“Provide interest-free capital with a government guarantee for the revival of the retail sector so that retailers can resume their business and play a key role in saving the country from the expected storm of unemployment”
M Jaqhangir Hayat
LAHORE: COVID-19 lockdown has posed billions of rupees losses to the retail sector and the government must have to come to rescue the sector as at the moment warehouses and shops are full of unsold goods and therefore working capital is completely tied up with no cash to pay for new purchases, shops’ rents and salaries.
Sales tax rate should be brought down to a single digit 5% as well as further reduction in interest rate. Turnover tax, income tax and holding tax should be revised so that prices can be reduced for end consumers.
This was stated by Chainstores Association of Pakistan (CAP) chairman Rana Tariq Mehbood while talking to Daily The Business here the other day.
He said that Chainstore Association of Pakistan (CAP) is the largest representative trade body of organized retailers and represents over 200 of the top retailers in the country while its members comprise of a wide variety of retail sectors including fashion, shoes, food, super stores, and department stores.
In answer to a question about restoration of supply chain he said that due to government’s indecisiveness millions of families are fast heading towards economic adversity.
“It would be a huge economic and social tragedy if the government does not take immediate measures to protect this sector. In the current scenario, even if retail is reopened from 10-May, the lockdown period would have reached 50 days. By that time, the retail sector would have lost over Rs. 900 billion with further billions of rupees worth of goods stuck in various stages of production,” he explained.
As per the government, even if businesses is reopened on 10-May, things will not return to normal due to limited operational timings and social distancing measures, he said adding that the complete lockdown has created a severe shortage of working capital and none of the government packages have been helpful for the retail sector or local businesses, he said.
“We as representatives of the organized retail sector of Pakistan have come to the conclusion that: The government has no strategy for small and medium businesses. It is not possible to continue our businesses with current losses,” he said, adding we are grateful to the management of the malls, the malls run by the Army Welfare Trust and the individual owners who have stood with us in this crisis and extended financial relief during and after the end of the lockdown period”.
He said that with the business partners our retail activities will continue in the future. On the other hand, we will be closing and vacating locations where the owners have refused to cooperate in such an unprecedented crisis, Mehboob adding that in this regard, from May 1, 2020, our members will start identifying locations which are to be vacated and inform the owners so that no legal issue arises.
“The above unfortunate process will lead to the loss of many jobs associated with these shops, offices and other business buildings as they become vacant and business becomes smaller. Once retail sector starts contracting we will have no option but to let go of employees present in these locations and this will eventually lead to layoffs at factories as well,” he said.
Talking about the inventories with the chianstores, he said that it will be impossible to maintain even a fraction of sales after the proposed closure as there will be almost no buyers in the market Mehboob said adding that therefore, this new scenario requires that all purchases from vendors be stopped and existing orders canceled. “This will unfortunately hit the local manufacturing sector very hard after the recent cancellation of exporter’s orders. At the moment our warehouses and shops are full of unsold goods and therefore working capital is completely tied up with no cash to pay for new purchases, shop rents, salaries etc,” he underscored.
He said it is feared that the whole world will fall into recession this year, which will also significantly affect the purchasing power in the country.
When asked how can the supply chain be restored he replied “In view of this situation, we demand the Government of Pakistan to take immediate and necessary steps to revive local economic activities in the country. Sales tax rate to be single digit 5% as well as further reduction in interest rate. Turnover tax, income tax and holding tax should be revised so that prices can be reduced for end consumers” the CAP chairman said, adding that there is an urgent need for coordinated measures for local economic recovery based on the same principles implemented for the revival of the construction industry, otherwise with the expected economic depression there will be no buyers of houses and buildings.
The government should immediately provide interest-free capital with a government guarantee for the revival of the retail sector so that retailers can resume their business and play a key role in saving the country from the expected storm of unemployment, the CAP chairman concluded.