The good thing about Pakistan's quinquennial balance of payment crises is that it brings economic discussions into mainstream. Primetime talk-shows abandon routine shouting matches, lining up their panels with preeminent economists – spirits of Economic Advisory Councils of present and past.
Their diagnosis? That Pakistan's export-base is small and narrow; and that expanding textile exports is the economy's only chance to break out of this rut. Their prescription is that fiscal incentives for the sector – from tax-breaks on BMR, sales tax exemption and rebates – to an expansionary monetary regime to encourage capacity expansion, should stay.
The badgering current setup has received from top economists on monetary policy tightening disregards that borrowing rates for exporters on EFS and LTFF have remained unchanged. So is the mounting evidence that the sector in the past has misused the financing facility, redirecting funds toward more lucrative projects such as in real estate.
Nevertheless, it is of little surprise that textile is set to remain the policymaker's lovechild for the foreseeable future. Compared to IT or services export where other regional players have made strides based on better-trained human resource and innovation, textile is a lower-hanging fruit. Domestic value-chain is already well-established. Furthermore, success stories such as Bangladesh and Vietnam abound, raising hope that with the right set of enabling environment, a turnaround is just waiting to happen.
The problem with this diagnosis is that it suffers from a serious lack of imagination and outsources all locus of control to policymakers. Textile's troubles are equally a function of poor marketing of domestically-manufactured products in global markets. And while macroeconomists failing to give marketing its due weight maybe an occupational hazard, it is hard to believe that textile seths are just as oblivious.
Survey top 30 garments or composite mills and preponderance will have the chief marketing role occupied by a family member. That's not always a bad deal, as sponsor prodigies are often able to afford a higher education abroad. But what about the teams working under them?
A similar survey of 10-year annual reports from a Karachi-based top business school reveals that Pakistan's largest industrial sector (by number of units) has never showed up among the top-five hiring sectors. In contrast, banking & financial institutions have always hired a lion's share, followed by FMCG, pharmaceutical and distribution. These sectors remain top preference for graduates based on lucrative pay scales and possibility of international exposure. Even the nascent IT industry has broken into the ranks in recent years.
Has the textile sector's fortune throughout the past decade been so abysmal that it could not afford to compete with FMCG MNCs? Incorrect, if one compares the ROE of top-5 textile companies in the KSE-100 with top-5 FMCG firms. The exporting sector has, on average, beaten FMCG returns by a significant margin.
The problem remains the seth-mentality, and this is best at-display in the ordinary interactions of textile employees with their service providers, vendors and bankers alike. Account managers with five-year experience are paid three times the minimum wage. The ostensible marketing job is performed by the same personnel who also take care of order confirmation, procurement, sales, dealing with the buyers, bank and shipping agency for finalizing invoice, and filing E-form, BL and Goods Declaration.
Of course, that mentality is not restricted to textile sector alone and extends to most seth-led businesses. One hope that the upcoming generation holding MBAs from UK and Canada shall be better prepared to deal with the situation head on. If not, there are always shopping malls and IPPs to invest and rent-seek guaranteed returns from.