oicci warning of ‘mass industrial layoffs’
Amir Paracha, president of the Overseas Investors Chamber of Commerce and Industry (OICCI), issued a warning on Tuesday about “mass industrial unemployment” brought on by restrictions on the import of raw materials.
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Business continuity is at risk for the majority of foreign players operating in Pakistan, according to the chief representative of 200+ multinational companies from 35 countries and 14 sectors who was speaking to a group of journalists at the OICCI headquarters.
“Banks are only opening letters of credit (LCs) for small amounts, or they are refusing to open any at all. Mr Paracha, who also serves as CEO of Unilever Pakistan Ltd., questioned how anything could be manufactured in the absence of raw materials.
Given the uncertainty surrounding the loan agreement with the International Monetary Fund (IMF), Pakistan has been struggling with a severe dollar shortage. As a temporary solution to the liquidity crisis, the government has implemented both formal and informal restrictions on the outflow of dollars. However, over the past few months, the import restrictions have become a semi-permanent feature, closing down significant portions of the nation’s industrial sector due to the lack of raw materials.
Furthermore, due to limitations on the outflow of dollars, multinational corporations haven’t been able to fully repatriate their profits in the form of dividends to their overseas corporate headquarters.
In response to a question, Mr. Paracha stated, “My estimation is that the pending repatriations are to the tune of $1.5 billion.”
Multinational corporations have explicitly informed the chamber that their overseas headquarters want them to temporarily halt all new initiatives in Pakistan, according to M. Abdul Aleem, secretary general of the OICCI.
“Our members have informed us that they have $2 billion worth of projects ready to launch. But they’re all holding out for the right moment, he said.
In the first eight months of 2022–2023, foreign direct investment (FDI) totaled $784.4 million, down 40.4 percent from the same period last year.
According to the international standard of 3 percent of GDP for developing economies, Mr. Aleem stated that the ideal level of FDI that a single company should draw in a year is around $9 billion.
By the end of 2022–2023, the number of unemployed people will rise by over two million to 8 million, predicts renowned economist Hafiz A. Pasha. He predicted that the unemployment rate will approach 10% “probably for the first time,” given that there are 75.3 million people in the labour force.
Nine out of ten businesses, according to a recent survey in which 69 OICCI members participated, have been “negatively impacted” over the past three months.
Import/remittance restrictions (20%), rupee depreciation (17%), inflation/energy costs (15%), high taxes/pending tax refunds (13%) and policy/political inconsistency (10%) are the main problems they have encountered in the past quarter. (10pc).
One in two respondents, according to the survey, is “either decreasing the production or laying off staff.” Furthermore, “either restructuring or partially/fully shutting down” are being considered by half of the respondents.
Pharma and oil marketing are the most severely impacted industries. Both of these do not deal in what you would consider luxury items. Because they are regulated, their margins are constrained. According to Mr. Paracha, the government needs to liberalise these sectors.
“Fixing the price of Panadol is not the responsibility of the country’s finance minister.”