Internal security biggest threat to democracy and economy
Foreign investors shy away due to concerns; Pakistan the only loser
KARACHI:
Years of destruction, caused by non-state actors, has pushed Pakistan far off the world’s business map. Due to its security concerns, the country remains relatively isolated as the rest move on from Pakistani products.
While this should have jolted every Pakistani into action, not much happened. The country remains paralysed by a narrative that diagnoses corruption responsible for all woes. It suggests that toppling a government through street power would fix all troubles. It confuses masses, threatens our nascent democracy and stops us from tackling the real issue — internal security.
By now, this narrative has gathered so much traction that Islamabad’s under siege. It’s hard to say whether this is based on misguided zeal or crafty brinkmanship? Whatever the case, the sit-ins have not seemed to help the economy.
Our domestic economy is mostly agriculture-based with industries like fertiliser, sugar, dairy, poultry, animal feed among others. None feel the pinch as much due to the country’s isolation. Most of these sectors, including transportation, real estate and construction, survive on the strength of demography alone.
Low-tech manufactured goods find eager domestic consumers. It does not help when most politicians also own such industries.
An often cited number, based on rough estimates, is the loss our economy has suffered due to security issues — $100 billion. This is easily countered by the populist promise that the $200 billion stashed in Swiss banks shall be brought back when the corrupt are held accountable.
One may gauge the problem by noting drastic reductions in Foreign Direct Investment, which stood at $24 million in the first month of 2014-15. Dismal as it may be, it only records our slide from bad to worse. What it can never record are the billions when investors decide not to pursue new business ventures in Pakistan. For our mainstream politics, these opportunity losses may be non-existent and hence, not worth shedding tears for. There is one more loss that remains eminently measurable. The money we lose when importers discontinue buying products from Pakistan. This loss is colossal and has decimated our apparel and the home textile export industries. Barring our internal security issues, there is no reason for the losses incurred by these giant industries.
Pakistan has potential
We have lost despite possessing high capacity for processing, cheap and abundant labour, excellent infrastructure, our own home grown cotton and an efficient banking and finance industry. We have lost when China has been shedding its capacity due to its ever-escalating labour cost and its consequent move to high value-added manufacturing. We have allowed Bangladesh to take on the $20 billion apparel spoils from China in the last 10 years. China has already shed $30 billion from its $80 billion share of global apparel trade.
Far from expanding, we have 80% of our installed production capacity unutilised in home textile, while new apparel units have not been set up. This low hanging fruit is worth $40 billion per year and 10 million new manufacturing jobs. If we factor in a decade of such losses, we get a figure of $400 billion.
Once again the popular discourse holds corruption responsible as the main reason behind declining exports. Another bizarre popular argument claims all our factories to have shifted to Bangladesh. Both are false. There are hundreds of Pakistani technicians and textile engineers working in Bangladesh. But these are not business owners or investors. These unfortunate professionals have simply been forced to relocate to secure livelihood; after they were laid off by their previous employers in Pakistan.
Bangladeshi factories suffer at least 24 hours per week of gas outage. No new gas connections are being offered to new factories. Load-shedding occurs for at least 8 to 12 hours a day. Capitalism, being remarkably resilient, finds novel solutions to the most intractable of problems. In Bangladesh’s case, dual-fuel diesel/gas generators mostly do the trick. Their higher cost is built into the product prices and passed on to their buyers. Some factories also pull home-made tractor trains fabricated by joining dozens of CNG cylinders together. These tractor trains queue up for hours at CNG stations to get their fill. On their return, they are unhitched and connected to factory’s gas mains. Some Pakistani factory owners improvise by burning firewood, coal or furnace oil in their boilers.
So long as a manufacturer has an assurance of steady sales, he can circumvent every challenge; electricity or gas being the less important ones. Clearly, our biggest challenge is sales orders drying up. Western buyers find it life-threatening to travel to Pakistan; a chore they must perform regularly for the continuity of their business. Lacking any production facilities of their own, these people need to stay in our factories at the start of each buying season. Their presence ensures that their computer generated designs and fashion creations are sampled and transformed quickly into real products. Bulk orders follow naturally when they return home. But security concerns change their destinations to other countries.
These mind numbing losses are directly attributable to security issues. No amount of government corruption can even come close. But, the populist narrative keeps gaining ground by peddling corruption as the only sickness and a regime change as the only cure.
THE WRITER IS AN ENTREPRENEUR WHO HAS WORKED IN BANGLADESH’S GARMENT SECTOR
Published in The Express Tribune, August 25th, 2014.
Years of destruction, caused by non-state actors, has pushed Pakistan far off the world’s business map. Due to its security concerns, the country remains relatively isolated as the rest move on from Pakistani products.
While this should have jolted every Pakistani into action, not much happened. The country remains paralysed by a narrative that diagnoses corruption responsible for all woes. It suggests that toppling a government through street power would fix all troubles. It confuses masses, threatens our nascent democracy and stops us from tackling the real issue — internal security.
By now, this narrative has gathered so much traction that Islamabad’s under siege. It’s hard to say whether this is based on misguided zeal or crafty brinkmanship? Whatever the case, the sit-ins have not seemed to help the economy.
Our domestic economy is mostly agriculture-based with industries like fertiliser, sugar, dairy, poultry, animal feed among others. None feel the pinch as much due to the country’s isolation. Most of these sectors, including transportation, real estate and construction, survive on the strength of demography alone.
Low-tech manufactured goods find eager domestic consumers. It does not help when most politicians also own such industries.
An often cited number, based on rough estimates, is the loss our economy has suffered due to security issues — $100 billion. This is easily countered by the populist promise that the $200 billion stashed in Swiss banks shall be brought back when the corrupt are held accountable.
One may gauge the problem by noting drastic reductions in Foreign Direct Investment, which stood at $24 million in the first month of 2014-15. Dismal as it may be, it only records our slide from bad to worse. What it can never record are the billions when investors decide not to pursue new business ventures in Pakistan. For our mainstream politics, these opportunity losses may be non-existent and hence, not worth shedding tears for. There is one more loss that remains eminently measurable. The money we lose when importers discontinue buying products from Pakistan. This loss is colossal and has decimated our apparel and the home textile export industries. Barring our internal security issues, there is no reason for the losses incurred by these giant industries.
Pakistan has potential
We have lost despite possessing high capacity for processing, cheap and abundant labour, excellent infrastructure, our own home grown cotton and an efficient banking and finance industry. We have lost when China has been shedding its capacity due to its ever-escalating labour cost and its consequent move to high value-added manufacturing. We have allowed Bangladesh to take on the $20 billion apparel spoils from China in the last 10 years. China has already shed $30 billion from its $80 billion share of global apparel trade.
Far from expanding, we have 80% of our installed production capacity unutilised in home textile, while new apparel units have not been set up. This low hanging fruit is worth $40 billion per year and 10 million new manufacturing jobs. If we factor in a decade of such losses, we get a figure of $400 billion.
Once again the popular discourse holds corruption responsible as the main reason behind declining exports. Another bizarre popular argument claims all our factories to have shifted to Bangladesh. Both are false. There are hundreds of Pakistani technicians and textile engineers working in Bangladesh. But these are not business owners or investors. These unfortunate professionals have simply been forced to relocate to secure livelihood; after they were laid off by their previous employers in Pakistan.
Bangladeshi factories suffer at least 24 hours per week of gas outage. No new gas connections are being offered to new factories. Load-shedding occurs for at least 8 to 12 hours a day. Capitalism, being remarkably resilient, finds novel solutions to the most intractable of problems. In Bangladesh’s case, dual-fuel diesel/gas generators mostly do the trick. Their higher cost is built into the product prices and passed on to their buyers. Some factories also pull home-made tractor trains fabricated by joining dozens of CNG cylinders together. These tractor trains queue up for hours at CNG stations to get their fill. On their return, they are unhitched and connected to factory’s gas mains. Some Pakistani factory owners improvise by burning firewood, coal or furnace oil in their boilers.
So long as a manufacturer has an assurance of steady sales, he can circumvent every challenge; electricity or gas being the less important ones. Clearly, our biggest challenge is sales orders drying up. Western buyers find it life-threatening to travel to Pakistan; a chore they must perform regularly for the continuity of their business. Lacking any production facilities of their own, these people need to stay in our factories at the start of each buying season. Their presence ensures that their computer generated designs and fashion creations are sampled and transformed quickly into real products. Bulk orders follow naturally when they return home. But security concerns change their destinations to other countries.
These mind numbing losses are directly attributable to security issues. No amount of government corruption can even come close. But, the populist narrative keeps gaining ground by peddling corruption as the only sickness and a regime change as the only cure.
THE WRITER IS AN ENTREPRENEUR WHO HAS WORKED IN BANGLADESH’S GARMENT SECTOR
Published in The Express Tribune, August 25th, 2014.