The government’s failure to document the large shadow economy and effectively secure the country’s borders against the invasion of smuggled and under-invoiced manufactured, intermediate, raw materials and finished goods is forcing manufacturers to opt out of the industry at the expense of tens of thousands of jobs.
“Effective documentation of all sectors of the economy is crucial if we want to stop jobs from shifting to other countries and become competitive,” argued Anjum Nisar, a Lahore-based producer of intermediate industrial raw materials for footballs, shoes, upholstery, stationary products, textile packaging, bags, PVC flooring, etc.
He told Dawn in an interview last week, “It’s time to decide if we want to grow and create jobs at home — or become a consumer society and export jobs elsewhere in the world.”
He contended that businessmen were getting out of manufacturing because of a strong policy-bias against the industry seen over the last few years.
“Neither government policies nor its attitude favour investment in the manufacturing industry. So why invest in the industry and work hard to lose money when you can make easy money by investing in sectors like real estate and retail that are off the taxman’s radar? Little wonder then that factories are closing and exports are down by almost a fifth in the last three years.”
The overall pace of indusial growth has slowed down to just above five per cent during the present financial year from 5.8pc last year, according to a report. Manufacturing has recorded a growth of 5.27pc against the modest target of 6.1pc for the year.
Large-scale manufacturing (LSM) expanded by 4.93pc on the back of improvement in the production of cement, sugar, tractors, buses, etc against the target of 5.9pc, while small scale manufacturing rose by 8.1pc.
Anjum was of the view that the lack of documentation of the economy was a major factor behind the shrinking size of manufacturing. “We could have had a large, vibrant and growing manufacturing industry and a lot fewer jobseekers on the streets if our policymakers had focused on documenting the entire economy and did not have a pro-import policy bias.”
He says the conditions in the country are not conducive for investment in new manufacturing industries. Yet he believes that all is not lost yet.
“Pakistan has a strong manufacturing base with a growing young population and cheaper labour force. But the revival of the manufacturing industry in the country, creation of new jobs and improvement in exports depends on how far the government is prepared to go.
“If the government is ready to tweak its policies to encourage investment in small- to large-scale manufacturing by taxing the entire production supply chain instead of selectively punishing the documented segments of the economy, secure its borders against the dumping of semi-finished and finished goods to protect domestic producers and cut the cost of doing business, we can see our fortunes changing rapidly.”
The former president of the Lahore Chamber of Commerce and Industry was also very critical of the role of the trade bodies representing businessmen. “Unfortunately, the business leadership, especially the Federation of Chambers of Commerce and Industry, is as little interested in the resolution of problems and issues facing the industry as our policymakers.
“The apex trade body is controlled by people who seem to act as a mouthpiece of the government instead of a representative of the business community’s interests. The role of such business and trade bodies needs to change.”
Anjum looks at the China Pakistan Economic Corridor (CPEC) initiative as a great opportunity for the Pakistani economy. But he thinks that the way the government is handling the connectivity initiative will benefit only Chinese investors and companies and not domestic businessmen.
“I feel that local companies are being discriminated against Chinese firms. If we do not secure our interests today, it will have grave consequences for us tomorrow.
“The corridor initiative will only result in adding to the debt stock and burdening our future generations unless our companies are encouraged to participate in CPEC-related projects and are provided the same tax benefits and policy incentives as Chinese firms.”
Published in Dawn, The Business and Finance Weekly, May 22nd, 2017