It is unfortunate that all of the perspectives given on the Pakistani economy only identify the government as the sole culprit.
Reality is different to this traditional school of thought most of us are taught.
To understand reality we must look at the fundamentals our private sector industry is based on. Pakistans industry can be broken down into two segments.
The first is our local industry. Our local industry I.e industries like automotive, ceramic, cement, glass, and others were initiated and continued on flawed foundations. How we started our local manufacturing was simple.
Local industrialists identified certain products that were being imported and shaped the system in such a manner that it became expensive to import and lucrative to produce locally however only if done with excessive protection. The traditional tool used for this shift to localisation is normally achieved by implementing a large percentage of import duties.
Take for example the auto sector. It is no secret that the automobile sector enjoys extensive protection mostly in the form of duties. Automobiles in Pakistan are almost double of what they would cost in most other places. This local manufacturing is being done at the behest of the consumer. The consumer is now forced to pay double for a car that is inferior in quality. If consumers are allowed to import cars directly for a cheaper price this would free up a lot of capital and allow it to flow to efficient areas where it is actually required
If I was allowed to import a car for half the price it has in Pakistan due to reduced tariffs, I might use the savings made on expanding my current business or on buying an apartment etc spurring other economic activity.
Furthermore one must understand that such protection causes industries to become inefficient. Had industries been forced to compete with imported goods they would always be looking to innovate and to introduce better, newer, cheaper products. Due to the protection, instead of reinvesting most industries are victim of industrialists increasing their personal wealth instead of reinvesting in the business.
The second segment of the Pakistani private sector is the export related industry. These industries seem focused on passing responsibility of their weaknesses on to the government due to rising energy cost and other such factors
Most exporters want to be committed lower energy tariffs. The government cannot produce cheaper electricity and the only way to subsidise certain industries is by making energy costly for the entire 250,000,000 people of Pakistan. Higher energy cost for the public will further burden them and make other non-export oriented industries more inefficient. This narrative by itself is flawed and unjust.
To understand further take the example of Germany. Currently reeling from high energy prices due to the ongoing Russian conflict Germany is facing all time high energy prices. Legacy businesses like BASF which consume more power then the state of Switzerland on given days is suffering. However the state is not offering to subsidise their loss. It is well understood that when private companies enjoy profits, in a free capitalist market it is for them to enjoy personally. losses due to whatever circumstances are also treated in the same way. Now companies like BASF are either considering relocating or they will need to innovate/evolve/grow into businesses that can operate in such conditions. This evolving stage is what creates companies that are truly special.
Furthermore the unjust protection of a few export oriented sectors results in these sectors becoming more inefficient. Instead of innovating companies are comfortable in their old ways.
For Pakistan to prosper Private industry needs to produce goods that are actually viable to manufacture in Pakistan. Forcefully sustaining industries with such protection is not viable.
