he says.

The fact is that the blind pol­icy of lib­er­al­i­sa­tion, weak in­sti­tu­tions and the lack of gov­ern­ment over­sight to nudge cap­i­tal to­wards so­cially de­sir­able and eco­nom­i­cally ef­fi­cient av­enues of in­vest­ment, have led to pre­ma­ture dein­dus­tri­al­i­sa­tion.

It meant a sub­op­ti­mal util­i­sa­tion of na­tional re­sources in men and ma­te­rial com­pro­mis­ing its growth and devel­op­ment po­ten­tial and lim­it­ing the ca­pac­ity of the econ­omy to cap­i­talise on abun­dant man­power.

The risk ad­verse bank­ing sec­tor and an un­de­vel­oped busi­ness class, lack­ing con­fi­dence, des­per­ate to mul­ti­ply as­sets quickly, reluc­tant to com­mit in­vest­ment in long term man­u­fac­tur­ing projects, played their part in ac­cen­tu­at­ing the trend.

The cor­po­rate class de­spite its in­flu­ence, par­tic­u­larly un­der dic­ta­to­rial gov­ern­ments, re­signed to a pol­icy frame­work that pro­moted trad­ing at the cost of in­dus­try.

The fact is many big in­dus­trial houses opened their own trad­ing houses and turned their fac­to­ries into godowns stock­ing Chi­nese im­ports that they merely as­sem­ble and put their brand on be­fore it hits the mar­ket.

“Look at the 30 big­gest busi­ness houses. They did suc­ceed in mul­ti­ply­ing their wealth but in a way that gave a crip­pling blow to the frag­ile and lim­ited in­dus­trial base of the coun­try.

“In­stead of ac­cept­ing the challenge of com­pe­ti­tion and tak­ing pains to im­prove their pro­duc­tiv­ity and com­pet­i­tive­ness they opted for an easy route to quick money and hopped the band­wagon of im­porters”, said an ex­pert. “It should not sur­prise any­one if light en­gi­neer­ing, home ap­pli­ances, toys, pipes etc. died or are dy­ing”, he added.

Eh­san Ma­lik, CEO, Pak­istan Busi­ness Coun­cil

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