December 5, 2001	Wednesday	Ramazan 19, 1422

KARACHI, Dec 4: The target to boost exports by 10 per cent per annum over the medium term appears remote, following global slump in demand, falling prices, lost supply orders and risk perception of foreign buyers.

Prior to the US attack on Afghanistan, the government had expressed fears in Interim Poverty Reduction Strategy Paper (IPRSP), submitted to the IMF to qualify for Poverty Reduction and Growth Facility, that “exports may fail to register targeted growth.” The IPRSP prepared in August 2001 listed two major reasons: demand slump in a sluggish US economy and erosion in unit values.

The Afghan war has brought more difficulties: higher shipping and insurance costs due to war risk levies.

Although exports for July-September 2001 rose marginally by $39.3 million to $2.26 billion compared to first quarter of last year, this was brought about by increase in volumes at lower prices.

The impact of fall in prices was countered by an increase in volumes— the average rise in quantity in textiles was 12.9 per cent. The same price-volume trend was witnessed in fiscal 2000-20001. Growth in exports during July-September 2000 was 14.5 per cent. But falling international prices, according to the State Bank, cost the country more than $703 million in lost revenues in fiscal 2001.

The demand for cheaper Pakistani goods remained strong during first quarter. The future of exports is, however, clouded by the collapse of the consumer confidence in the United States, which is the largest export market with a share of 24.4 per cent of the total export earnings of $9.2 billion. The share of Asia improved from 34.5 in FY 2000 to 36.9 per cent in FY 2001 and that of Western Europe declined from 29.2 per cent to 26.9 per cent.

With European economies on the verge of recession, the increased access to EU markets from January 1, 2002 may not prove much of a help unless the buyers’ risk perception and consumer confidence in Europe picks up. The US has not taken a decision as yet to provide greater duty-free access to American markets for Pakistani goods due to opposition from the domestic textile manufacturers.

Similarly, leading South East Asian economies, whose growth was fuelled by substantial exports to America, have been hit by deep recession. They include Singapore and Taiwan. Owing to recession, the US has ceased to be an engine for world economic growth. Both business and consumer confidence in the US has plummeted specially after September 11. Pakistan’s exports to south and east Asian countries, with the exception of China, are likely to be hit.

In terms of the five largest export markets, the US continues to dominate, followed by Dubai, UK, Hong Kong and Germany. The economic situation in Germany is worsening.

The export base is not diversified and is concentrated in relatively low value-added products. The share of value-added goods have ranged between 56-67 per cent of the total exports. Although Pakistan has missions in 75 countries, 60 per cent of the total exports went to 10 countries in first half of last fiscal.

“The spill-over effect of devaluation on the overall cost structure has hampered growth in export production,” says IPRSP and adds “the rise in the cost of tradable inputs and an unusual increase in utility charges has neutralized the effect of exchange rate devaluation.” A leading industrialist says that the IMF policies adopted by Islamabad are anti- investment, anti-production and anti-exports.

With all the efforts to integrate the national economy into the global market, the total foreign trade has remained stagnant at just below $20 billion for past several years. Normally, exports have stagnated between $8.5 -9billion and imports between $10-11 billion. This has led some independent economists to conclude that Pakistan, in the first instance, should focus on making the domestic market prosperous so as to attract foreign investment and foster foreign trade. Premature globalization is not helping foreign trade specially exports.