Missing the bus

Published May 15, 2023

 Shahzad Saleem, Chairman of the Nishat Chunian Group and the Pakistan Textile Council
Shahzad Saleem, Chairman of the Nishat Chunian Group and the Pakistan Textile Council

Shahzad Saleem is the chairman of the Nishat Chunian Group and the Pakistan Textile Council, a not-for-profit organisation created by Pakistan’s top 31 textile companies as a research, advocacy & impact acceleration platform for the textile and apparel industry. It has recently set up a national compliance institute in Islamabad and is working on the Generalised Scheme of Preferences facility from the European Union.

“Our economy will not turn around automatically; our country cannot make progress automatically,” Mr Saleem told this correspondent in a recent interview. “Only an unfettered private sector has the power and potential to turn around our messy economy. That’s the only way around the economic chaos we are witnessing in the country today.”

But for that to happen, he says, the nation must take some decisions critical for its future, and the authorities devise and put in place long-term labour, education, tax, energy and other policies.

“You can’t expect the economy to rebound, manufacturing to expand and export to soar in the five-year election cycle, which keeps successive governments from investing in long-term policies. We are missing the bus, or perhaps we already have.”

In his opinion, the first step towards long-term economic planning pertains to the complete separation of economic discourse from political discussions.

The ascendency of politics over the economy is the biggest elephant in the room

“Politics has completely taken over economic discourse. Both the government and the opposition talk only about politics. We are condemned to watch useless discussions on our TV screens. We don’t talk about the economy or what policies are good or bad for the people, industry and country.

“Whenever someone calls for privatisation of public sector businesses to save taxpayers’ money, everyone starts opposing it. No leadership addresses these issues. Do they want to promote businesses or not? Even if they want to, they are shy of saying it publicly. The ascendency of politics over the economy is the biggest elephant in the room that has to be addressed forthwith.

“Political parties should have a core economic team that should not get dragged into politics. I firmly believe the GDP will grow when every citizen gets work, good or bad, low income or whatever, and education. We don’t need foreign investment. We need to create opportunities for work for everyone, value their work and respect them.”

At this point, he goes on to quote a few examples of the public mindset against private businesses, saying this mindset needs to change if the power of the private capital is to be unleashed to perk up the flagging economy.

“This cannot happen without the government restricting itself to the regulatory role for creating an enabling business environment for investment.”

Like many of us, he firmly believes that no country can borrow its way to prosperity. “You cannot grow the economy through borrowed money or through public spending. At the end of the day, the only option is to encourage private investment. It will lead to employment, larger tax collection and increased GDP per capita. The economy is in a terrible state due to bad decisions over the last many decades. Only a thriving private sector can help put the economy on the road to growth.”

In reply to a question, Mr Saleem laments that the textile industry is being demonised. “It is a misnomer that the textile sector has been receiving concessions. The industry does not get any energy subsidies. For example, the weighted average cost of gas is $6 per million British thermal units (mmBtu), and the industry is paying $9 per MMBtu. Where’s the subsidy in it?

“We are paying a higher price because many other sectors are getting gas at a much cheaper rate. There is a wide gap in gas prices in Punjab and Sindh. It is why certain sectors are opposed to the weighted average cost of gas (WACOG). The constitution gives provinces the first right to their resources, but it doesn’t stop us from implementing WACOG.

“The textile industry is struggling to survive as the production costs have gone through the roof due to increases in energy prices and interest rates, as well as a reduction in the global demand.”

He says the reduction in domestic cotton crop output is a serious issue for the textile industry as it is one of the major factors affecting the exporter’s competitiveness. “The cotton production has dropped to 6-7m bales; this is a very serious issue. The industry can’t address this issue. The government must look into this and encourage cotton production.

“Again, politics is stopping us from importing high-yield seeds. If we are able to even double the cotton output, it will dramatically slash the import bill, boost exports and narrow current accounts. Cotton crop is our low-hanging fruit.

“Then we need to look at ways to support value-added businesses. That does not require cash subsidies but favourable policies like making it easier to comply with labour laws, fair tax regime and lower rates, better regulatory environment, and investment-friendly policies.”

Mr Saleem is disappointed that our governments continue to disregard local investors and run after foreign investors without realising that the risk profile of a foreign investor for our country is much higher than a local investor, which is why he demands a return on equity as high as 30 per cent in dollar terms.

“Our system penalises honest companies for being in the official economy. The policies need to be revised and convey the right message. For example, the government is collecting wealth tax on foreign assets but not local assets, which is giving the wrong message that people should not declare their foreign assets.

“Corruption is in every part of the world. It’s not a good thing, but you can’t shut down the economy to eliminate it. Then we have parallel institutions to deal with corruption. Why? When one agency fails to deal with corruption, we create a new one.”

Published in Dawn, The Business and Finance Weekly, May 5th, 2023

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