LAHORE - The industrial associations, opposing central bank’s monetary policy’s unchanged discount rate, observed that industry was already confronted with an issue of persistent increase in the cost of doing business for the last few years, primarily driven by power outages and poor law and order situation.

“Debt servicing has now become a major component of cost for cement industry as even after three interest rates cut in past the effective bank markup for the industry is still above the regional countries markup rate. The cement sector’s representatives have appealed the authorities to provide some specific interest rebate to the industry to keep it afloat. All Pakistan Cement Manufacturers Association chairman Muhammad Ali Tabba sought government support for industry’s survival in the challenging situation of sharp increase in input cost. “The input cost has increased sharply in the last decade and there is lack of mechanism to pass on this burden to end consumers”, he said. Due to all these challenges, the production capacity of the cement sector has reduced to the lowest level of the last decade, he said. The manufacturers are worried by the stagnant domestic demand of this fiscal and continuously declining export. With a view to rejuvenate the economy the industry wants the State Bank to bring it to a single-digit.

They said that the SBP governor should have taken some bold step and reduced discount rate by at least 150 basis points.

Pakistan Tanners Association chairman Sheikh Saqib Masood observed that for government, cut in discount rate means decrease in the debt servicing cost, as it is the biggest borrower. He said that the availability of cheaper liquidity to the tanning industry is the need of the hour, as the central bank’s tight monetary policy in the name of financial discipline caused irreparable dent to the private sector growth and brought in an unusual surge in unemployment, he said. “Neither any industrial expansion took place nor any investor put money in any new business venture. And one of the reasons was unavailability of cheaper money to the private sector.”  PTA leader said that electricity and gas tariffs and discount rate in Pakistan is much higher than its competitors in the region, he added. He further said that discount rate in Pakistan is 10pc, whereas it is 7.75pc in Bangladesh, 8pc in Sri-Lanka and 9pc in India and Vietnam. Similarly per unit electricity tariff in Pakistan is $0.17, $0.13 in India, $0.09 in Bangladesh and Sri-Lanka and $0.073 in Vietnam. As of today, labour wages per hour in Pakistan is $0.51, $0.20 in Bangladesh, $0.22 in Sri-Lanka and $0.30 in Vietnam, he added.

PHMA former central chairman Sardar Usman Ghani said the rupee is constantly under pressure mainly due to the increasing oil imports, lack of foreign investment and repayments to the International Monetary Fund. The Pakistani currency’s journey to decline has created alarming situation, the rupee may touch further low against the US dollar if balance of payment situation is not improved and political tension is not eased. Mr. Usman said that this entire scenario is constantly hurting the viability of trade and industry.

He stated that due to inefficient and unfriendly economic environment, the cost of operating a business in Pakistan is considerably high. Consequently, Pakistani businesses are at a comparative disadvantage in respect of operating costs as compared to their competitors in the region.  Pakistan Carpet Manufacturers & Exporters Association (PCMEA) chairman Major (r) Akhtar Nazir Khan Cooki urged the government to make cost of doing business of the export oriented industry compatible with the regional competitors like, India, Iran, China, Vietnam and Sri-Lanka.

The main factors of high cost of business in Pakistan are raw material, utilities, cost of finance, human resource, technology, infrastructure and supporting institutions. The cost competitiveness of business units in Pakistan is comparatively weak and there are no significant positive signs of improvement over the years, he added.  Major Cooki said that a cut in the discount rate should be seriously considered by the SBP, as average CPI for FY14 is at less than 9 per cent far lower than SBP initial estimate of 11-12 per cent.