Look, I am going to be straight with you, cause I believe that no one should be a scapegoat. I have spent the last ten years in procurement and I have seen things that would make you scratch your head like a circus monkey. The kind of things that keep you awake at 3 a.m. wondering if you are working with a real business or some elaborate Ponzi scheme juggler. So let me tell you what is actually happening on the construction sites, in factories and real estate offices of this Pakistan, because somebody needs to say this aloud.
If you talk to any local supplier who deals with any real estate developer or corporate buying house, you will hear stories of endless waiting, broken promises and severe financial stress. It is an open secret in our market that the entire supply chain is forced to act as an involuntary bank for big fat dogs. Companies demand months of credit, mistreat their vendors and refuse to provide any legal guarantees for timely payments. Even worse, this is not just bad business practice or poor management. It is a deliberate, calculated corporate strategy driven by cash transactions, tax evasion and a conscious avoidance of any paper trail. And if you work in procurement like I do, you know exactly what I am talking about.
Every single day, I watch large companies systematically squeeze their suppliers like a chef squeezes a lemon. In some cases they demand six month credit terms. They pay in physical cash with zero documentation. They dodge taxes like it is a national sport or public service. And when things blow up, they throw their own procurement staff into the fire to save their own skins. This is not capitalism. This is organized theft with a business card.
Let me tell you how things actually happen on the ground, because I have lived through this circus. A private real estate developer or a large manufacturing company needs some materials, it could be steel bars, cement, sand, ceramic tiles, or leather and soles for a shoe brand. The procurement team, which is probably me or someone like me, reaches out to some supplier. The supplier is naturally excited because working with a big name means volume, status and the kind of regular business that keeps the lights on. The developer or manufacturer acts god, like they are doing the supplier a massive favor by considering them as their vendor.
Here comes the fun part. The buyer immediately lays down the law like some kind of Buddhist monk spreads a scroll in a monastery. There will be no advance payment. They drop the bomb "We need ninety days credit minimum. Our cash flow situation is a bit tight right now". The buying team deliberately does not inform the supplier that there will be no letter of credit, nor there will be any bank guarantee. That is three months of waiting for your own money while the developer is already collecting advance payments from customers who are desperate to buy apartments or any property.
The supplier hesitates, but here is where the magic happens. The buyer dangles the carrot of future orders. "If you do this for us now, there will be plenty more business coming your way. We have five more projects lined up." Or they simply use their market dominance to bully the vendor straight up. "Look, if you do not agree to these terms, we have three other suppliers who are willing to do it tomorrow morning." so he reluctantly agrees because the alternative is watching business walk out of the door.
The supplier delivers the goods, fund the raw materials, pays labor out of their own pocket and then they wait. Three months pass, and sometimes three become six. And let me tell you, those three months feel like three years when your money is sitting in someone else's pocket and you cannot pay your own workers on time.
The buying company in the meanwhile, is laughing all the way to the bank, because they have effectively gotten a free loan from you. They've sold your products to their customers already or used those supplies for their benefit. They collected cash and now they are using that generated cash for other things, land speculation, marketing for new projects, paying their own executives fat bonuses. And they are not paying you a single rupee of interest for the privilege of holding your money hostage and using it to speculate.
When the "three month" mark finally arrives, you would think the payment would come through, right? Wrong. The payment does not come through a proper bank transfer or a crossed cheque that enters the formal financial system. Instead, the buyer calls the supplier to some location at some random time. Maybe it is evening, maybe it is a Saturday afternoon when banks are closed. And then they hand over physical currency notes. Hard cash, straight from the drawer, with zero digital footprint and no official receipt that ties back to a legal contract. No bank statement, no invoice trail, just nothing. This is not only a bad business practice, this is a calculated strategy from the very top.
These companies are simply clever, aren't they? They do not sign contracts. Not a single one. No Purchase Orders. No Blanket Purchase Agreements. No formal documentation whatsoever.
Why does the buyer insist on this? Because they want to make absolutely certain that there is no paper trail connecting them to this transaction. If they ever sent a bank transfer, there would be a record, so FBR guys could see it. Their accountants would have to record it. Their tax liability would increase. But with cash, it never happens. Officially, it never happened.
I have sat in meetings where the owner told directly to the whole team, "I do not want to see any papers, Just handle it verbally". At first, I thought the guy was being paranoid. Then I realized that he was being smart. He was being smart in the way that criminals are smart when they commit white collar crime.
A Blanket Purchase Agreement is a legally binding document. It says what you are buying, what you are paying and most importantly, when you have to pay. If you sign a BPA and you do not pay in sixty days, the supplier can take you to court. They have documentation. So it means that they have evidence. The courts will rule against you and you will owe interest & penalties. This is the kind of accountability that keeps large companies honest.
But if there is no agreement, there is no accountability. The supplier has nothing. No signed document, no email trail, no official purchase order. All they have is maybe some sort of "delivery challan" that too without being rubber stamped and a WhatsApp message that could have been sent by anyone. If they try to take the company to court, the company's lawyer just laughs and says, "What contract? We have no record of any agreement. These are unsubstantiated claims."
By keeping everything strictly verbal or informal, the buying company creates a shield of plausible deniability. There is no official record that the goods were ever ordered. There is no official record that they were delivered. There is no official acceptance of the goods on specific terms.
If the supplier complains about delayed payments, the buyer can simply ignore them or delay them further with complete impunity. What is supplier going to do? Call the police? The police will laugh at them.
This is calculated corporate design from the very top. The procurement officers are given explicit verbal instructions by owners. They are told, often in private meetings with no witnesses, to push suppliers for the longest credit possible. They are told to demand goods on informal terms. They are told to never create documentation that could be used against the company in a legal dispute. And when things go south, they are often the ones who take the fall.
This informal setup serves a much darker purpose than just avoiding supplier liabilities. It is the primary engine of tax evasion in our domestic commerce and I say this as someone who has watched it happen from the inside.
Large real estate developers and buying companies often operate in two completely different realities simultaneously. On the consumer side, they collect white money through formal banking channels where tax documentation is mandatory. Customer pays through banks, cheques clear, everything is recorded. The company collects advance installments on new projects and this money flows through bank accounts where FBR can theoretically track it.
But on the procurement side, they deliberately plunge into the grey economy. They procure materials from local suppliers entirely in cash. Why? Because this allows them to keep a massive portion of their operational expenses completely off the books. They do not have to pay withholding taxes on supplier payments because there is no official record of the payment. They avoid reporting accurate records to the Federal Board of Revenue because they are hiding the reality. They bypass sales tax obligations because there is no invoicing trail to audit.
Think about the mathematics of it because this is where it gets really clever. A developer who collects ten billion rupees in advance installments from customers, should theoretically be reporting that as revenue and paying substantial withholding taxes on every single material purchase they make. But if all those purchases are made in cash without formal invoices or receipts, there is simply no record for the tax authorities to find. It is a beautiful system if you are the one doing the evasion. Someone summed this up beautifully "You appear honestly fine until you're caught red-handed".
The poor supplier is strangled in this web. To stay competitive and keep the big customer happy, the supplier accepts cash payments. They struggle to show legitimate sources of income for their own tax returns. They end up bearing the burden of a broken tax system while the big corporation walks away scot-free. The supplier pays taxes on profits they barely earned because they had to wait six months for payment and take expensive loans in the meantime. The developer pays minimal taxes because they have manipulated the records. And the rest of us taxpayers are left to fund the country is infrastructure shortfall.
In this toxic ecosystem, nobody is safe. Not even the employees working inside the buying company. Procurement officers and managers are forced into an unethical and unprofessional situation.
The owners tell their procurement teams to go out and procure materials at the lowest possible rates on the longest possible credit terms. Simultaneously, they are strictly forbidden from creating any paper trail. Everything must be verbal and deniable.
When things go wrong and suppliers start protesting outside the office gates or threaten to take the matter public, upper management steps back. They throw their own procurement staff under the bus as scapegoats. Management can easily claim that the rogue purchase manager acted outside company policy by making unauthorized verbal deals or mishandling funds. They can safely say that the procurement officer went rogue, that they made side deals to get kickbacks, that they were corrupt. The procurement officer is blamed, loses job, or faces legal harassment, while the owners who gave the original instructions remain completely protected behind their corporate apparatus and their lawyers.
I have seen it happen. Good, smart, dedicated people got fired because they were following orders that were never written down. The owner gets to maintain plausible deniability because there is nothing tying them to the strategy. They can fire the procurement manager and claim that the manager was acting independently. And the procurement manager is left without a job, without a reference and often without the ability to prove that they were just following orders. The system chews them up and spits them out because they become too visible, too exposed, too much of a liability.
This widespread practice of exploiting suppliers through undocumented credit and cash payments is slowly destroying the true productive capacity of our country. And I am not being dramatic here. I am being factual.
Small industries, construction subcontractors and local manufacturers cannot grow, innovate or hire skilled labor because their working capital is constantly being held hostage by powerful buyers. Instead of investing in better machinery, research and development or training skilled workers, business owners spend half their time chasing recoveries and begging for their own hard earned money.
The shoe manufacturing clusters of Lahore are full of competent technical people and talented designers. But many of them are stuck in a perpetual state of cash crisis because their large retail customers have frozen their payments for months. The construction sector is plagued by similar dynamics, where small material suppliers and subcontractors cannot pay their own workers on time because the main contractor is still holding their bills hostage. The workers get angry, the quality of work suffers, projects get delayed and the entire supply chain becomes dysfunctional.
What is the incentive for a vendor to invest in better processes or equipment when they know that their money will be locked up for six months anyway? What is the incentive to hire more skilled workers when you cannot guarantee them timely payment? Where is the incentive to expand and grow when you are perpetually short on cash? There is none. So the vendor just survives day to day, never improving, never becoming more competitive.
This must have to change. If we want to build a stable and progressive economy in Pakistan, this culture of exploitation must fundamentally change. And I am not naive enough to think it will change on its own. Powerful people benefit from it and they have no incentive to stop.
We need transparency in commercial transactions. We need legal protection for vendors through enforceable contracts and formal payment timelines. We need strict regulatory enforcement against undocumented cash transactions in commercial supply chains. We need tax authorities to actually crack down on companies that deliberately avoid creating a paper trail to evade taxes. We need procurement regulations that make it illegal to pay suppliers in cash without invoices. Even there should be a legal entity or authority to regulate the procurement professionals in Pakistan, just like PMDC, PEC, ICAP since procurement has far reaching effects in broader spectrum. The procurement professionals must be trained, chartered, certified and licensed to control this practice, whether they are in Private sector or serving any governmental agency or even freelancers.
Some of this is already in the law, by the way. The issue is enforcement. Nobody enforces it because enforcement would require stepping on the toes of big developers, mega corporations and those people have connections.
Until things change, the new entrepreneur with good intentions will keep walking into the market, acting as the unsuspecting sheep who delivers goods on credit, only to realize too late that the system was rigged against him from the very beginning. He will work harder and harder, fund more & more inventory out of his own pocket and slowly watch his business drain away while powerful buyers enjoy the fruits of his labor without paying for it.
The tragedy is that this is entirely preventable. Other developing economies have built mechanisms to protect suppliers. Pakistan too has some sort of regulatory framework, but enforcement is weak and cultural attitudes towards informal business remain deeply entrenched. Until we decide as an entrepreneurial society that suppliers deserve the basic dignity of timely payment and legal certainty, this cycle will continue to strangle the real entrepreneurs who actually produce the goods that keep our economy moving.
And that is the part which is haunting. Because I know it can be different. I have seen it to be different. But it requires actual commitment, actual change and I am not sure if we have guts for it as a country.
Shehroz