Our self-inflicted wounds.

Byline: Jawaid Bokhari

Rising negative growth in manufacturing and mounting nonperforming loans (NPLs) have prompted 10 banks to set up Pakistan Corporate Restructuring Company Ltd (PCRCL) to revive and rehabilitate sick industrial units.

The proposed company will pick up cases where NPLs can be promptly restructured and sponsors of commercially or financially distressed companies can inject equity. Such companies will be saved from possible corporate deaths and the banks' assets problem - i.e. NPLs - will be resolved.

The Companies Rehabilitation Act was promulgated in 2016 after being debated within the government for a long time. The need for the establishment of such a rehabilitation firm was being strongly felt now as the shrinking industrial sector continues to face risks of further disruption with cost-push inflation, depressed domestic demand and stagnant exports. PCRCL is the first such company to have secured a licence from the Securities and Exchange Commission (SECP).

Industrial growth has turned negative since June 2018 with a pickup in the continuing trend this year. The manufacturing output recorded negative growth of 6.48 per cent in July-October 2019. The year-on-year drop was more pronounced at 7.97pc in October.

While trade policies are being reoriented towards boosting industrialisation, a tight monetary policy continues to curb domestic consumption

Aware of the worsening situation, the government is also working on a comprehensive policy for the revival of sick industrial units that will be announced 'soon,' Prime Minister Imran Khan told a delegation of the Federation of Chambers of Commerce and Industry (FPCCI). PCRCL will help the government implement its policy.

Designed as an instrument of trade rather than revenue collection, the recently announced National Tariff Policy has already been initiated with the setting up of the Tariff Policy Board. The policy aims to provide time-bound strategic protection to the domestic industry in its infancy against foreign competition that will be phased out to make the industry globally competitive. The policy measures recommended by the board, after approval of the cabinet, will be incorporated in 2020-21 budget proposals.

Addressing a seminar last week, State Bank of Pakistan (SBP) Governor Reza Baqir stressed the need to shift away from the inward-oriented economy to the outward-oriented economy that puts a greater emphasis on exports to achieve high and sustained economic...