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Comprehensive economic package is in the offing

By AMANULLAH BASHAR
Jan-28 - Feb-03, 2002

The United States of America is expected to announce a comprehensive economic package for Pakistan when President General Pervez Musharraf visits Washington next month.

The size and dimensions of the forthcoming package aimed at offsetting the after effects of September 11 events on Pakistan's economy. Apparently, the economy had to suffer tremendously in all respects including drop in exports and closure of various manufacturing units, especially small textile and leather and leather product units in Punjab and Sindh. The large-scale export oriented units were not exception to the recession and gone under capacity utilization due to lack of fresh export orders.

In order to ascertain the magnitude of losses the economy has suffered in Pakistan, the Economic Section of the US Embassy in Islamabad had initiated a survey regarding drop in production of the manufacturing sector to assess the impact of September 11, 2001.

Under the survey, information is being collected regarding overall performance of the industrial sector in terms of output loss, increase in costs of production, fall in export orders, increase in freight and insurance charges, use of raw material etc. This has also been asked from the industrial sector is it bouncing back after the initial negative effects of September 11 events?

The Economic section is also looking into sector-wise performance in terms of production losses, decline in exports, and increase in insurance charges on various sectors. Situation regarding overall fall in employment in the industrial sector and industry-wise fall in employment and the number of establishments closed especially in the textile sector and other major sectors has also been inquired.

Among other questions regarding impact of the crisis, the survey also seeking projected or forecast production levels, costs and exports for the industrial sector as whole and also for various sectors including textile, leather, engineering and sports for the financial year 2001-2002 and projected impact on GDP of the country.

Contrary to the expectations for a boom, textile industry in Pakistan is currently facing drop in fresh orders due to uncertainty prevailing in the buyers market in the aftermath of September 11 incident especially in the United States.

Textile industry feels that the exercise undertaken by the Economic Section of the US Embassy is in line with the anticipated US package of incentives to be granted by the US government.

The losses to Pakistan's economy led by Afghan crisis are estimated at $2.50 to $3 billion. Although the losses are tremendous especially in the private sector as the people in general suffered acute social and economic problems mainly due to stagnant economic activity, the manufacturing sector may not be able to furnish the exact detail as the losses are wide spread ranging from the loss of wages of the workers to the level of finished product.

The textile industry constituting a large segment of the total exports which comes nearly to 65 is eagerly looking for the Package of incentives to be announced by the United States, which is one of the major buyers of Pakistani textiles. The United States has not announced any sort of incentives for the textile industry in Pakistan so far. The recent announcement regarding lifting of duty on comb yarn from Pakistan actually was a case being fought by the textile industry and imposition of duty on comb yarn was unjustified. Hence withdrawal of duty on comb yarn has nothing to do with the expected package from the United States.

As a result of negotiations presently going between Pakistan and the United States, a comprehensive package expected to be announced shortly by the United States to offset the adverse impact on the industry in Pakistan.

Sources said that large stock of inventories of the textile mills is welling every day in the absence of exports and fresh orders. The actual impact of the crisis would come to the sight in the second half of the current year as the industry was so far engaged to accomplish the export orders, which were already in the pipeline. There is a marked decline in fresh orders, which is the main cause of concern for the textile sector. Decline in the knitwear, yarn and gray cloth is noticeable and calls for immediate solution, he said.

Commenting on the EU package of incentives given to Pakistan, he said it would certainly result in enhancing exports from Pakistan. However it would be too early to comment on its total impact on our exports.

Better financial discipline on the part of present team in government and successful rescheduling of huge foreign debt, farmer friendly policies and above all sincerity of the purpose to bring the economy out of crisis, has however started showing positive results reflected in the strong signals in various sectors.

The economy is expected to grow to 3.5 per cent at the end of the current fiscal year mostly on account of good cotton, sugar and wheat production.

While the financial strength of the country is also being reinforced with improved inflow of home remittances which are estimated to cross over $2 billion at the end of the year.