Declining Economy Hurts Pakistani Workers

Pakistan has a diverse economy that includes textiles, chemicals, leather products, food processing, financial services, telecommunications, retail, automobile manufacturing, light and heavy armaments, agriculture and other industries. It is the 45th largest economy in the world in terms of official exchange rates ($144b GDP) and 25th largest based on purchasing power parity GDP ($410b PPP). Its service sector accounts for more than half of its GDP.

As the economies in the US and Europe slow down, Pakistan's key exports of textiles and leather products are experiencing a slowdown in growth as well. This is particularly painful at a time when the country's import bill has skyrocketed due to rising oil and food prices. Textile exports in Pakistan grew from 8.92 billion USD in 2004-05 to 10.11 billion USD in 2005-06, reflecting a growth rate of 18%. As against this, in the current year, export growth has been only 5%. For all leather goods excluding footwear growth was 24.05%. Of the total leather sector export target of $1.135 billion, the tanned leather, in particular, achieved excess export by $38 million till April 2008. However, the new target of $1.5b by 2010 is proving to be difficult to achieve. Reliable figures are hard to find but the closure of a large number of textile units due to power cuts during the last three months has led to job losses for more than 15 percent of the textile workforce, according to Karachi's Business Recorder newspaper.

Textile industry represents the biggest exporter and the largest industrial employer in Pakistan. According to most recent figures, textile exports fetched $7.805 billion of total export of $13.476 billion during the first nine-month. The sector lost considerable share in overall export of the country as it dropped to below 58 percent in July-March of current fiscal year, which used to be around 65 percent in the past. The textile exports declined by three percent from the export figures of the corresponding period last year and they missed the target for this period with a huge margin of $979 million or 11 percent.

Leather industry is the second largest exporter. The industry employs about 200,000 people directly, producing fine quality finished leather for export as well as for home consumption, according to Pakistan Tanners Association.

In Asia, Pakistan is the 8th largest exporter of textile products. The contribution of this industry to the total GDP is 8.5%. It provides employment to about 15 million people, 30% of the country work force of about 49 million. However, the proportion of skilled labor involved in textiles is relatively small as compared to that of unskilled labor. Agriculture still the largest single employer with 44% of the country's work force but it only contributes 21% of the GDP.

In addition to continuing political instability and power cuts in Pakistan, the worldwide economic slowdown is causing concerns and hurting the textile and leather industries and employees. According to a report by Gregory Warner for American Public Radio's Marketplace program, the leather industry is not growing like it used to and unemployment and crimes are on the rise.

The Marketplace report talks about the young, mostly Pashtun workers, who come from their villages to seek unskilled, low wage jobs in Karachi and other urban centers in Pakistan. It singles out one young worker, 17-year old Momin from Pakistan's north-west frontier province (NWFP), who makes $68-$88 a month transferring skins from a cart to a conveyor belt in a Korangi tannery in Karachi. When asked if he ever visits his village to see his parents, Momin tells the reporter, "How can I go home? If I have to keep paying somebody? I keep paying what my family owes." On top of that, his father wants him to pay for his Hajj, a journey to Mecca that costs at least $3000.00.

A recent BBC report talked about an unemployed textile worker, Gul Rehan, also from an NWFP village, who says he has never depended on charity to cope with hunger and poverty before. But now he sits in a line outside a restaurant in Karachi, waiting for free food. First, his crop on a little piece of land in NWFP failed, and then the towel factory where he took a job, like most knitwear industries, closed down last year.

According to the BBC report, three times a day, hundreds of men, women and children queue up outside dozens of Karachi hotels for meals which are paid for by philanthropists and charity donors.

The rapidly rising unemployment and skyrocketing inflation together have dramatically increased hunger and poverty among the most vulnerable in Pakistan. At 33%, the sum of unemployment rate and inflation, known as the misery index, stands at its highest level in Pakistan's history, and it is likely to increase social strife and hurt the chances of recovery.

These reports highlight the deteriorating economy in Pakistan and its disproportionate impact on the poor migrant workers. Unless the current leadership finds a way to stabilize the economy, the workers suffering is likely to add to greater political instability in Pakistan.

There are many Pakistanis who argue that we must give democracy half a chance to cope with the challenges even if it means going through a slump in exchange for sustainable power of the people to govern themselves. Unfortunately, people like Gul Rehan and Momin, who can least afford it, end up bearing the brunt of such sacrifices. The "civil society" and the "fearless pro-democracy leaders" usually do not forgo their meals to achieve democracy.

I am all for sacrifice, I just wish that the sacrifice be shared more equitably by all of the people. We should all help however we can through various charitable institutions. But I think the "pro-democracy leaders" such as Aitazaz Ahsan, Nawaz Sharif, Asma Jahangir and others who have contributed to the current economic decline have a special responsibility. They can and should use their celebrity status to raise awareness of the issues of poverty and joblessness. They should help organize efforts to build a safety net for the most vulnerable. This would demonstrate their sincerity of concern for the poor and the disenfranchised.

Here's a video clip about skyrocketing inflation in Pakistan and its impact on the poor:


Riaz Haq said…
Here's a Wall Street Journal story about Sialkot's soccer ball industry's struggle to survive:

Adidas contracted with Sialkot's Forward Group to make the replica World Cup balls. Forward Group expects to ship six million balls this year, up 40% from 2009.

But even with its Adidas contract, Forward Group faces big challenges. It has to run its own electric generators because of daily nationwide power shortages. The roads to Sialkot, in eastern Pakistan near the border with India, are rutted. And foreign sports executives remain reluctant to visit because of the terrorist threat.

German's Adidas Group has given one company in Sialkot, Pakistan, the contract to produce the entire range of mass-market-hand-stitched replicas of the "Jabulani" soccer ball that will be used at this summer's World Cup. The city, once the soccer ball capital of the world, is facing stiff competition from China. WSJ's Tom Wright reports.

Adidas made the decision to switch to thermally bonded balls for the matches at the 2006 World Cup. The goal was to make the balls perform more consistently when players kicked them. With a hand-stitched ball the seams inevitably produce dead spots. Initially, Adidas made those balls in Thailand before switching production to China ahead of the 2010 competition.

In recent years, China has also taken over most of the production of World Cup promotional balls, a lucrative market of about 40 million little balls emblazoned with sponsors' logos, says Khurram Anwar Khawaja, a soccer-ball producer and former president of the Sialkot Chamber of Commerce and Industry.

Sialkot has also lost a big share of midpriced mass-market soccer balls to China, which began producing cheaper machine-stitched balls a decade ago.

Forward Group and the other soccer-ball makers here are determined to defend their turf. They have cut costs by automating many parts of ball production. Local businessmen joined together to build an international airport in 2008 after the government failed to do so.

Now, the soccer-ball makers are planning to set up a research center to develop their own version of the latest thermal-bonding technology that Adidas is using for World Cup match balls, a process that involves fusing together patches of synthetic "leather" by machine.

Two years ago, Adidas transferred its proprietary technology to Forward Group, which has been making small amounts of thermal-bonded balls. Recently, the company successfully lobbied Adidas for permission to use the technology to produce balls for the UEFA Champions League final next month in Madrid, one of the biggest events on the global soccer calendar.
Riaz Haq said…
Here's Fiber2Fashion report on value-addition by Pakistani yarn spinners:

everal cotton spinning companies in Pakistan are investing in value-addition as well as in compact yarns to beat the economic downtrend and to survive.

The excessive power and gas shortages is also forcing the high power consuming spinning industry to go for innovative value-added products that consume less energy.

Mr. Abid Farooq, Managing Director of Ali Akbar Spinning Mills and former chairman of APTMA, told fibre2fashion, “A lot spinning units are investing hugely into compact spinning nowadays and every conventional non-compact spinning mill is investing some money in compact yarns.”

Explaining the reason, he says, “Pakistan has a certain share in world yarn market, which is not likely to increase in near future. There is too much competition and the spinners cannot increase their capacity to export as the yarn export market is limited.”

“On the other hand, there is still a lot of room for the value-added yarn products to get higher market share compared to yarn. So, that is one reason for several spinners diversifying into manufacturing of downstream products. They have invested in value-addition to get a greater share in the Chinese and the European markets,” he adds.

Pakistan is facing a huge shortage of power, electricity and gas, which prevents addition of new capacities in spinning industry. Spinning machines require a lot of energy, so spinners are moving into value-added areas that need less energy.

As Mr. Farooq says, “Making new investments for manufacturing of value-added downstream products is another form of survival for the Pakistan spinning industry because spinning in itself is a very competitive industry and it is very technical. So, most of the new investments are going into value-addition.”

Talking about the knitwear sector, he avers, “The knitwear sector is coming back to life from a very bad slump a few years ago. Several knitwear units that had closed down are being revived again. The increase in dyeing and finishing capacities is also helping the sector.”

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