Nowadays, sitting down to write a column, the beginning inevitably is a prayer that by the time it gets published we have won the Virus Wars; a developing country like Pakistan cannot withstand any kind of war for long. And we are probably reaching our limits.
Undoubtedly, the biggest tragedy is the loss of life, and those who have lost their loved ones to this pandemic have suffered unimaginably; our heartfelt prayers for them. Another, unseen at the moment, casualty is the loss of freedom of any kind; the State, perhaps right fully so considering the circumstances, has assumed and will continue to assume more authority and control. Wars, beyond lives, tend to annihilate freedom and wealth. In any case one was never a believer of democracy, an unnatural system. Except all that is still not the end of it.
Unfortunately, if the situation and the lockdown continues for long, matters may well get worse for everyone else, even beyond freedom of speech, freedom of press, and marginalising of otherwise taken for granted fundamental rights. Empty stomachs in desperate times are a lethal combination and have the potential of shaking the social fabric at its core.
There can be no two views about it; the lockdown is another catastrophe in the making; perhaps even a bigger one. Unfortunately choosing between a pandemic and economic shutdown is like Russian roulette; lose-lose scenario, if you continue. Frankly, I would not wish to be in the leadership's shoes right now. Allah SWT guide them - Aameen.
Last week was all about businesses coming forward, rising, to substantively support the efforts of private charity across the country, busy in distributing rations to the deserving; which is a huge challenge in itself. Notwithstanding the assurances from the State that the country has sufficient quantity of food supplies, which it probably does, procuring and distributing rations to millions is a gargantuan task; logistics alone may cost a pretty penny. And all this can continue for how long?
The domino effects of market shutdown long term can lead to economic collapse of a scale not seen before in our lifetime. Even today I hesitate in making predictions, primarily because all scenarios seem to point towards not a good place; putting it conservatively.
Considering the above background, the decision to give incentives to the construction industry is indeed a wise step in the right direction. This industry is the primary employer of the majority of the daily wagers in the country and also the end consumer of many other industries. With great difficulty, I ignore my professional tendency to start a commentary on the tax related, at the minimum, incentives- primarily, if these were the demands of the industry players, why should anyone doublethink, they should know better. Albeit a small comment, hopefully the Federal Board of Revenue is on the same page with the Industry when the former drafts the respective laws, otherwise the virus will be ancient history before the incentives kick-in, or the courts have interpreted related legislation.
Realistically speaking, allowing the construction industry to continue with business as usual essentially means the ending of the lockdown; the related supply chain probably engulfs most all downstream and upstream industry in any developing country. Agriculture, rightfully so, was never shut down. The decision has apparently been made.
On the incentive side a small suggestion, why restrict it to the construction industry only. Most all businesses are reeling, if not buckling under, because of the Virus Wars, and without an across the board revival, there will be no takers/buyers for what the construction industry churns out, or builds. How long will the industry, known to generally operate with other people's money, invest capital without a payback?
Almost every affected country has come out with a host of taxation and other incentives to alleviate the hardships of businesses because of the Virus Wars. It would be advisable to engage a team of experts other than from FBR to review these thread bear and perhaps pick and choose incentives which may work in our domestic environment. Why exclude FBR? From history it is rather evident that FBR has a conflict of interest when it comes to drafting incentives.
But as they say, intelligence is a must to be a copycat. Incentives will need to be reviewed for pros and cons individually, rather than collectively- and after taking cognizance of our domestic market place.
Take interest rates- in any crisis, get them wrong and the pain will grow exponentially. In normal times get interest rates wrong and you will shortly be in a crisis. Being a strong opponent of free markets in general, I have always believed that nobody can out think the market when it comes to interest rates. Strangely enough free market's groupies are pretty okay with a regulator setting interest rates. But that is a debate for another time- considering we have a regulator fixing interest rates, why not have multiple rates?
For instance foreign investors can continue to be given an attractive interest rate. Perhaps interest can all together be waived off for business during the lockdown impact period. New Industry may be given zero rated facilities. A much higher rate may be set for gambling at the casino. Perhaps a slashed fixed rate of interest can be offered for home loans- not car loans. Perhaps long term project loans can be on slashed fixed rates. And then some!
For the endless critics who will definitely cry core inflation- chuck it! (Chuck as used here is a synonym)
Perhaps the incentives given to date are sufficient, then again perhaps they are not; would it really hurt to continue to think, and do our homework. to figure out the right incentives.
(The writer is a chartered accountant based in Islamabad. Email:
[email protected]. The views expressed in this article are personal. The views are not necessarily those of
the newspaper)
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