Big business calls for lemon socialism

Updated Apr 07 2020

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THIS is an unprecedented situation globally. Like many others, Corporate Pakistan did not get it. Not yet at least, their behaviour indicates. Applying a conventional approach, fixated on the bottom line, it is again attempting to socialise risks and losses by asking the government for bailing it out.

How long it will take the business community to digest the enormity of the challenge, shake off its habit of leaning on the government and adjust its strategy to the new reality is hard to predict. The pandemic, global news testifies, is not classist. It infected and marooned the symbols of wealth and power as much as the wretched of the world. Whether we swim or sink will depend, to a great extent, on the quality of our response individually and collectively.

The business community of Pakistan has weathered a lot in this crisis-prone country and did manage to succeed. It has experience and is resourceful. Its stakes are high as it has more to lose than others. The pandemic has put to test, like never before, its wisdom and animal skill to work through the odds.

The overwhelmed government has responded compassionately to the business community’s demands, promising moon and committing packages, tax breaks and concessions at a time when its own budget is in tremendous stress and even the routine inflows are threatened. The donors’ money can provide some relief, but how much and for how long is hard to predict in these tumultuous times.

Corporate Pakistan is not only demanding relief but also making a case for altering the tax structure to the benefit of the most resourceful segment of society

The Pakistan Business Council (PBC), the most vocal and well-equipped platform, worked out a well-worded wish list to shield its members from the fallouts of local and global lockdowns. In a letter addressed to the finance minister that it shared with the media, it outlined high points of a relief package “to sustain employment and preserve ability to swiftly commence operations when circumstances permit”.

It admitted that it is the responsibility of companies to keep regular workers on the payrolls. There is no mention of millions of contractual workers who have been laid off. The PBC acknowledged the government’s predicament in the current trying times. This did not, however, stop it from asking for a deferral of tax payments and other levies (EOBI, WWF/WPPF contributions) citing disruptions in cash flows and the need to retain solvency.

It wanted output sales tax and excise duties for February and March be paid in instalments, 100pc input adjustment to sales tax, writing off three per cent additional sales tax at the import stage, turnover tax slashed to zero from current 1.5pc, suspension of all advance taxes, immediate release of income/sales tax refunds, restoration of Section 65 B, tax credits to firms sustaining workers, tax rebate of 50pc to the earners of Rs1.8m per annum and reduction of corporate and property taxes by 5pc and 50pc, and the withdrawal of Sindh Infrastructure Development Cess among other things.

Claiming to be pragmatic, in essence they not only demanded relief but also made a case for altering the tax structure to the benefit of the most resourceful segment in a country where the tax structure is already skewed towards indirect taxes. PBC CEO Ehsan Malik responded thus to Dawn’s queries.

“At a time when cash flow is under extreme pressure, 80pc of the relief sought is temporary deferrals and one-off remissions. The emphasis is on sustaining employment,” he said.

“The window for unconventional demands doesn’t exist. Our government has limited capacity to match what other countries have done to assist business. Hence, we have taken a pragmatic approach. Sustain the present whilst the government negotiates a more plausible set of targets with the IMF. Fortunately, the IMF is open to help,” he added.

An incorrigible optimist, premier’s adviser on commerce and industry Abdul Razak Dawood talked to Dawn in between countless meetings in Islamabad. He said he was in constant touch with business leaders, adding that he enjoys a personal relationship with many of them because of his long career in the corporate sector. “Every morning I hold a video conference with the leaders of business chambers and trade bodies from around the country to listen to their problems and enrich my own understanding for a more informed input in official huddles for their benefit. The government is keen to do all in its power as it understands the value of the sector for the economy and the country,” he said over the phone.

“Things have started moving,” he said, probably referring to the tax refund distribution and multiple packages announced by the prime minister and the finance minister to calm the anxious business community. He promised a written detailed response that did not reach within the deadline.

The experience of the last one month amply demonstrated how the pandemic shook the world, tearing the order at its very seams. The future continues to be uncertain as the collective wisdom is currently being applied to contain the outbreak and sustain people under the lockdown.

Attempts to reach Anjum Nisar, president of the Federation of Pakistan Chambers of Commerce and Industry, did not succeed. The Overseas Chamber of Commerce and Industry Secretary General M Abdul Aleem defended the private sector’s position. “All governments, including that of the United States, are bailing out private companies. Else they will be forced to lay off, default and cause systemic risk,” he wrote back.

Majyd Aziz, president of the Employers’ Federation of Pakistan, has self-quarantined because of his interaction with PPP leader Saeed Ghani before he was tested positive for the coronavirus. He said the private sector currently finds itself trapped between a rock and a hard place. “The panic motivated business leaders to scale up their usual demands for relief, relief and more relief. Their demands are the same: quick disbursement of refunds, reduction in the markup rate and deferral of payments to the FBR, utilities, etc. However, for probably the first time, they also voiced their concern for wages and salaries,” he said.

“There is no unity in business leadership that seldom sits on the same side of the table. Each body is focused on issues. This is a time to realise that the treasury is under severe pressure as the FBR continues to miss monthly collection targets, political instability looms and uncertainty continues,” he added.

“Prime Minister Imran Khan is on TV every other day announcing relief for one sector after another. I have only heard business leaders demanding more but they rarely offer support in hard times. If exporters are getting refunds, shouldn’t a percentage be donated for relief?” he asked.

He said the business community should volunteer to help the government in the current crisis and “wait for the dark clouds to lift before asking for deliverance for selves”.

“We will swim or sink together,” another business leader critical of what he called the inward-looking mindset of the business community commented.

“The pandemic is testing the government and its structures. There is a possibility of its crumbling down under its own weight. Where are thought leaders and economists? Why have they gone underground? This is the time when we would like to hear from them,” he added, requesting anonymity.

“Despite all the hype about the dynamism of the market and its futuristic driver i.e. the private sector, it cranked at the first major jolt. Governments with all their flaws are functional and trying solutions. Some work some don’t, but they are at it,” another champion of lean, clean, effective and strong government argued.

“How come the booming drug industry of Pakistan is nowhere to be seen in the health crisis? They have sufficient cash to throw around for advertisement and image-building social exercises, but see no role for themselves in the provision of necessary basic medical supplies and testing kits in the current emergency,” he added.

own understanding for a more informed input in official huddles for their benefit. The government is keen to do all in its power as it understands the value of the sector for the economy and the country,” he said over the phone.

“Things have started moving,” he said, probably referring to the tax refund distribution and multiple packages announced by the prime minister and the finance minister to calm the anxious business community. He promised a written detailed response that did not reach within the deadline.

The experience of the last one month amply demonstrated how the pandemic shook the world, tearing the order at its very seams. The future continues to be uncertain as the collective wisdom is currently being applied to contain the outbreak and sustain people under the lockdown.

Attempts to reach Anjum Nisar, president of the Federation of Pakistan Chambers of Commerce and Industry, did not succeed. The Overseas Chamber of Commerce and Industry Secretary General M Abdul Aleem defended the private sector’s position. “All governments, including that of the United States, are bailing out private companies. Else they will be forced to lay off, default and cause systemic risk,” he wrote back.

Majyd Aziz, president of the Employers’ Federation of Pakistan, has self-quarantined because of his interaction with PPP leader Saeed Ghani before he was tested positive for the coronavirus. He said the private sector currently finds itself trapped between a rock and a hard place. “The panic motivated business leaders to scale up their usual demands for relief, relief and more relief. Their demands are the same: quick disbursement of refunds, reduction in the markup rate and deferral of payments to the FBR, utilities, etc. However, for probably the first time, they also voiced their concern for wages and salaries,” he said.

“There is no unity in business leadership that seldom sits on the same side of the table. Each body is focused on issues. This is a time to realise that the treasury is under severe pressure as the FBR continues to miss monthly collection targets, political instability looms and uncertainty continues,” he added.

“Prime Minister Imran Khan is on TV every other day announcing relief for one sector after another. I have only heard business leaders demanding more but they rarely offer support in hard times. If exporters are getting refunds, shouldn’t a percentage be donated for relief?” he asked.

He said the business community should volunteer to help the government in the current crisis and “wait for the dark clouds to lift before asking for deliverance for selves”.

“We will swim or sink together,” another business leader critical of what he called the inward-looking mindset of the business community commented.

“The pandemic is testing the government and its structures. There is a possibility of its crumbling down under its own weight. Where are thought leaders and economists? Why have they gone underground? This is the time when we would like to hear from them,” he added, requesting anonymity.

“Despite all the hype about the dynamism of the market and its futuristic driver i.e. the private sector, it cranked at the first major jolt. Governments with all their flaws are functional and trying solutions. Some work some don’t, but they are at it,” another champion of lean, clean, effective and strong government argued.

“How come the booming drug industry of Pakistan is nowhere to be seen in the health crisis? They have sufficient cash to throw around for advertisement and image-building social exercises, but see no role for themselves in the provision of necessary basic medical supplies and testing kits in the current emergency,” he added.

Published in Dawn, The Business and Finance Weekly, April 6th, 2020