Increase in the minimum wage: Industrialists perturbed by Sindh govt's decision

KARACHI: The industries of Sindh particularly of Karachi are highly aggrieved and perturbed by the controversial move of the Sindh Government to increase Minimum Wage from Rs17,500 to Rs25,000 without following due process of law and in contrary to the provisions of Sindh Minimum Wage Act 2015 and ILO's minimum wages fixation convention 1970 which have deprived the industries of Sindh from level playing field not locally but also globally making them uncompetitive and unviable to operate due to exorbitant upshot in the cost of manufacturing as wage is the major component in the cost.

The said action by the Sindh Government appears unconstitutional which has compelled the industrialists to plan and shift their industries to other provinces or abroad. Resultantly, it will severely impair the national economy as the 54 percent share of industries of Karachi in national exports will face downfall and the 67 percent revenue generated mainly from Karachi for the national exchequer and 95 percent revenue for the Sindh Revenue Board will also decline. The gravity of situation shall lead to massive layoffs, unemployment and law & order situation.

This joint statement is issued by the Federation Of Pakistan Chambers Of Commerce & Industry (FPCCI), Karachi Chamber Of Commerce & Industry (KCCI), Pakistan Hosiery Manufacturers & Exporters Association, SITE Association Of Trade & Industry, Landhi Association Of Trade & Industry, North Karachi Association of Trade & Industry, Pakistan Readymade Garments Manufacturers & Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Cloth Merchants Association, Pakistan Knitwear & Sweaters Exporters Association, Pakistan Cotton Fashion Apparel Manufacturers & Exporters Association, Pakistan Bedwear Exporters Association and other FPCCI affiliated Chambers and Associations of Sindh Province.

The trade organisations see the Sindh Government's Notification No.L-II-13-3/2016 dated 9th July, 2021 to fix minimum wage of Rs25,000 as unjustified and unreasonable executed in non-compliance of the due process of law, contrary to the Sindh Minimum Wage Act 2015 and sidelining the jurisdiction of minimum wage board and without consulting stakeholders - the employer representatives. Fixation of minimum wage of Rs25,000 will proportionately increase and multiply the variables cost on account of the employers contribution in the EOBI and SESSI.

The trade organisations articulated that the Sindh Government has created huge division and wide disparity by fixing minimum wage of Rs25,000 whereas minimum wage in the Federal and Punjab province is Rs20,000 and in KP and Balochistan is Rs21,000. The minimum wages fixed by province of Sindh is not equitable to the employers. The manpower resource is a fundamental requirement and cost for manufacturing sector and same cannot be subjected to increase of 43 percent in one go. Prices of other raw materials like gas, electricity, petrol and diesel etc. are uniform across Pakistan. How can industry survive with different wages in provinces?

Export is the backbone of the economy and 54 percent export of Pakistan is from Karachi alone and minimum wage is already lower in our competing countries as compared to current rate of minimum wage. In Bangladesh, Minimum Wage is US $94 = PKR 15,000 (14.28 percent lower than Pakistan). The enhanced minimum wage will hamper the cost of manufacturing of export industries, make them uncompetitive in the international market and it will also defeat target of creating import substitute industry in Pakistan. Covid-19 also put a fatal blow on Industries of Sindh due to closure for 75 days in the beginning and 10 days Eidul Fitr Holidays. Now in the Covid-19 scenario, the industries are struggling hard to overcome the hardships for complete revival. The one-sided imposition of minimum wage of Rs25,000 over the industries of Sindh will push the industries towards complete disaster and closure.

The trade organisations also appealed to Sindh Government to review and reconsider the matter of minimum wage as per the relevant laws, rules and procedures in the best interest of Sindh province, people of Sindh and industries of Sindh otherwise industries will be shifted to other provinces and also new industries will not be established in Sindh Province which will lead to mass unemployment and huge decline in revenue generation.

Copyright Business Recorder, 2021