Addressing interest free loans distribution function, Prime Minister Imran Khan expressed the hope the year 2020 will usher in an era of fast jobs creation for the youth and provision of low cost houses for the deserving people. He had made this promise in his maiden speech after taking oath as Prime Minister in 2018 to implement policies for creating 10 million jobs and providing 5 million houses. When the leadership of opposition parties showed impatience by reminding the fulfillment of these promises made to the nation, Federal Minister for Science and Technology FawadChaudhryhad to clarify by saying that government does not provide employment directly but it facilitates jobs creation in the private sector.
It is correct that government in every country directly provide limited numbers of jobs. It creates a favourable economic environment that gives spurt to domestic and foreign direct investment in different sectors of the economy. The situation on ground is that domestic new investment has declined and foreign direct investment is confined to purchase of debt securities. The latter type of investment increase foreign exchange reserves but does not create employment. Investment of $3 billion flowed into these securities and the investors have now started the disinvestment process by withdrawing $263 million in the past few months. If the disinvestment process gains momentum then country’s foreign exchange reserves will start depleting.
The downturn of economy is on as it is not out of recessionary cycle as yet. Textiles and automobile industry provides large number of jobs wherein full capacity production activities are not going on. In the past one year one million industrial workers have lost jobs. The auto parts manufacturing industry alone has laid off 40,000 workers. A long term industrial policy was intended to be out in September last year but its finalisation has missed several deadlines. The energy policy of the past two governments that hit hard the manufacturing sector has not been changed. As an adhoc measure, electricity and gas tariffs have been freezed for four months to stem further downturn in the industrial sector.
Large and medium scale industries are dependent on imported raw material and intermediate goods for the production of finished products, the cost of which has escalated as a result of currency depreciation. High interest rate, regressive taxation and technological stagnation have depressed the growth in large and medium scale manufacturing. Expansion of technological base by liberal investment in research and development was not the priority of previous governments nor does it seem to be on the priority list of the present government despite loud talk of promoting knowledge economy. Currently, government spends 0.49 of GDP on research and development, zero spending on higher science and technical education.
Establishment of special economic zones under the CPEC framework is inevitable for the second phase of industrialisation after the one which had ended in the decade of 60s. Out of 9 such zones, groundbreaking ceremony AlamaIqbal Industrial Zone in Faisalabad has been performed by the Prime Minister two months. However, broad parameters of investment policy about joint ventures between the local and Chinese entrepreneurs are not yet known. The existing high tariffs of energy inputs will not be affordable for local and foreign investors who may be keen to set up their industrial units in these economic zones. Moreover, smooth supply of electricity to the industries located in the economic zones cannot be ensured until the up-gradation and expansion of the transmission and distribution system. Gas shortage in winter and compelling suspension of its supply will be another impediment for the second phase of industrialisation for increasing output and employment. Let us hope that government will be able to set the direction of economy at the beginning of next fiscal year.
