PAKISTAN relies heavily on exports. They provide the bulk of the foreign exchange needed to import the essentials of a modern economy like petroleum, machinery, transport vehicles and even foodstuffs — vegetable oil and tea. If exports decline, the urban centres will face rapidly growing unemployment and despair. The rural areas will face severe loss of income for their cash crops. Most Third World countries evolve strategies to export their way to economic growth. During the 80s even our exports were the engine of growth. Other Asian economies have been far more successful in exporting their way out of poverty. We have also been attempting to do the same for the last two years.
Today even our existing exports are at peril. Even before the events of September 11, the world economy was heading for a recession. Our exports would have been affected anyway — and the signals of a downturn were clear.
The worldwide downturn in consumer spending has become acute — specially in the United States. The American consumer will not buy non-essentials like textiles and garments which are our main exports. This will badly affect our exports in the short run.
Even more serious is the damage done to the “country perception” in the eyes of the Western consumers and the buyers. As it is Pakistan was considered a “dangerous” place to do business with. Buyers were loath to travel to Pakistan. The unending news of bomb explosions, sectarian shootings and other factors had already destroyed buyer’s confidence. The consumer does not want to buy the “Made in Pakistan” label. Laws in most countries make it obligatory to put the country of origin on each article.
The executives whose jobs are to buy for chain stores and mail order houses rationalize that Pakistan is no longer a safe and reliable source of supply. No matter how good and reliable the individual supplier, if the whole country blows up supplies will obviously be disrupted. So he is prepared to pay a little more and go to the next best source of supply. It will not be easy to restore this confidence once it is destroyed.
Those of us who ‘sell’ know how difficult it is to find customers. Once he is gone it will take years to bring him back. We are in dire jeopardy and if we do not move now we may be set back by decades. Many on going orders are being cancelled. The commerce minister mentioned a figure of $1.40 billion. This would be about 17 per cent of our exports. Most buyers and organizations are seriously considering moving their buying from Pakistan. What can we do?
Firstly we should try to persuade our more hotheaded fellow Pakistanis that this is no time for American baiting. They will not take it as tolerantly as they have done in the past.
Secondly we must show through our media that the average Pakistani is not an extremist. While a couple of thousand people demonstrate on the main streets the factories keep running, the ports are operating normally, banks are functioning and life goes on.
Thirdly on a government-to-government and company-to-company basis we must explain to our customers, store buyers, and the foreign media that the demonetizing of Pakistan will only serve the objectives of the terrorists.
Fourthly we must ask the Western nations to give us preferred access to their markets for the next few years to compensate for the tribulations that we will have to suffer as a frontline state. Commerce minister Razak Dawood has already left for Washington with a delegation of businessmen to do this. He needs all our support and must be given full backing.
For the short-term the government of Pakistan must take immediate measures to save the exporting industry from collapsing. There is no justification for holding up the payments of sales tax refunds and duty drawbacks. Even under normal circumstances these should be paid promptly, now their immediate release will give the exporters a breathing space. The State Back should further reduce the export refinance rate to 8 per cent for a period of six months at least. The State Bank should encourage the banks to be liberal with post-shipment finance. This will enable the exporters to offer credit to their customers. Trade credit can be the most effective instrument in allaying the worries of the customers. Many of them believe that opening LC’s on to Pakistani suppliers is hazardous.
If all this not done quickly then we are in for a major economic downturn, which is the last thing we need at this critical juncture.
