LIKE most nations, Pakistan sealed its borders with neighbouring countries to combat the Covid-19 pandemic. Within the country, a lockdown was announced for 15 days with effect from March 22 and was later extended to April 14.
Notices came pouring in on the Pakistan Stock Exchange (PSX) with dozens of listed companies announcing “suspension/temporary closure of their production facilities” in compliance with the directives of provincial governments. A few stipulated the date for the resumption of activities, but most stated “until further notice”.
By the end of last week, 92 listed companies had forwarded notices to the PSX, declaring that their production had ground to a halt. They included units from all sectors: eight automobile assemblers, including Honda Car, Indus Motors and Pak Suzuki. A large number of engineering-sector companies, auto-part makers, chemical firms and glass and ceramics entities filed similar notices. Four cement plants — Attock, Bestway, Maple Leaf and DG Khan — also dispatched such notices. More than a quarter of the companies that pulled shutters were from the textile (composite and spinning) sector.
‘It is a fundamental right of employers to hire and fire the labour force’
The federal and Sindh governments do not see eye to eye on the matter of lockdown. The prime minister believes “the economic and social impact of the coronavirus outbreak is a greater crisis than the pandemic itself” while the Sindh chief minister shudders at the thought of an unmanageable number of coronavirus cases in a medically ill-equipped port city of millions of people. While Islamabad recommends the rollback of the lockdown from April 15, the Sindh government is adamant that people should stay indoors for another 15 days.
Topline Securities in a recent report stated that the brokerage expected six weeks of strict lockdown till the end of April and a gradual lifting of restrictions over the next two months with the situation starting to normalise post-June. “We expect industries to be operating ... at 70pc by September and 85pc by December; all of that resulting in an estimated average production loss of 35-40pc in (the last) nine months of 2020.”
A senior stock strategist said the lockdown had already done immense damage to company earnings. “A back-of-the-envelope calculation shows that corporate earnings for the current year would be eroded by 15-20pc from the previous estimates made three months ago,” he cautioned. Taha Khan Javed of Al Meezan Investments concurred. He maintained that companies would have to bear losses owing to plant shutdowns. “Even when the lockdown restrictions are eased later in the month, economic activity will remain on the lower side for the overall quarter.”
Employers’ Federation of Pakistan (EFP) President Majyd Aziz says he finds himself between a rock and a hard place. On March 23, the Sindh government restrained employers throughout the province from terminating the services of their employees and directed them to pay their wages notwithstanding the fact whether they were attending duties. Mr Aziz is displeased: “Businesses are run for profits and it is the fundamental right of the employer to decide about operating the mills and to hire and fire the labour force,” he said.
He argued that many companies wanted to see the wheels of mills turning but were hard-pressed for cash while other mused over maintaining social distancing when production lines were rolling. Due to depressed export demand, factories could not be expected to run on full capacity. “Industrialists worry where they will sell their products,” he said. Regarding foreign buyers of textiles, Mr Aziz said there were four categories: those who cancelled orders, those who have put them on hold, those have asked textile makers to continue filing orders and those who stand by their commitment and require the local producer to ship the product.
A source at the Federation of Pakistan Chambers of Commerce and Industries (FPCCI) said that its senior officials met the chief secretary of Sindh last week. Issues discussed and agreed upon included opening the industries where workers live within factory premises, packing material factories, export industries where consignments are ready for shipment and those that have orders in hand, and factories in the export-processing zones. They also agreed to open all factories and businesses on 30pc capacity utilisation upon compliance with social distancing and health precautionary measures.
A day before the government announced a hefty package for the labour-intensive construction industry, the lockdown from the cement industry was lifted. A notice to the PSX by DG Khan Cement conveyed the good news to its stockholders: “In view of the relaxation allowed to the construction industry from the current situation of lockdown due to Covid-19 by the authorities, DG Khan Cement has resumed production processes at its plant site at Khofli Sattai, Dera Ghazi Khan.” Maple Leaf Cement announced on April 7 that it had resumed production operations at its plant located at Iskandarabad in Mianwali.
Sources say that certain textile mills in Sindh tried to defy lockout orders last week. But they soon found men of law knocking on their doors and received heavy fines. The parliamentary committee on Covid-19 was informed on April 9 the government was reopening low-risk industries to ensure the supply of essential commodities.
Published in Dawn, The Business and Finance Weekly, April 13th, 2020