EDITORIAL: The Cabinet has approved removal of five percent regulatory duty on import of cotton yarn till June 2021; this might seem like a smart idea to protect the interests of the textile sector, given the unusual dip in estimated cotton production and the need to import more yarn this year, but it once again exposes inconsistency in the government's policy-making. Surely, the prime minister's many special advisers, who head most of the forums where such decisions are taken, don't need to be reminded of one of the most basic rules of economics; that when you toggle taxes and incentives too often you disturb industry's input costs and upset its production and revenue calculations. That way, some targeted policies might provide an umbrella for a specific sector for a short period of time, but they tend to do more harm than good in the long run. Now if the commerce ministry's calculations, rather hopes, of local production returning to the last few years' average by June do not turn out to be true, then there's no telling if importers of yarn will get another waiver or not. That, needless to say, often makes long-term planning a rather perilous exercise because some very crucial decisions have to be delayed till the last minute, which simply rules out the possibility of hedging in international futures markets should large imports really be needed.
For some strange reason a similar indecision on the part of the government can be observed at all crucial stages from harvesting to production to commerce. Why, for example, has it formed a bad habit of taking so long to announce the cotton support price? How exactly does it expect farmers to react when it leaves them in the dark about what price their product is going to fetch? This is one of the major reasons for contraction of land under cotton cultivation over the years, to the point that we are now forced to import the commodity we once used to export. The other big reason is the sugar mafia, of course, since the privilege and power it commands in parliament enables it to divert precious land from cotton to sugar cultivation. Still, the government's indecision when it comes to the support price has only added to the recent mass exodus from cotton production in the agriculture sector.
It is regrettable, more than anything else, that the government does not seem to appreciate the need and importance of long-term and consistent planning. Policy reversals and frequent changes show that it has no sense of direction and is only concentrating on meeting immediate goals. Yet while such tactics may see you through one more day, they will do your greater vision of upgrading industry to add value to exports and eventually increase national revenue no favours whatsoever. All sectors therefore should have their respective policies clearly defined and explained to them at the beginning of every fiscal year and all the energy used in finding short-term escape routes later should be invested in creating long-term plans, complete with support prices and regulatory taxes, right at the beginning. If the government really wants to do something about the beaten down state of the industrial sector as a whole, it will need much more than cosmetic measures to improve the two things that really matter - performance and earnings.
The Pakistan Tehreek-e-Insaf (PTI) government is nearing its half-way mark in the electoral cycle. So far it has been consistently behind the curve in implementing some of its own policy recommendations. As a result it has failed to maintain much order and got locked in a one-step-forward-two-steps-back type of movement, especially when it comes to the economy, and blamed its failures on previous administrations more out of frustration than any other reason. It must immediately revisit its strategy before things begin to go downhill very fast and it is unable to regain its composure in time to make a difference before the next election. To turn things around it must stop reacting and start acting, and make clear, long-term policies that it can then get down to implementing. Simply putting your finger on one hole after another will keep the water out, but only for a very short time.
Copyright Business Recorder, 2020
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