FACTORIES are shut, workers are staying home and companies are running out of liquidity to maintain even payrolls. The outbreak of Covid-19 has brought the global economy to a standstill in an unprecedented way.
Against this backdrop, Dawn spoke to Ziad Bashir, director of Gul Ahmed Textile Mills, one of the country’s biggest exporters. The company employs about 15,000 employees. With 56 per cent of revenues originating from foreign markets, its total sales amounted to Rs57 billion in 2018-19.
Following is the edited version of the interview with Mr Bashir, who is also the founder of Ideas, the retail wing of the textile maker.
Are your factories completely shut or partially open to meet export order deadlines?
Our factories are completely shut owing to the non-implementation of the government’s directives. We were unable to ship a huge number of export orders that have already been produced.
How are you dealing with cash-flow problems?
The only way we will be able to deal with our cash-flow problems is when the government returns the refunds that it owes us. Apart from this, we see no other solution. We’re otherwise extremely stretched in this time of crisis.
The government should waive utility payments and support the wage bill for three months, says Gul Ahmed Textile Mills Director Ziad Bashir
Has the government’s promise about delayed utility bill payments materialised yet?
No. There has been no implementation in this regard. We are receiving utility bills as usual. The government must have its teams follow up.
What are the incentives you demand the government should extend during this pandemic?
One, waive rents and utility payments. Two, the salary and wage bill should be supported by the government for three months to help businesses get through. Three, interest on past loans should be waived and low-interest loans should be extended to businesses. Four, turnover tax should be waived for a year. Five, sales tax should be waived for a year. Six, the zero-rating policy should be brought back.
Is the government’s focus on the export sector going to yield tangible results amidst a global economic downturn?
Words need to be followed up with a concrete plan of action and implementation, which are still lacking. All exporters are shut and have incurred enormous losses on account of this inaction. Companies will move their orders elsewhere if they feel their supply chain from Pakistan is not reliable. The focus on exports is much needed, especially since the world is looking for new sourcing options outside China. That said, the domestic economy is just as important and domestic commerce should not be ignored at the cost of exports.
What kind of supply chain problems are you facing?
We are facing supply chain issues as many components and raw materials from global and domestic sources have not been able to reach factories. The government hears us out, but has been unable to help physically owing to the non-implementation of its orders on the ground. Law enforcement agencies have been stopping all people and goods from reaching the factories, which is resulting in forced shutdowns.
How much of a hit do you expect in your local and foreign sales in 2020?
We expect sales to be down by 50 per cent or more in the year ahead globally as well as domestically. Family disposable incomes drastically dropped domestically last year because of hikes in interest rates, salary tax and sales tax rates along with a large jump in inflation. With all retail stores shut globally, there will be a huge mismatch in supply and demand, which may take up to two years to equalise again.
How long do you feel you are capable of maintaining 100pc payroll before you start trimming your workforce?
If the government does not (act in time), all companies will have to lay off people. That is inevitable. The Employees’ Old-Age Benefits Institution and the Sindh Employees Social Security Institution have to step in and at least support payroll substantially for three months.
How long do you expect the economy to stay shut?
I expect the lockdown to affect the economy for the next two to three months. The containment process has an enormous impact on industry. The economy will be affected long after it’s officially open. The lockdown cannot realistically last here for as long as (it can in) developed economies owing to ground realities. We need to create a fine balance between maintaining social distancing while allowing the economy to function partially and averting a complete economic meltdown.
Is the lockdown the best way to deal with this threat?
I think an intelligently planned lockdown instead of a complete lockdown is a much better option. Pakistan has a very high number of daily-wage workers. Exports are a huge employment generator. They are also critical for the balance of payments especially when our foreign exchange reserves are running low. This country has always run on philanthropy, particularly from Karachi. But for the first time I see these philanthropists are stretched and unable to meet the massive requirements arising out of this unplanned lockdown.
Published in Dawn, The Business and Finance Weekly, April 6th, 2020