Industries May Relocate to Pakistan from China Due to Covid-19

The world will probably rethink global supply chains after recovery from coronavirus so as to prevent concentration of industries in one country, China, which will give some industries a chance to move to Pakistan, “said SBP Deputy Governor DrMurtaza Syed of the State Bank of Pakistan.

Speaking at a meeting to discuss the impact of coronavirus on Pakistan’s trade, organised by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Syed pointed out that though coronavirus cases were decreasing in China, the infections were increasing in other countries. “By the end of May, the situation may improve,” he added.

The central bank official stated that 50-60% of the factories were closed in China due to COVID-19, therefore, next quarter results would show a decline in economic growth. Last year, the global GDP grew around 3%, which was going to fall this year due to the epidemic, he said.

“Risk appetite is decreasing among investors around the world and money is moving towards risk-free markets like bonds,” he said.

Syed pointed out that England and other developed economies were reducing interest rate to help their markets cope with the impact of the coronavirus.

“Machinery import is decreasing as Pakistan has completed imports under the China-Pakistan Economic Corridor (CPEC), therefore, currently we have some room. However, due to the decline in machinery imports, progress on the Special Economic Zones (SEZs) is going to be delayed.”

He pointed out that the exporters were also looking towards Africa and European countries to divert their exports. “Recently, oil prices decreased, which is going to have a positive impact on Pakistan, as oil is one of the major commodities imported every year.” In the near future, the situation due to the coronavirus could turn worse, but there was hope in the long term, he remarked.

Speaking during the meeting, The Indus Hospital Infectious Diseases Consultant Dr Samreen Sarfaraz said, “COVID-19 is a storm in a teacup, which is exaggerated and shown as a tsunami.”

“COVID-19 is moderately transmissible and a new viral illness of low mortality rate,” she said. “Roughly, 80% of patients recover without being admitted in a hospital, other 17% recover after admission for supportive care and only 3.4% die,” she said.

“Its pandemic potential is nothing when compared to the influenza pandemics in the past.”

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  1. India is doomed and the Indian SEZs are doomed.dindooohindoo
    • The pathetic state of the exports from the SEZ is assessed by the number of non-operative units and the poor capacity utilisation of the SEZ units – information about which is in public and national interest
    • The lack of planning of the GOI is highlighted by the fact that the GOI has done no benchmarking of the operations of the SEZ per se, and the SEZ units within – for each sector with comparable peers,in India or the global competition
    • If a sector, say X,exists in a SEZ in a specific maritime geography and its global export hub,is in Country A, and the GOI has not been benchmarking the operating parameters of the Indian SEZ and the SEZ units of that sector (X),every 3 years – then the SEZ units in sector X,in India,will definitely cease to exist,or be in a state of terminal decline or exist at the mercy of competitors
    • With the miserable performance of the Indian Rupee,and its impact of reduction in Dollarised Rupee costs payable to the SEZ authority by the SEZ units – why are the exports from the SEZs still a failure? In addition, in several sectors, the rupee costs paid by the SEZ units to the SEZ Authority,are not the determinant for operating and financial viability of the SEZ units
    • In essence,the GOI has utterly failed to provide a level playing field to Indian exporters,in terms of admin costs,operating cost neutrality,financing costs,effective logistics costs and fiscal red tape and procedures
    • The centres of manufacturing excellence near SEZs (For CMT/Job work/Material and Labour sourcing) are not cost effective – as there is no synergy between the SEZ and the Industrial planning and policy
    • The strategy of the GOI is highlighted by the fact that the GOI has engaged no 3rd party to analyse the inefficiency of the operating parameters of SEZs and the SEZ units within the SEZ – for each sector within it , with comparable peers in India,and the global competition
    • What planning and strategy will the GOI do,if it has no formal analysis of the specific operating costs,parameters,management and other issues,which explain the dismal state of the SEZ units by sector,scale and management quality
    • The dismal state of the GOI planning is that it has not properly planned the sector profile of the units in each SEZ, to ensure that the right sectors are in the appropriate geography,in the right SEZ,to minimise the net logistics costs on the EXIM chain, and minimise the inward material logistics costs – considering the future dislocations in inward and external material sources and options of transhipment and alternative export markets
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    • All of the above is to be seen in light of the fact that the SEZ has no data of the financial or operating performance of the SEZ units,loss making units or even the financial and operating performance of the Developers of the SEZ – and is naturally not concerned with the losses or the financial performance of the SEZ units therein
    • The peculiar pattern of CMT and Job workers of key sectors such as Gold and Diamond jewellers,with multiple movement of stocks at different processors o/s the SEZ – is not the norm for Gems and Jewellery SEZs or SEZ units – and represents an abnormal industrial agglomeration with a planned and structural dislocation in manufacturing and processing operations – which cannot be solely for the purposes of manufacturing and commercial efficiency.
    • Information on raids and prosecutions is critical especially in sectors with high import duties (on merit mode) for inputs,customised finished goods (wherein DRI/Customs cannot assess over invoicing),frequent movements to and from 3rd party processors (which makes the case for wastages and losses in SION and disappearing materials), materials where the EXIM transit time is a few hours and the logistics costs are less than 1per cent of CIF/FOB rates, inputs and outputs with marked differences in rates of different grades of items and offgrades,warehousing artificial losses,amortisable costs ,bad debts and write offs in select SEZs (to be used for 3rd party exports or mergers to obviate tax on SEZ profits),items where the SEZ units are well aware of the sampling and test checks of the DRI and Customs at the SEZ for the inputs and outputs etc.
    • The Gems and Jewellery industry is run by cartels from a particular community spread from Western India to North America,EU,East Asia,West Asia and Africa and is a well coordinated money laundering and smuggling operation from the state of rough diamonds and raw gold,to the marketing of jewellery and warehousing of processed and raw diamonds,the banking chain,raters and the chain of associate and front companies – which is all the more insidious,as all the data with DRI/ED/Customs/Interpol used by the Indian State for surveillance all originated from the overseas counterparts and partners of the Indian traders located in India (who are in many cases – in spirit the same de facto entity owners)
    • The premise that Indians are the least cost labour source for the jewellery sector and their informal working style (w/o documentation,using informal labour and in slum style conditions) is an innovative marvel of Indian genius,is a pathetic deception,and the entire array of fiscal and monetary sops for this sector (including SEZ) allows the sector to generate financial buffers via money laundering,tax arbitrage,treasury operations, merchanting exports, accomodation financing ,cash financing, alternative fund transfers,FX speculation,leveraging double and layered financing, defrauding Indian Merchant exporters such as STC and MMTC,Credit insurance fraud etc. which provide the sector a pricing edge in overseas markets ( via illegal,nefarious and fraudulent means)


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