Chairman Businessmen Group (BMG) & Former President Karachi Chamber of Commerce & Industry (KCCI) Zubair Motiwala, while expressing serious concerns on the prevailing business environment, stated that host of businesses are still struggling to remain afloat while many have turned into sick units after getting severe battering due to the Covid-19 pandemic related long staggering lockdowns and global economic slowdown.
In a statement issued, Zubair Motiwala said that during the period when businesses, particularly SMEs, were trying to overcome the losses of the initial wave of Covid-19, the second wave erupted. “This wave is proving to be more dangerous and continues to haunt the economy, trade and businesses in 2021. The severity of the situation can be gauged from the fact that for the first time since 1952, Pakistan’s GDP posted a negative growth of 0.4% in FY20 whereas, the Large Scale Manufacturing sector recorded a drop of -10.17%, inflation at 10.74% and current account posted a deficit of $2.96Bn. The year 2020 even saw a 7-year high inflation figure of 14% in Jan’20 and an unprecedented drop in LSM output of -22.95% in Mar’20, -41.89% in Apr’20 and -24.8% in May’20 as compared with the respective months of 2019. The prices of electricity, gas and even essential commodities such as wheat, sugar, oil, meat, eggs, vegetables, medicines, witnessed an unprecedented surge even at time of pandemic in 2020”, he added.
He further pointed out that thousands of businesses particularly small businesses and traders have shared their distress stories and fears of going bankrupt with KCCI therefore, it has become inevitable to declare 2021 as the year of ‘Relief & Rescue’ in the supreme national interest otherwise numerous businesses would completely fade away, which would further worsen the economic woes, destroy business activities, give rise to poverty and unemployment and may also trigger anarchy all over the country.
Zubair Motiwala urged that the government will have to prioritize relief and rescue activities throughout 2021 by sharing the burden of business community. Appreciating last year’s relief measures including Rs1.2 trillion corona bailout package, Chota Karobar Scheme subsidizing electricity bills, incentives for construction sector, substantial cut in interest rates, Deferment of Principal Amount of Loans and Refinance Scheme for Payment of Wages & Salaries and the Industrial Support Package (ISP) announced by Prime Minister that offers additional consumption of electricity to small and medium enterprises/industries (SMEs) at 50% less rates, Zubair Motiwala said that the business and industrial community appreciates all these steps but keeping in view the gravity of the situation and the severe crises being faced by all the industries, there was a dire need to do more in 2021.
He explained that shopkeepers and Small & Medium Enterprises (SMEs) usually have two major unavoidable expenditures including the rental payment for premises and salaries payable to workers. These small traders, shopkeepers and SMEs, who lost all their savings in dealing with the extraordinary situation caused by COVID-19 pandemic in 2020, desperately need to be rescued in 2021 hence the government should urgently devise some kind of an effective mechanism to share half of the burden of the rent of business premises while 50% of salaries payable to workers must also be borne by the government, to ensure survival of many shopkeepers and SMEs and avert massive job losses.
He added that this is not a naïve concept because many countries opted to provide relief to their businesses to revive their economy. Like Canada introduced ‘Canada Emergency Rent Subsidy’ scheme, for businesses that had suffered loss of revenue due to the coronavirus pandemic, under which they could apply for a subsidy which could cover up to 65% of business’s eligible expenses until Dec’20. Furthermore, through the ‘Canada Emergency Business Account’, businesses could apply for Loans of up to $ 60,000 without interests until December 2022. On the full loan, $ 20,000 would be forgiven if the balance is repaid by 31st December 2022.
Likewise, affected firms in Vietnam were eligible to concessional loans from Vietnam Social Policy Bank (VSPB) with no interest during May’20 – Jan’21 for making salary payment to their workers who temporarily stopped working. Myanmar through ‘Insured Fund for Workers’, the Social Security Board, decided to pay 40 percent of the salary to insured workers, as a family assistance fund. While in Russia, budget grants for SMEs in affected industries were announced to cover salaries at the rate of one minimum salary per employee for 2-months plus subsidized and forgivable loans for all enterprises in affected industries to pay minimum wages for 6 months.
While commenting on the source of funds for business relief package, he said that it is also a distressful situation that billions of rupees are going down the drain by loss making Public Sector Enterprises as they register net losses of over PKR 250 billion annually as well as burgeoning circular debt which has swelled to massive PKR 2.3 trillion in Dec 2020. They should be privatized at the earliest and these resources should be channeled to support other businesses and industries in Pakistan.
He argued that during 2020, all types of businesses remained completely closed for almost four months because of the lockdown imposed to contain further spread of coronavirus. Numerous businesses were later on allowed to operate partially but to date, the business and commercial activities have not normalized as many businesses particularly shopkeepers, restaurants, marriage halls, parks & playgrounds etc. were operating with limited timings while the cinema houses and educational institutions remain completely closed. The natural outcome of the measures taken to contain the outbreak was that thousands of people were left behind unemployed, many small and medium businesses either closed or barely survived by expending their savings set aside for bad times or by piling up loan liabilities.
Zubair Motiwala said, “How are we going to survive when the cost of doing business continues to rise while gas, which is the basic input, was hardly available to industries during the ongoing winter season.” He further added, “We, after long debates, had an agreement with the Energy Ministry in which we agreed to increase gas tariff from Rs786 to Rs930 per MMBTU as differential of RLNG and indigenous gas but this agreement was reached when it was committed by the government that gas would be provided to industries at optimum pressure and there will be no holidays but there was no gas available to industries.”
“Our question is that we have agreed to pay higher tariff for our smooth production, who would be responsible for the loss of production, who would be responsible for unemployment, and who would be responsible for creating a situation in which we are unable to meet the commitments made to buyers. If the agreement is not being abided by the government side, is it necessary that the industrialists continue to abide it and keep on paying higher tariff for gas which is hardly available”, he added.
On the other hand, he believed that the recent improvement witnessed in the exports of Pakistan especially in textile will not be sustainable because when the competing economies emerge out of restrictions and lockdowns due to Covid-19, the competition would be quite fierce and Pakistan will struggle to sustain orders amid higher cost of manufacturing. Currently, Pakistan is taking advantage of that vacuum, but when competitors will overcome the crisis of Coronavirus, Pakistani textile exports would see a massive decline. It is suggested that govt. must think on this critical point and made a viable and long-term policy and opt to facilitate businesses.
He hoped that 2021 brings good economic relief for the masses as well as the businessmen. However, chances of that are slim as the government plans on going back to IMF which would mean more tariff increases that will raise the cost of production in 2021. Furthermore, a new wave of taxes is expected to make life even more difficult for both the business community and common man.
He stressed that difficult time would only end if the business community gets conducive environment with much lower costs of doing business which is currently not the case. The interest rate needs to be brought down to 3-4% while the businesses affected by COVID-19 be provided interest free loans as done by other countries which should be further supported by a comprehensive relief and rescue package for the businesses, trader and industries including SMEs.