After Pakistan Election, Uncertainty Reigns
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It’s been a tense time in Pakistan.
Days after the country went to the polls for its 12th general election—with blasts in Balochistan leaving more than 30 dead and violence shutting down several polling booths—there is still high security and threats of violence. There is also an intense period of wrangling.
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Election results have taken analysts by surprise, as independents won more than 100 of the 266 seats, most of these having allegiance to former prime minister Imran Khan, who was barred from contesting and is imprisoned. Although his party, Tehreek-e-Insaf (PTI), had unexpected success, independents are not allowed to form a government.
After days of wrangling, an emerging agreement on Wednesday between his party and Pakistan People’s Party, led by Bilawal Bhutto Zardari to form a coalition has finally been carved out. In another surprise move, it is expected that the new government—if it pulls through—will be led by Shebaz Sharif, the younger brother of Nawaz Sharif.
Nawaz Sharif of the Pakistan Muslim League Nawaz (PMLN), who has been prime minister three times before, and has returned from exile, was widely expected to be a clear winner but his party managed to win only won 75 seats. The minimum required is 133 to form a government.
Business leaders and manufacturers have been watching closely, as it is clear that a coalition government will have to be pulled together amidst the fragmentation and disarray. Coalitions are not without precedence. Following the dissolution of former Prime Minister Khan’s government after a no confidence vote last summer, a coalition of 13 parties completed the previous term, and an interim caretaker government has been in place to oversee the elections.
According to local media reports, the government will have to be formed before the end of the month, within a 21-day window after the announcement of election results.
Manufacturers in Pakistan told Sourcing Journal that for the most part, the expectation is that economic policies will not swerve widely from the past. The apparel and textile sector, which accounts for 60 percent of the country’s exports, will continue to find support as the economic situation teeters in the country, and is expected to be held together with a further loan by the International Monetary Fund (IMF), only with stricter conditions.
Analysts in the region are watching the events closely, as well.
Dr. Ahsan Mansur, an economist and executive director at the Policy Research Institute in Bangladesh, observed that business would continue to find its feet, irrespective of the government. There would also be little option for any government that is formed but to cut subsidies in the coming months, address the trade deficit and find solutions for power shortages.
“Power shortages are a major issue, and have never been resolved in a satisfactory way,” he said. “On top of that there is the situation of serious macro instability, balance of payments, inflation—the country will have to be fully on board with the IMF program to overcome the economic problem. This will take a lot of political will,” he said.
Over the past year, the textile and apparel industry has been seeing losses, with shortages of cotton after the floods in 2022, a shortage of electricity and gas, and cutbacks in the global markets. According to figures from the All Pakistan Textile Mills Association (APTMA), textile exports for the first 10 months of the calendar year 2023 declined by 16 percent—down from $15.88 billion in the same time period in 2022 to $13.34 percent in 2023.
One week before the elections APTMA put together a 41-point policy road map for the incoming government.
It was clear that regardless of who came to power, the need of the hour would be to focus on diversification and expansion of the industry, if there was any hope of meeting the forecast of $50 billion in exports by 2029.
The points included a focus on scaling up production and a strategic reorientation of the industry toward higher value-added original brand and design manufacturing to create more than 1.4 million direct and indirect jobs, along with an ambitious initiative to establish 1,000 new garment plants.
The report also noted the need for policy reforms, the establishment of specialized industrial and export processing zones with developed factory sites and plug-and-play facilities. These zones would significantly lower barriers for new ventures and catalyze the expansion of exports by attracting domestic and foreign investment.
“In the face of external and internal adversities, we achieved remarkable growth as our exports surged by over 54 percent, rising from $12.5 billion in 2020 to $19.3 billion in 2022. However, the economic crisis of 2022-23 brought to light the fragile nature of these gains, emphasizing the need for a sustainable and resilient way forward,” Asif Inam, chairman of the APTMA, observed.
Local manufacturers told Sourcing Journal that various important initiatives were already underway.
“The hope is that the process of having signed on with the Pakistan Accord on Health and Safety in the Textile and Garment Industry will help bring in more business,” one manufacturer noted, adding that “an assurance of safer, and more transparent factories could perhaps provide a counter to all the other declining factors.”
In January, more global signatories were added to the International Accord for Pakistan, bringing the number of brands and retailers committed to the Accord beyond 100.
Over the past year, a pilot study was followed by the first round of initial inspections in factories in Lahore and Karachi between Oct. 16 and 28. Accord officials noted this as a “significant milestone.”
“These participating factories demonstrated commitment to ensuring workplace safety, receptiveness to feedback, and preparedness throughout the initial inspection process. We look forward to our ongoing collaboration with these factories and their contribution to ensuring health and safety in the textile and garment industry,” the Pakistan Accord noted.
Discussions between the Accord teams and various stakeholders have been continuing, including with representatives from the commercial sections of the EU Member States, the International Finance Corporation (IFC) the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Textiles Program in Islamabad, the International Labour Organisation, Better Work, H&M, Euro Centra Pakistan, and various garment and textile manufacturers covered by the Accord.
These are expected to map the way forward for the industry.
The sector also benefits from Pakistan being one of the largest beneficiaries of the generalized system of preferences (GSP+) scheme. While the renewal of the scheme was being contested over the last few months, the European Parliament on Thursday unanimously voted to extend the current GSP for another four years.
EU Ambassador to Pakistan Riina Kionka noted in a post on X, that “the rollover is proposed so as to avoid a cliff edge at the end of 2023. “It is unrelated to Pakistan’s performance or that of any other beneficiary country,” she noted.
