Pakistan Textile Council

Is textile a rent-seeking industry?


KARACHI: Speakers at an hour-long panel discussion on the question of “Is textile a rent-seeking industry?” on Saturday could’ve simply said “no” and wrapped up the programme within a minute.

But the like-minded panellists, including the owners of the two of the largest textile mills, used the discussion forum organised by the Pakistan Textile Council to dwell at length on the bad hand that the state has dealt the dollar-earning sector.

Shahzad Saleem, who serves as chairman of the Nishat Chunian Group, condemned the “persecution” of businessmen — especially in textile and power sectors in which his business group holds large stakes — in the name of rent-seeking.

Rent-seeking is a term that’s often used locally to disparage businesses for making profits without contributing to the overall productivity in the economy.

The textile industry, in particular, is accused of lobbying the government for access to subsidised energy and cheap financing. The argument is that the incentives it enjoys dwarf the economic benefit it generates in terms of dollar earnings and job creation.

Similarly, power producers are called rent-seekers for earning guaranteed returns on the basis of take-or-pay contracts. Automakers have come under fire for lobbying to limit imports for their own gains while cement players are routinely accused of cartelisation.

Mr Saleem laid the blame for economic imperfections on the state’s incompetence instead. “Rent-seeking is all about not taking risks,” he said while noting that six of the 10 major textile exporters from 30 years ago have gone bankrupt. “(Textile) is a highly risky business,” he said.

He also mentioned the “negative narrative” that absolves certain sectors like real estate and agriculture of all blame while labelling the manufacturing sector as “thief,” even though the latter contributes 56 per cent in taxes despite its 15pc share in the economy.

Low exports are one of the fundamental reasons for Pakistan’s chronic balance-of-payments crisis. They decreased 26.2pc year-on-year to $2.1 billion in April. With $1.2bn monthly foreign sales, the textile industry accounted for a 57.7pc share in the country’s total exports last month.

“Our textile exports compete with the world,” remarked the panel moderator Ali Khizar, a business and economy journalist.

He highlighted the fact that leading textile makers in the 2000s became wealthy on income they made through subsidised financing but invested the same profits subsequently in real estate projects, which generated no dollar earnings or tax revenue.

Interloop Ltd Chairman Musadaq Zulqarnain said capital formation, albeit through fair means, has become a “gaali” in Pakistan because of the unfounded accusations of rent-seeking.

In an apparent reference to the quasi-official control on the outward remittance of dollars, he said his businesses operating out of Sri Lanka didn’t face even one day of delay in dividend repatriation despite the sovereign default.

Calling Pakistan a commercially isolated country, he advocated for a liberal trade regime in the region that has a population of 3bn.Lahore University of Management Sciences Associate Professor Dr Ali Hasanain said the government should use incentives at its disposal in a way that nudged return-seeking, ratio­nal entrepreneurs towards the most productive sectors.

Published in Dawn, May 28th, 2023

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