THE goodwill for the government among the business elite seems to be losing its shine, as they can be seen talking in terms of the thick ‘clouds gathering on the political horizon’ and ‘energy and commodity cycles acerbating economic challenges’. More than any other factor, however, it is the recent outburst in the domain of diplomacy that has for sure triggered a strong sense of resentment.

Taking the political chaos as a necessary evil of democracy, and the economic challenges as universal in the wake of the pandemic, Pakistani businesses say they can live with it all, but the diplomatic strong talk is making them nervous, with some even calling it ‘suicidal’.

The wisdom of publicly ridiculing trade partners is seemingly beyond their comprehension, and they fear retaliation that could cripple the fragile national economy.

Read: Foreign policy is falling victim to political confrontation and populist rhetoric

In a recent policy note, State Bank (SBP) predicted a lower growth rate than the target of 4.8 per cent but still over 4pc in the current fiscal. “This moderation should help keep at bay demand-side pressures on inflation and contain non-oil imports, notwithstanding the significant uncertainty about the future path of global energy and food prices due to the Russia-Ukraine conflict,” it hoped.

In terms of indicators, it said: “Since January, automobile sales and electricity generation have declined month-on-month. Sales of petroleum products and cement have also decelerated. In the second quarter of 2021-22, growth in fast-moving consumer goods (FMCG) sales dipped and general sales tax collections from services were lower than last year. On the supply side, large-scale manufacturing (LSM) growth has been revised upward following the rebasing, settling at around 5-6pc (year-on-year) since October. Agricultural prospects have somewhat weakened, with key inputs, such as fertiliser off-take and water availability during the Rabi season, being lower than last year. Cotton and wheat production will likely be less than previous estimates,” noted the SBP report.

Political confusion and economic challenges are taken as part of life in Pakistan, but diplomatic strong talk is making business leaders nervous

That being so, the exporters are hoping that the West would ignore the recent provocation and that the sober elements would ensure that delusional self-grandiosity would somehow be kept in check.

“Do they not understand that the Russian invasion has united the West once again and collectively they can choke Russia dry? China’s policy turn is just a matter of time as Russia ignores calls for restraint. The war images have rallied strong public support for Russian sanctions. No wonder US giants like Coke, Pepsi, Mc Donald, Facebook, etc are pulling out of Russia. Why is Pakistan bent on inviting trouble? Do we not already have more on the plate than we can chew,” remarked a worried textile exporter as he poured his heart out, regretting his earlier support for the current rulers.

Ehsan Malik, CEO, Pakistan Business Council, echoing the sentiments of PBC members, said: “Exporters are confused about how the diplomacy will counter the negatives of recent public statements about the West. At risk is our duty-free access to the EU markets under the GSP-plus scheme. The hope here is that Western governments will be influenced more by the need to continue supporting the jobs and wellbeing of the people of Pakistan than be distracted by this statement or that. By now, they should have got accustomed to our penchant for trying to punch above our weight.”

A former president of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) said: “There is no way to insulate the business from the fallout of intensifying political chaos as the PTI, throwing caution to the winds, tries to outsmart the opposition and defeat the no-confidence vote in parliament.”

Countering the argument and discarding threat, Abdul Aleem, Secretary-General of the Overseas Investors’ Chamber of Commerce and Industry (OICCI) stressed that despite all the “doom and gloom in certain quarters, high oil prices and the recent conflict in the region, the key segments of the economy, including manufacturing and export, are doing reasonably well, growing at a steady pace. We are reasonably confident that the economic growth of around 5pc can be achieved”.

He was, however, critical of the third amnesty scheme recently announced as yet another opportunity to whiten ill-gotten wealth. “We are strongly opposed to tax amnesty schemes. One wonders who asked for it and how much revenue the government hopes to generate. There are already many loopholes in the tax net, like tax breaks on farm income. Such moves demotivate honest taxpayers who are waiting for authorities to name, shame and punish the identified tax-evaders,” he said.

Aizaz Mansoor Sheikh, Chairman of Kohat Cement and former head of All-Pakistan Cement Manufacturers Association who sits on several boards, was disappointed with the general business environment. “These are tough times for businesses. We were still dealing with the Covid fallout when the Ukraine crisis struck, driving things from bad to worse. Prices of commodities and energy have gone through the roof due to sourcing and logistics issues. We are facing additional pressure because of massive currency devaluation and political instability,” he lamented.

Mr Malik endorsed. “The relentless commodity headwinds, acerbated by the Ukraine crisis, have made an already difficult external account situation worse.”

Without directly opposing the recent relief package that includes Rs10 per litre relief on petrol prices and Rs5 relief in electricity charges, the business leaders did mention the situation in Sri Lanka which recently imposed seven-and-a-half-hour daily power cuts because it did not have enough foreign exchange to import fuel. Being an oil-importing country, Pakistan, instead of supporting fuel conservation, has incentivised consumption by making it more affordable even if the government can’t afford to do it, they argued.

Inevitably, growth will slow down. The third-quarter results of companies by the end of March may not suffer, but the following quarter’s results are likely to be affected. The commodity cycle is not the only factor impacting the sentiment, they argue. Uncertainty, political and otherwise, is clouding the outlook rather seriously.

Published in Dawn, The Business and Finance Weekly, March 14th, 2022

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