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Pakistan In Focus

COVID-19 raises digital economy, e-commerce in Pakistan

Pakistan’s e-commerce and digital economy has received a huge sales boost during the current coronavirus pandemic as physical mobility of shoppers has remained limited.

In recent years, the country has made efforts to expand digitisation of its economy by promoting online businesses in a bid to boost exports and create jobs for young people, source reported.

“We have received an overwhelming response… our data shows that online orders have grown nine times [since March],” said Muhammad Ammar Hassan, Chief Marketing Officer at Pakistan’s largest online shopping store. “We are experiencing 100 percent year-on-year growth in each item … and this has increased even further since March 2020 due to the coronavirus.”

The State Bank of Pakistan (SBP) claims that the shift to electronic payments would stimulate consumption and trade, helping the country’s economy by as much as 7 percent, creating 4 million jobs and boosting gross domestic product (GDP) by $36 billion by 2025, source added. Although the digital industry remains in the infancy stage in Pakistan, a steady rise has been seen in e-commerce transactions as well as in the number of registered e-commerce merchants, it pointed out. Sales of local and international e-commerce merchants in Pakistan almost doubled to Rs40.1 billion in 2018 compared to Rs20.7 billion in 2017, according to data of the Ministry of Commerce.

“These figures do not include all the postpaid and cash-on-delivery transactions, which account for 60 percent of the total value of e-commerce in Pakistan,” said Ministry of Commerce Joint Secretary Aisha Humera Moriani.

The government is also developing an international payment gateway that will be integrated with other online payment platforms like PayPal, aimed at facilitating incoming payments to boost exports and assist freelancers.

Further flour crisis in the making

Still reeling from the previous flour crisis that led to a surge in its prices, the country appears to be heading towards another one following the early release of wheat stocks by Punjab, lack of proper planning due to the unavailability of accurate production and consumption data and non-procurement of wheat by Khyber Pakhtunkhwa and Balochistan.

The PTI government had taken notice of the recent wheat and flour crisis and an inquiry was held into the flour mill owners involved in cartelisation that caused the price hike.

In bid to break the cartel of millers and stabilise prices in the local market, Punjab had released wheat stocks early in the market instead of doing it by end of the year as it normally did.

Policymakers have already raised questions about the accuracy of the production and consumption data and expressed concerns over the early release of the stocks that could further aggravate the situation. So far, the government has remained unsuccessful in bringing down flour prices.

The cabinet was informed last month that the Economic Coordination Committee (ECC) had made some key decisions in consultation with the provinces to respond to the emerging situation.

To immediately stabilise supply, Punjab was asked to release 900,000 metric tons of wheat. The private sector was allowed to import wheat without placing any quantitative limits. Border authorities were instructed to enforce strict measures to curb the smuggling of wheat.

In addition, K-P and the Balochistan governments had been advised to work out an arrangement with the Pakistan Agricultural Storage and Services Corporation (Passco) and Punjab to mitigate the situation, besides engaging directly with importers to meet their requirements. The Sindh government had also been asked to share its wheat release schedule to ensure predictability and stability in the market. The conversion rate of wheat to flour was enhanced to maximise the supply of the latter from the available stocks.

Meat company raises Pkr 800 mn through IPO

The Organic Meat Company Limited has successfully raised interest-free financing of Rs800 million through the offer of 40 million shares to local and foreign institutional investors and high net-worth individuals at the Pakistan Stock Exchange (PSX).

The Pakistan-based exporter of halal meat sold 40 million, or 35.77 percent, of the firm’s shares at Rs20 each. The sale price was higher by Rs2 than the bid opening price of Rs18 per share. “The funds being raised through the IPO (initial public offering) would help us raise the value and profile of the company and enable future growth,” The Organic Meat Company Chief Executive and Sponsor Faisal Hussain said in a pre-IPO press statement.

“It’s been a long journey, starting from a very small facility to getting listed (at the PSX). We will make every effort to live up to the expectations of investors and also continue the growth momentum,” he said.

In the first phase of the IPO – the book-building process – the company received bids for 100 percent (40 million) shares from institutional and high net-worth individual investors.

Successful bidders were, however, provisionally allotted 75 percent of the 40 million shares and 25 percent of the issue size would be offered to retail investors at Rs20 per share from July 14 to 16. In case of low subscription by the retail investors, the unsubscribed shares will be allotted to the remaining successful institutional and high net worth bidders on a pro rata basis.

“Investors’ response was far better than expected despite the coronavirus-led economic contraction. The shares were oversubscribed by 1.7 times,” the statement said. It was the first IPO after a gap of 15 months at the PSX.


Hub industrial units complain of low gas pressure

Businessmen in the Hub Industrial and Trading Estate (HITE) are complaining about gas pressure fluctuation without any notification, which is resulting in disruption of production in the industries.

Employers Federation of Pakistan (EFP) President Ismail Suttar and the Lasbela Chamber of Commerce and Industry (LCCI) termed the fluctuation in gas pressure in HITE unbearable for the manufacturers that were already suffering due to the economic downturn in the wake of Covid-19 crisis.

Sui Southern Gas Company (SSGC) started gas load-shedding in the industrial area without giving any prior notice, which was aggravating the situation for commercial activities, especially for exports, he said.

The EFP chief called on the federal government to take notice of the issue, which was threatening the quality of highly valuable products. “SSGC must be held accountable for not notifying Hub industrialists in advance about the disruption in gas supply,” he said. “Industries have just commenced operations and are currently striving to meet whatever little demand they receive from the depressed global market.”

The EFP president pointed out that the gross domestic product (GDP) was feared to fall by an unprecedented $100 billion in the new fiscal year and exporters were in dire need of protection by the government from the unreliable gas supply.

“Pakistan cannot afford any fall in the competitiveness of exporters, especially resulting from the unannounced low gas pressure in the Hub Industrial and Trading Estate.

However, an SSGC spokesperson said gas pressure complaints were received from Hub a few days ago and the pressure was enhanced accordingly to resolve the problem. “At present, there is no such issue and optimum pressure is being maintained in the system, however, there may be low pressure during peak hours to some individuals, which can be attended to on the receipt of complaint from the customers.”

Exporters fear tax refunds will remain stuck in fy21

Textile exporters have voiced fear the government will not be able to release the stuck sales tax refund claims in the new fiscal year as well because billions of rupees worth of exporters’ liquidity is still lying with the government, which has not been released earlier.

“Textile exporters are deliberating whether to continue operating the industrial units or close them down permanently,” said Pakistan Apparel Forum Chairman Jawed Bilwani. “The industry is facing extreme unrest as the government has turned a blind eye to its demand of restoring the zero-rated sales tax facility.” Major demands and recommendations of export sectors went unnoticed by the government, which was surprising and unreasonable, Bilwani said. As per past practice, the government sought budget proposals from chambers and trade associations, however, this time trade organisations were neither consulted about budget nor were their proposals incorporated into the budget, he said.

Bilwani underlined that the government launched the FASTER system for sales tax refunds without prior consultation with the stakeholders or any kind of orientation about how to operate it.

Although the government promised the release of sales tax refunds within 72 hours after data entry into the FASTER system, in the first five to six months, the system functioned below par and remained inactive.

During that time, the Federal Board of Revenue (FBR) had to process refund claims manually and the State Bank paid refunds on FBR’s advice, he said.

He emphasised that the textile export sector was the backbone of economy and provided countless employment opportunities, particularly to women and lower-class workers in garment units. “Depriving the highest foreign exchange earning sector of relief in the budget is beyond comprehension,” he lamented.

More than 54pc Pakistanis face pay cuts or layoffs

More than half the working-class has either taken a pay cut or lost a job – or both – because of the Covid-19 outbreak, while others’ confidence remains downbeat on fears of unemployment prospects in the near future.

“54 percent respondents have either faced salary cuts or have been laid off by their employers in an attempt to reduce operational expenses,” according to Dun & Bradstreet (D&B) Pakistan and Gallup Pakistan joint report on ‘Impact of Covid-19 on Consumers in Pakistan’, incorporating views of 1,291 residents via a telephonic survey conducted between June 04 to June 16, 2020.

The report said that millions of jobs were lost in Pakistan as businesses were not allowed to operate during the lockdown. Some employees were laid off while others were sent on paid or unpaid leaves; creating panic amongst the working class. Some 18 percent of the respondents have already lost their jobs due to the pandemic.

Furthermore, it was observed that the impact of job loss was primarily faced by low-income workers. Additionally, 59 percent of the respondents were concerned about losing their jobs shortly in the wake of Covid-19.

Due to the fear of job loss, consumer expenditures have shifted from non-essential items to essential items, the survey suggested. 33 percent of the respondents cited an increase in grocery expenditure, 32 percent recorded an increase in household cleaning items and 32 percent cited an increase in medical expenditure. Additionally, 39 percent of the respondents claimed to have reduced expenditure on apparel and footwear.

Nearly 80 percent of respondents were currently worried about the spread of Covid-19 as it continues to affect their daily lives, as per the report. However, a vast majority of the respondents, around 41 percent, expect the situation to normalise within the next six months. Respondents in Pakistan were most concerned about securing their family’s health, managing their finances and having an impact on savings.

During the month of June, consumer spending on entertainment and education declined severely, while consumer spending on medicines and household cleaning items increased, even high-income consumers recorded a sharp decline in expenditure on luxury items ie 53 percent decline in travelling, 51 percent on apparel and footwear and 49 percent on outdoor entertainment.

Despite the closure of brick-and-mortar stores, only 15 percent of consumers have moved to digital payments, as per the survey. Even though the movement of population is restricted due to the outbreak, citizens were reluctant to use digital payment options.

However, Sindh has been quick to adopt digital payments as 21 percent respondents were first time users, said the report. Around one in five respondents in the province have used digital payments for the first time due to coronavirus outbreak.

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