The rising political temperature and the possibility of another round of a countrywide lockdown amidst rising Covid-19 cases may be unsettling, but Pakistan’s business community is currently too engrossed in responding to strong local and global demand to care about rallies and their outcome.
The capital market was unfazed by the Pakistan Democratic Movement (PDM) jalsas and political bickering. The benchmark index gained 1,115 points to close the week at 41,279 points last Friday. Tepid growth numbers of large-scale manufacturing (LSM) were embarrassing for the government that doled out precious billions to appease the business community. The Pakistan Bureau of Statistics (PBS) reported 1.2 per cent year-on-year LSM growth in August with only six out of 15 major industries growing.
The premium on car sales and rising cement despatches, however, do indicate a spurt in activity that will eventually reflect in relevant data. Businessmen mention challenges, but are happy with the dividends of the surprisingly good pandemic management in the country.
Despite the squeeze on family income in a sagging economy, the fact is that the market saw a spike in consumer demand for all types of products — convenience, shopping, specialty and unsought ones — as the coronavirus-induced lockdown was lifted in August after four long months.
Despite the squeeze on family income in a sagging economy, the market is witnessing a spike in consumer demand after the coronavirus-induced lockdown was lifted in August
From soaps and detergents to clothing, electronics, furniture, cars, personal care/beauty products and luxury items, the surge in demand was too steep for suppliers to match instantly. Many had scaled down operations during the lockdown. The demand-supply gap exerted pressure on prices as it takes time to make adjustments and revive the suspended operations.
On the front of global trade, the pandemic-related disruptions and trade barriers such as higher tariffs on key suppliers (China and India) opened up a window of opportunity for Pakistani exporters. The changing market dynamics in the West, where economic stress increased the share of low-end products in the market, also worked for the advantage of Pakistan. The fact that the country dealt with the health crisis better and succeeded in containing the number of cases and the mortality rate also encouraged overseas importers to mark Pakistan as a safe and viable source for imports.
“I have been in the business of industrial chemicals and dyes for years, but had just been catering to local demand. But with over 20pc tariff on Chinese products in the United States, my produce entered the gigantic US market. I started exports to the West this year for the first time and the month-on-month increase has given me confidence to look at the possibility of scaling up the capacity to realise the full potential of exports,” a former president of a chamber of commerce and industry said.
“Pakistan’s industry is bouncing back on the strength of sound fundamentals. Cheaper credit and supportive fiscal measures helped, but it’s the rising demand that has energised businesses. We hope that the government and the opposition will realise the gravity of the economic situation and ensure stability if it cares about the country and its hard-pressed people,” said Shariq Vohra, newly elected president of the Karachi Chamber of Commerce and Industry (KCCI). He said there are 2,700 industrial units in the city, 90ppc of them being small with 10-20 employees.
He trashed the toxic audio circulating on social media in which a man calls for army intervention and threatens to roll back investment and leave Pakistan if the impression of patronising the PPP and PML-N is not dispelled.
“Yes, we wish for investment in the crumbling infrastructure of Karachi that has persistently been ignored by successive governments and hope for greater consistency in economic policies, but we are not in the business of giving ultimatums. We have serious stakes in the country and wish to partake in shaping a better future,” he said.
Pakistan Business Council CEO Ehsan Malik said: “What’s concerning businesses the most is a threat of resurgence of Covid-19. Most listed companies reported record profits and a reversal on account of the pandemic is upsetting. Politics is in the background for fast-moving consumer goods companies as the ban on the movement of sugar and flour is a bigger nuisance, triggered by a heightened focus on inflation.”
Siraj Kassam Teli, chairman of the Businessman Group, a platform for the city’s entrepreneurs, wished to see the Rs1.1 trillion package announced for Karachi invested in the city on an urgent basis to ease the cost of doing business.
Rana Sikandar Azam Khan, a business leader from Faisalabad, spoke about vested interest dominating the political narrative. “They don’t mean what they say. The rotten system needs to be fixed to realise the country’s economic potential.”
Shaban Khan, a leader of Islamabad Chamber of Commerce and Industry, said the current political commotion is unnerving his community. “People will start holding the capital back again. This is not what we need at this point.”
Published in Dawn, The Business and Finance Weekly, October 26th, 2020