During my stay at the marketing department while interning at Kohinoor Textile Mills Ltd. (KTML), the department underwent some strict government regulation hindering the company’s prospects of high profits from the foreign textile market. The 15% imposition of levy on yarn export was government’s reaction to the concerns of local textile merchants who had to pay high prices for acquiring production material.
Such measures always benefit one party while proving costly for the other. While the government takes its necessary steps to protect local merchants, it curtails the freedom of the manufacturers. The reaction from both parties is accordingly; approval from those who benefited, while scorn from those at loss.
While this specific action taken by the Pakistani government only a week ago proved to be in the interest of some, it certainly turned costly for the yarn marketing department at KTML. Not only did the levy imposition come as a loss for the company’s current foreign customer accounts, but also turn as an opportunity for local merchants to exploit manufacturers. According to my boss, the deputy marketing manager, “they shot our jet down and now they expect us to continue on a horse-cart.” The adverse effect of the drastic measures taken by the government on the dept’s revenue angered every employee. “Could there not be a better action the government could have taken? We could sure use some slackening off from them!”
There is no doubt that these steps by regulatory bodies are necessary to create a fair ground for everyone, but the question it posses is “How knowing is that watchful eye?” Obviously these steps were taken after acquiring a fair idea of the current circumstances, but do policies take into consideration every contributing factor? Take for instance Pakistan government’s levy imposition on export of yarn. The government’s action is completely justifiable – the protection of the rights of its citizens should most certainly be set as the high aim. But, does is that drastic a step correct? The estimated value the government had put on was, after all, an estimate and estimates are propositions based on mere prediction, leaving ample room for screwing up.
Looking at the scenario in the light of both interest groups, we can notice that putting that estimate was indeed no easy task. Assigning a figure to the potential of a firm to be successful in the international market, and that even in a market so volatile that price fluctuations cause losses worth millions of dollars globally everyday, in comparison to promoting local businesses that help open avenues of opportunities for a population dealing with 15.2% unemployment. Phew, sure spins my head around!
In conclusion, as private firms compete for higher revenues, the government cannot afford to keep its hands tied. The only way to dampen the effect of a drastic regulatory action is through proper preparation. If the companies plan on investing broadly, their risk of failure upon taking a blow can be reduced significantly.