Home Views & Opinions Geopolitical, economic and strategic impact

Geopolitical, economic and strategic impact

1346
0

Corona Calamity has impacted over 200 countries with 1.3 million effected. Some more some less depending on the genetics, demography and behaviour of people regions to region. Key word is discipline and social distancing. Unfortunately South Asian sub continent do not have very good record in observing discipline unless hand of law is over them. Pakistanis leads in generosity individually yet indulge in all sort of wrong doings as cooperative entity. In this Pakistan’s record is poor.
Pakistan Defence Forces always have been on the forefront in emergency and Calamity. They are again at the forefront to fight Corona Calamity. Corona is deadly virus which has gripped the world and by now endangering the health of forces as well while performing duties. While China has managed to stem the tide, the world at large still grappling. In Pakistan also the number is increasing and has crossed figure of three thousand. Yet we are lucky that death rate is so far low. Next two weeks will determine the trend. Fact remain Corona is going to change the world in all its three dimensions in economic, social and strategic dispensation. It is estimated at least thirty percent economy has noise dived. Considerable damage has been caused to small and middle level industry. In Canada and US service industry has rendered over 10 million jobless. Same is the case in EU and GB. All this is fore bearing of another Great Recession. It is estimated EU will suffer over 4 trillion US $. Same is the case in USA where expert estimate 2 trillion US $ package is insufficient and estimate requirement is of 10-12 trillion US $. Canada has allocated around 1.2 trillion dollar. They estimate 30% down fall in economy. Complete service sector in disarray. Service industry has shed thousands of workers. Air Canada has laid off 4500 employees. Canadian govt is giving subsidy to sustain those loosing jobs.
This indicate at least for a year Pakistan will not get orders from abroad for its export to an extent . In any case, the demand for Pakistani products is very elastic. Where as our import items demand is inelastic. We exported, around 23 billion US $ last year and new target, may not be sustainable, what to talk of increase. We have to look inward for sustainability of economy. Two, we should find markets other than our traditional destinations. Russia, CIS and Africa is untapped and least effected where we can trade in local currencies. Third, US $ is now the strongest currency. This downfall of Pak Rupee is no different. All major currencies stand devalued at historic level. Further divisions in EU unity is going to impact the market further in post Covid 19. Resources are going to be channeled towards health care.
In Pakistan the situation demand new approach. We have to boost Demestic industry both in large scale, medium and small enterprises. SME was growing ten years back then were made to depend on imports. There is always opportunities in calamity. A very vast segment of health care has opened up. No one ever thought to assemble ventilators or for that matter other health care equipment and gadgetry. What is necessary is to maintain international standards. Similarly, PMs initiative in construction industry is a step in right direction. The package to builders is good but time limit of 31 Dec is too narrow. This should be at least for two years. And to extend further on year to year basis. Any investor will be shy if not sure of Continuity in policy. Along with this it must be remembered forty or so allied industries barring steel and cement fall in to medium and small segment. The package does not specify the relief for these to boost production. Three components of production are land, finance and entrepreneurship. The third is available but land and non availability of easy finance make it difficult for entrepreneurs to maintain international standards. Land can be provided in new industrial zones on long term instalments and for finance a two prong approach be adopted, recreate institutions at Govt level and bind banks to at least keep 60 % lending to SME,s and agriculture engineering, enhance manufacture and adopt modern agriculture techniques. First to put industry on track. The scope of allied industries is very large. Like manufacture of Fancy lights, wires and switching, Sanitary and tiles, and the list is long. Same is the case with auto assembly. I had the opportunity to head three leading assembly brands, has been part of decision making committees. In 1999 in a presentation based on research my observations were that we were not using the potential of market. It was not agreed to then by Industries Minister . Situation is no different today. Pakistan’s auto policy favour but few. It does not allow technology growth. Now, the days of combustion engine and hybrid technology are over. It is now the time of electric vehicle. I was the first to point it out year back and presented Governer Sind to introduce Electric buses for Karachi. Major world brands fear loss of their investment in Hybrid Technology.
Similarly in 2005 I had raised the point, Pakistan must move to LHD to avail benefit of 72 % world auto research and industry. Plus most important we are connected to LHD countries and not RHD barring India. It enlist 10-15 cost over heads when we buy RHD vehicles and even CKD. None of the existing brand tried to go for real-time technology transfer, unlike India.
In Pakistan large, medium and small scale industry, over 30-40 % labour force is of daily wage workers and mostly migrant to large cities. There is no authentic data about this labour. In time of crises they go back to native villages. In a way this is also useful otherwise they would have been on the roads asking for rations and money. It is important Govt taking due care, with selective lock down.This labour has be put to work. Opening of construction industry will absorb much of it. However medium and small industry and service sector be also opened selectively. Situation on virus be clear in four weeks. It is estimated in two to three month time Pakistan Economy will shrink by 15% and in next three months it will be around 30%. Stock Exchange index has come down to 2800 and may go down further if lockdown continue beyound April 14. Travel and Tour Sector is virtually closed down with most airlines grounded. Their vows are compounded as they have been indulging in mind boggling credit, six months to one year, to companies. Now they have no fiscal space. Companies exploiting Travel Agencies themselves will be facing crunch.
To give a boost to Small and Medium industry Package of 100 billion is not enough as they constitute 70 % percent of economy.
Due to shrinkage in economy the fiscal space created be exploited by economy managers. Lower energy rates and in billing all additional charges be abolished. Subsidy can be given instead of doll out the money. Lower lending rates, GST, collection of Advance tax be reviewed merely on presumption that Business will grow is exploitation. Bank borrowings be made easy as bank discourage SMEs. Service sector be taxed on fixed rates as is done many countries to save them from tax collector sharks.
Finally in these times corporate sector should also shoulder responsibilities to share the burden on state during the abnormal times. We see no contribution from banks, Pharma, telecom sector, auto, sugar, cement and textile giants in providing relief. They have been making hefty profits. Govt at least should bind them to look after their own employees.