LSM statistics show upturn

The latest Large Scale Manufacturing (LSM) statistics released by the Federal Bureau of Statistics show a positive trend: from registering a negative growth of 1.57 percent during the first six months of the current year (July-December) the figures for the first seven months (July-January) showed a positive 1.03 percent in the Quantum Index Number. The question uppermost in the minds of the country's economic managers would be what changed in January 2011 that led to a dramatic change in the LSM output?
One major positive in the economy has been the increase in remittance income this year. During July-January remittances rose by 17.7 percent or 919.92 million dollars in total terms in comparison to the comparable period last year.
In January 2011 alone remittance income was estimated at 826.57 million dollars, up 23.76 percent or 158.67 million dollars higher than the 667.90 million dollars received in January 2010. The countries from which remittance income rose were as follows: Saudi Arabia (from $153.50 million to $209.58 million), UAE (from $158.33 million to $181.40 million), USA (from $123.49 million to $148.03 million), GCC countries (including Bahrain, Kuwait, Qatar and Oman) from $95.27 million to $95.18 million, UK (from $67.56 million to $92.53 million) and EU countries (from $15.14 million to $23.56 million). The government maybe quick to claim credit for becoming an attractive haven for remittance income, yet it is relevant to note that the savings rates in this country have been much higher, in conformity with International Monetary Fund recommendations, than in almost all other countries from where remittance income is received, especially in the West where rates are at a historically low. But at the same time, high interest rates in Pakistan raise the cost of borrowing, which is cited as one of the major impediments to the growth of the LSM.
A positive growth in the LSM, notwithstanding, few can deny that the economy performed rather dismally during the ongoing fiscal year. Some of the factors responsible were external to the system and include the devastating 2010 summer floods, continuing global recession that impacted on our consumer-based exports and last, but not least, the ongoing conflict in the Maghreb countries as well as some oil exporting Middle Eastern countries that led to a massive rise in the price of oil that, in turn, accounted for our burgeoning import bill. Internal factors held responsible for the economic crisis range from the government's inability to effect any meaningful changes in the tax system widely regarded as inequitable and anomalous to an inability to reduce expenditure other than development, which has led to a failure to invest in the sadly deficient infrastructure sector.
There is a consensus in this country that the major factor responsible for negative LSM growth during the past few years is the continued shortage of energy to meet demand; and disturbingly, while load shedding continues to be heavy, yet electricity bills, or costs of production of LSMs, witnessed a steady rise due to the periodic increase in tariffs. This increase is expected to be 2 percent per month till the end of the current fiscal year. In addition, gas shortages during the winter months virtually shut down two fertiliser plants, with an obvious impact on the country's LSM statistics. The only recourse for the government is to expedite exploration activities which obviously implies that the focus has to be on natural resource-rich Balochistan.
It is unfortunate that the government's strategy in dealing with the politically charged atmosphere in Balochistan has been restricted to a public apology by the President, an apology on behalf of the country's former ruler Musharraf, and the Aghaaz-e-Huqooq-e-Balochistan package that does not deal with the concerns of the Baloch nationalists. There is an urgent need for the government to expedite exploration activities in Balochistan through initiating a dialogue in an effort to resolve all political and economic issues that continue to simmer.