Withering state of business

Pakistan’s large-scale manufacturing (LSM) industries underwent contraction for the fourth successive month, despite uninterrupted supply of electricity to these units, casting further doubts on the possibility of meeting the higher GDP growth rate target set for the ongoing fiscal year. On a year-on-year basis, the LSM sector posted a growth of 2.6%, suggesting that performance was even worse in 2015. The development comes even as the PML-N government ensured uninterrupted supply of power to large-scale industries, diverting it from small- and medium-sized units in an attempt to spur growth. However, a fourth-successive contraction suggests that industries are either hampered by less-than-adequate demand or facing inefficiency at their plants. The fertiliser sector has been affected by contraction in the agriculture sector, where Pakistan continues to pin its hope of growth, with the oil and gas sector pegged back by suppressed crude prices. The latest agreement reached among oil producers for the first output cut since 2008 will take time to materialise and analysts are skeptical already. Hence, it would be safe to assume that there is very little hope going forward.

Finance Minister Ishaq Dar continues to take foreign trips in an apparent bid to lure foreign investors, but back home local industries continue to face growth issues. Barring the auto sector, where growth has come on the back of a lower cost of financing, depressed oil prices and a few new models, LSM industries have suffered extensively. Lack of export orders and flood of imports have meant that the situation has remained grim. Government officials keep coming up with new targets, but no talk takes place on how to achieve it. If talks do take place, implementation and execution remain on the back burner. All eggs, on the other hand, continue to be placed on the CPEC to solve all economic woes as its by-product. One should not be surprised when GDP growth clocks in much less than targeted when the current fiscal year ends.

Published in The Express Tribune, October 1^st, 2016.

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