April 29, 2002	Monday	Safar 15, 1423

IT IS true that financial indicators for the country show a good measure of improvement. The central bank says its tills are brimming with foreign exchange reserves—at the last count, they were $ 5.2 billion and the Bank was still counting.

That is the highest dollar stake with the country for as far back as anyone can remember. And the Rupee looks stable at just about Rs 60 to a dollar, quiet defying the fear’s of its crawl upto Rs 100 that many economic gurus were airing just a couple of years ago. And the situation in the banking sector has started improving. But here is the crunch: Could all of that compensate for the dwindling real economy? And the answer is: No. Can those stock pile of forex reserves alone sustain the economy if investment fails to pick up? Again a No. Can even the current level of export earnings be maintained in the face of growing competition and not very conducive market environment that is related to factors beyond our control? The answer would be in the negative.

The State Bank’s last quarterly report admits that the government cannot afford to be complacent. However, many feel that direct actions to reverse the trend of sluggishness of the industrial sector are not forthcoming. With the acceptance of free market principles as a norm no one is expecting the government to indulge itself into direct economic activity by taking on itself the task of investment promotion assigned to the private sector. Everyone including the government recognises that it is not its business to do business. The enabling role of the government as a facilitator, a promoter and a conductor to a certain extent, though, is indisputable.

Ever since the announcement of holding of the referendum, even the government’s economic functionaries look pre-occupied. “These are pretty quiet days for economy”, commented a private sector activist, “in political hustle and bustle economics has taken a back seat. Difficult policy decisions are deferred for some more opportune time. Task force and specific committees formed to address particular problems find hard even to hold meetings— taking decisions and making recommendations comes later”.

It is difficult not to agree with the opinion. There are several cases where such a tendency on the part of the government becomes evident. The progress of the committee that was formed by the government and headed by the finance minister to seek private sectors involvement in identifying and then removing the ten main irritants hampering activity in specific sectors is not known. It was reported that bodies of several trades received questionnaires in this regard. Many did even return them on times after duly processing them. What transpired after that no one knows. Probably all of that is now on the back burner.

Sources in the CBR told this scribe about formation of another high-powered committee that was reassessing the impact of tariff and duty structures in the light of complaints registered or demands made by certain private parties. There must be many industrialists disenchanted with the present order of duty and tariff structures. One such segment is leather garment exporters. Their representative says that they have asked the government to impose duty on the export of leather from Pakistan. There is 20 per cent duty on export of raw hides and skin from the country.

Leather garment manufacturers complain that there is capacity and demand for good quality leather in the country but though Pakistan today produces some of the best leather, its availability in the local market is limited. “Leather industry has reached a stage where it has great potential to cater to the demand of leather made-ups and footwear in the West and create a niche’ for itself in the world market but for the non-availability of superior quality Pakistani leather”, a leader of leather garment manufacturers said.

When the question was put to tanners’ representatives that if there is demand for their product at home why do they prefer to sell it abroad? The response was simple. Their spokesperson said that they sell their product to those who pay them more and in a market that offers better prospects. “If the local traders involved in garment or shoes or other consumer itemscan afford they should offer competitive prices. It’s not only that they want prime quality product but they want it cheap as well.”

At the moment the import of leather is totally free in the country. Why these manufacturers not import whatever material they require as input from the world market? Pakistan Leather Garment Manufacturers & Exporters Association president Fawad Eijaz Khan says they do but imported material is not ideally suitable from the marketing point of view. “International buyer who places orders with us prefer Pakistani leather over imported leather in value -added leather product produced in the country”, he explained.

Eijaz, in support of his view said that leather is exported at the cost of value-added leather goods quoted export figures of leather garments that have declined by huge 27 per cent since September 11 incident over the corresponding period last year whereas exports of leather has increased by 3 per cent over the same period. According to figures provided by PLGMEA the average yield price of prime quality leather will be reduced by around 10 per cent but its utilization in garments and other products will bring a value addition of minimum 30 per cent.

There are number of industries in the leather garments and products that have reduced their production with the contraction of market. PLGMEA claims that if demand fails to pick up in the absence of the government’s support a lot of industries will close down.

Of the total leather tanned in the world, 65 per cent is consumed by footwears. In Pakistan except for Bata and Service that produce footwear for local consumption, the production of shoes for export is negligible. Some industries that were set up in this sector actually closed down due to non-availability of required quality of leather in the local market. The loss was borne not just by the proprietors of such units but by hundreds of workers who were rendered jobless in an already labour abundant market.

It would be apt if the committee supposed to be reviewing tariff and duty structure take a closer view of the situation in leather sector, remove anomalies and make corrections where necessary. “It would better serve the government if special committees formed to address specific issues do business as normal instead of getting distracted by momentous issues” an economic observer with a brokerage firm mused.