LAHORE: Pakistan is confronted with the worst-ever economic crisis of its history, as businesses are bearing the brunt of high input cost, massive rupee depreciation, rising interest rate and political unrest, said Tariq Mehboob, chairman of the Chain Store Association of Pakistan (CAP).

“Unprecedented inflation and high cost of utility services have badly affected the lives of the common man. The retail sector is the ultimate sufferer, as the country is heading towards a wilful default,” he said, while talking to BOL News.

“More than 4,000 containers are stuck up at the port due to unavailability of the dollars. The industries, relying on imported raw materials, have been closed down due to the refusal to open the letters of credit. As such, the country has practically defaulted and we are delaying announcement. The situation is really pathetic for a country heavily relying on imports for raw materials and fulfilling the energy and food needs,” he said, while fearing a civil war-like situation if the people at the helm of the affairs failed to take immediate measures.

“From now onwards, the situation will only go from bad to worse. There is a need for immediate government intervention to avoid the worst scenario. As the first step, the government should make arrangements for clearing 4,000 stuck up containers. It will provide some breathing space to thousands of businesses waiting for the delivery of their consignments,” he noted.

Mehboob is a humble and down to earth entrepreneur having diversified and extensive experience in the retail sector, manufacturing and trading.

He built and nourished the clothing retail chain “Royal Tag”, which has now become a symbol of quality and exceptional customer service.

He is the founding member and chief executive officer of the Rana Trading Company, parent organisation of Royal Tag (formal fashion retail brand for men), with a network in 11 cities across Pakistan.

He is the Executive Committee member of the Pakistan Industrial and Traders Associations Front (PIAF) and the Lahore Chamber of Commerce and Industry. He is also an executive member of the Turkish businessmen body TUMSIAD’s Pakistan Chapter.

Following are excerpts of an exclusive talk with him:

Your take on the political unrest and frequent change in governments?

Businesses and the economy are the ultimate sufferers of the political chaos. For me, the impact of political unrest on businesses is far more than the global inflation. In such a scenario, the businesses avoid making short- and long-term investments for expansion. It also affects the foreign direct investment.

The regime change increases the likelihood of subsequent changes. People evaluate the policies of the next government before making any investment. A country like Pakistan cannot afford prolonged political unrest and frequent change in regimes. Relevant stakeholders should sit together and resolve the issues through consultation in the larger interests of the nation and the economy.

Impact of increase in the electricity tariff, fuel prices and outages on businesses?

The increase in the electricity tariff and fuel prices have considerably enhanced the cost of doing business. Many industries have been closed down and more are heading towards closure due to the high energy tariffs. The use of diesel-fired generators during hours’ long power outages is out of question. Other resources such as solar are also unfeasible due to high cost.

Moreover, the interest rate hike has forced the industries to drop the idea of going for this alternative option. There is a need to take immediate measures to reduce the input costs and end power shutdowns for the manufacturing sector and markets.

As a long-term strategy, the government should construct dams to increase water storage capacity and generate low-cost and environment-friendly electricity.

What are the challenges the retail sector is facing? Possible way forward?

Like other sectors, high energy costs and frequent outages are big issues for the retail sector. Early closure of markets will not help in conserving energy. Lights in the housing societies and streetlights consume more energy than the markets. Early closure will damage businesses and, as such, reduce tax collection. The government should have gone for daylight saving time at the start of the winter season just like over 70 countries on the globe.

Inflation has also affected businesses by decreasing the buying power of the consumers. The government should ensure uninterrupted supply of low-cost electricity and take measures to control inflation.

Your take on the point of sale initiative?

All our members have installed the point of sale system. Now, the issue is capacity of the Federal Board of Revenue officials. They are busy in frequent audit of outlets having PoS system. The FBR should work for training and capacity-building of its officials and check uncalled for harassment of businesses.

How do you see the growth of ecommerce in Pakistan?

The world has seen considerable growth in ecommerce in the post-Covid-19 scenario. This mode has also gained popularity in Pakistan. The prevailing economic crisis has seriously affected ecommerce. International companies are not allowed to take back dividend. The government should take practical steps to remove the complications hindering ecommerce.

How the global inflation and high freight charges have affected businesses?

Inflation has badly affected all the businesses across the world. The situation is really alarming in Pakistan due to heavy reliance on imports. We depend on the imports to fulfil our energy needs. We even import agro-based products such as oilseeds, grains and pulses. Our industries heavily rely on imported raw materials. Our products are not competitive in the global market due to the high cost of manufacturing.

Moreover, inflation is much higher in Pakistan, compared with other countries. The monthly inflation rate is more than 26 per cent. During the present regime, the accumulated impact is more than 64 per cent. Unprecedented inflation has affected the businesses and made the lives of the common man miserable.

Possible measures to reduce the trade deficit?

It is a big challenge due to heavy reliance on imports. The major portion of our imports are crude and edible oils. We will need to import half a million cotton bales to fulfil our domestic needs. The previous regime did a lot for import substitution through local production. Now, the economy is at a standstill and the country is on the verge of default due to the prevailing political chaos and wrong policies of the present regime.

The government should continue to identify areas and encourage sowing of palm oil, sunflower and other oilseeds to save the precious foreign exchange in the days to come. There is a need to take long-term measures like building dams to generate cheap electricity and ensure availability of water for irrigation purposes. We should give due importance to all the sectors. Diversification of products, value addition and exploring new destinations are necessary to enhance exports in the long run.

How interest rate hike affected businesses?

An increase in the markup rate has enhanced the borrowing costs of the enterprises. Many small industries have closed and more are on the verge of closure due to the lack of capital.

The State Bank of Pakistan (SBP) should revise down the interest rate and bring it at par with the regional countries such as India, China, Sri Lanka and Bangladesh. It should also take practical measures to increase the share of small businesses in total borrowings.

What can make the business environment encouraging?

The pandemic had already played havoc with the economies of the world. Now, high energy costs and power outages have worsened the situation. The business environment is extremely tough for the new entrants, while the existing players are fighting for their survival.

The uninterrupted supply of low-cost electricity is the basic need of all businesses. The new entrants should be given proper guidance through one-window facility and tax exemptions. The government should ensure a stable rupee and give due attention to the Small and Medium Enterprises (SMEs) and the cottage industry.

Your take on the future outlook of the overall business environment in Pakistan?

The scenario is not encouraging unless the government takes concrete measures to revive the economy and provide an enabling atmosphere to the SMEs and the cottage industries.

The government should reduce the input cost, end power outages for the manufacturing sector, control inflation, revise markup rates and ensure stability of the exchange rate.