Steering through the post COVID world - An Open letter to PM Khan

2020 has been a tough year so far. COVID-19 has wreaked havoc claiming thousands of lives, forcing lock-downs and devastating economies around the globe. As the world has slowly started to re-open hoping that the eye of the storm has passed, they are faced with a plethora of questions to be answered. The biggest of all these questions perhaps is, ‘how will the world look like, post COVID-19’. It might be too long a shot to predict how long will this pandemic take to vanish and how would a post COVID world look like. However, what is easier to predict and forecast is the fact that we might have to live with this for quite some time – perhaps until a vaccine is introduced.

COVID-19 has tremendously impacted the way we interact and transact. Handshakes are a tale of the past, hugs are rather impossible to achieve while maintaining a 6 ft distance, Invitation lists on weddings have gone dry, sports are being played behind closed doors, while exams are being administered in soccer fields. Nobody could have predicted any of this on new year night, but merely 6 months into 2020 these are hard realities of today. Such is the pace and magnitude of change our planet has undergone in past half a year.

Economically speaking, COVID-19 and the resulting lock-down have been a disaster. Millions of people have lost their jobs, many goods, services and even businesses have become irrelevant or completely redundant. Tourism, Travel, and Hospitality are the worst hit sectors and are expected to take longest to revive – perhaps not until the Pandemic is completely over. The next worse hit sector is retail. Although groceries and pharmacies saw a surge in footfall when lock-downs were announced, but since then all physical retail has suffered a lot owing to regulations, SOPs and customer preferences.

Pakistan saw its first case of COVID-19 in last week of Feb 2020. It slowly started to spread in mid of March through local transmission and thus lock-downs were announced on March 21, 2020. Although the Federal Government had different view on how to handle the situation, but provinces preferred to go for complete lock-downs. Life, as we knew it, came to a complete halt and people were restricted to their homes. Then came Ramadan in late April and the big question was about prayers. SOPs were devised and Mosques were allowed to open under those SOPs. Since later half of Ramadan is a high time for retailers, they started raising their voices asking the government to devise SOPs and let them open. With opening of markets on EID, the spread certainly increased, and Pakistan saw a surge in cases right after EID.

The economic impacts of the lock-down on an already fragile Pakistan economy were devastating. Pakistan’s economic growth is forecast at negative for the year 2019-20 and as we come closer to July, conditions do not look any good for the next fiscal year either.

Government’s handling of the COVID-19 so far has been a roller coaster ride. Unfortunately, nobody on the planet has any idea about what a perfect response is to this pandemic. Lock-downs can contain the spread and flatten the curve but at the same time they wreak havoc on the economy, bringing the middle- and lower-income groups to the verge of bankruptcy. Luckily, the spread of disease in Pakistan has been relatively contained (when compared with the likes of Italy, France, UK and USA), however the tremors of its economic impact have been felt all across the country.

One thing that has been widely praised is the income support initiative by the Federal Government under the umbrella of Ehsaas, providing vital cash support to daily wagers and those low-income sections of the society who had lost their jobs. On the healthcare side, the response initially was shaky, but they soon caught up and things look under control now, with a comprehensive response strategy for the affected in place, although with rise in cases, there is always a risk of healthcare systems getting chocked. In the middle of all of this, came the Budget 2020-21 presented in National Assembly on 12 June 2020. Although, it has brought some tax reliefs for certain sectors but as a whole it has failed to impress. The Budget does not consider the new realities of the Post-COVID world and thus fails to address many vital issues.

Generally, disasters or misery are opportunities for nations to rise from the ashes. We should take this low time as an opportunity to move ahead with the same pace as the rest of the world will. One thing COVID has forced on the businesses, governments and even social interactions is digitization. As more and more people got aware of the need to sit home, they became conversant with online meeting spaces, electronic shopping, and virtual office collaborations. None of these things were new to the world, but the Pandemic has made us realize that these are more convenient and more practical alternatives to ‘what we used to do’.

As people shift towards digitization in the post COVID world, demand for many jobs and services will reduce significantly while some will completely go out of business. As this happens, some new avenues will open and that is where we need to focus if we want to keep pace with the world. One such thing that could have been incentivized in the 2020-21 Budget is E-Commerce. An ideal response could have been a reduction in Sales Tax rate for online sales and Income Tax holidays for new entrants into the E-commerce market. This could significantly incentivize the investor into investing in E-commerce, while at the same time it will encourage the customer to buy from this channel.

Another challenge that Pakistan has been facing in E-commerce is the delivery mechanism. There are hardly a few courier companies available locally that offer delivery services to E-commerce firms and sudden rise in demand have remarkably exposed their ability to timely deliver, causing sales losses to the businesses. For the government however, there is another way of looking at it. The government should see an opportunity in it, an opportunity to build a vast delivery and logistics network. A huge chunk of workforce went out of jobs recently, instead of giving them cash donations, why not give them jobs and help them build careers. Build a new logistics and delivery company using that out of job workforce and be a catalyst for an E-Commerce revolution in Pakistan. As businesses invest into E-commerce, the government can come forward leveraging their existing infrastructures and build a back-bone for the future economy. If well managed, such a setup has the potential to earn billions and contribute to government's Non Tax Revenue.

Another challenge that E-commerce companies have faced in Pakistan is the availability of reliable E-commerce platforms. The bigger established players have good internal systems and have access to expensive tools and platforms from around the globe which they use to run their E-commerce business. However, if the government could step in and incentivize our Tech Community or collaborate with them to build reliable platforms, payment gateways and inventory management systems for the E-commerce businesses in Pakistan, this could certainly help Pakistan in becoming self-reliant for its E-commerce related activities and could eventually pave the way to export such services to the outside world.

Whether we accept it or not, but E-commerce is going to be a huge game-changer in post COVID world and sooner we realize this and react, the better it is for us. Mr Prime Minister, if we do not act today, we might lag behind rest of the world once again and loose out on this opportunity. You have worked really hard to reduce imports and improve the current account deficit since you took office, but if we lag behind in E-commerce, our consumer will be forced to buy from international players and all your efforts of reducing imports will go in vain. Moreover, with brick and mortar retail getting hammered in post COVID world, E-commerce will serve as a bridge for our local industry to reach customers, and hence will help keeping them alive.

In a nutshell, my recommendation will be to devise a comprehensive strategy to boost E-commerce in the country and leverage our future economic growth on it. A comprehensive strategy should as a minimum cover the following aspects:

· Incentivize investment in E-commerce business by offering lower tax rates and / or tax holidays.

· Improve supply chain reliability, specifically focused on B2C deliveries

Focus on IT part and collaborate or incentivize investments into systems, gateways and platforms that enable E-Commerce businesses.

Stay Safe, Stay blessed..