The major issue facing Pakistani manufacturers and anxious exporters is not the coming South Asian Free Trade Area (Safta) which opens up the country for trade with India in a big way at no or low tariff but the varied challenges of globalization.
Pakistani businessmen need not be alarmed by the prospect of opening their markets for cheaper Indian imports - as well as for China which has already been happening for long now but by the consequences of access to domestic market to more countries when the textile quota system ends this year and the increasing tariff cutting by the World Trade Organisation (WTO).
What they should be concerned with is the threat of globalization, with threats to our goods coming from far off countries and not through the South Asian region by way of SAFTA alone. In fact SAFTA and the increasing South Asia economic cooperation can offer protection against the threat of the larger and more advanced economies of the world, and enable us unite or for collective defence of our interests or welfare.
The fact is that Pakistan has been competing with India to the extent of $12 billion of its exports annually including around $8 billion of its textile exports. That shows the resilience of our exports which can become stronger in future years if reorganised and reinforced better.
But while Pakistan has been facing the external threats to our goods successfully, the challenge now is to our goods at home from cheaper foreign manufacturers flooding us. The solution to the problem is not blocking a 'preferential trade area' or more radical 'free trade areas' in South Asia, but to take advantage of the newly developing trade and industrial scenario in the region and gain by that, as the East Asian tigers had done earlier, and China is doing now globally.
Our businessmen have to cut the cost of production, improve the quality of their products, and make their business practices more efficient and cleaner. If they don't or if they are too slow to do that, they will not be able to face the galloping new challenges that are coming in the world trade.
An earlier study showed that the cost of smuggling goods into Pakistan on an average is 22 per cent. Hence the cost of importing goods into the country through the legal channels should not be above 22 per cent.
The trade practices and import tariff have been more and more to the advantage of smugglers. Hence the domestic industry has been facing the increasing threat of smuggling.
Textiles apart, tyres area an example. And the four million overseas Pakistan are estimated to bring in a great deal of permitted and non-permitted goods tax-free and sell them in Pakistan to the detriment of domestic manufacturing, particularly electronic manufacturing.
But now as many of such goods are available in Karachi at almost the same prices at which they are available in Dubai there is less smuggling of such goods than in the past.
It was such considerations which forced the IMF to make the government reduce the average import duty from 35 per cent to 25 per cent in two years, and the businessmen don't seem to be protesting.
Cost-cutting has become important enough for the Karachi Chamber of Commerce and Industry, whose president Siraj Kassam Teli led the latest trade delegation to India, asked the government to set up a cost-cutting commission that includes members of trade and industry. He wants the recommendations of the commission to come out early enough so that they are incorporated in the new budget to be presented in May or June.
He wants a large cut in power rate to make it economic and the power supply to be made steady. He wants the taxation to be made rational and tax refunds made quick.
He demands that labour laws be reformed and made more workable. He wants steady supply of water at fair prices. The kind of too many holidays given too often is not helpful for production or export.
In the report following his return from India, he has suggested the South Asia Free Trade Zone should come into operation before the scheduled 2006. Evidently the businessmen are in a hurry and want early action.
But earlier a group of businessmen had said that only 15 per cent of the textile industry was ready to face the challenges of doing without the textile quotas from the end of the year. That means that a lot more spade work has to be done.
At least about the textile industry, finance minister Shaukat Aziz says that $4 billion have been invested on its renovation and expansion; that could not be said of the other industries which too will face the increasing impact of globalization. They have to wake up and act instead of asking for SAFTA to be halted or come in slow phases.
What are the consequences of not having proper or adequate trade with India? Mr Teli says in his report that the recorded trade between India and Pakistan is $250 million and illegal trade $2 billion. And the real potential for trade between them is $10 billion to $15 billion. He wants Pakistan to prepare for a ten billion dollar trade with India systematically.
He wants machinery, including textile machinery, which Pakistan does not produce but imports from other countries at high prices to be imported from India. He prefers automobile parts imports from India. He thinks Pakistan can export a great many varieties of textile manufacturers to India which it does not produce.
The Indian prime minister Atal Behari Vajpayee wants a common currency for South Asia. Some Pakistanis oppose that, including the governor of the State Bank of Pakistan Dr Ishrat Hussain, arguing that it is premature. But if the goodwill and eagerness are there, South Asia need not take as many years as Europe has to have one currency.
Teli wants Pakistan to import construction machinery from India which Pakistan imports but doe snot manufacture. It is cheap there and can make houses-building cheap in Pakistan, he argues.
Some businessmen want the Pakistan customs to check the import of sub-standard or shoddy goods from abroad, using precious foreign exchange. Such goods have a brief life and so more such goods are imported. The importers and traders make money but the consumers and the country are the losers. This is true particularly of the electronic industry in which high cost goods can have a brief life.
Pakistan should be able to make use of organisations like the UNDP and the Asian productivity organization to improve the productivity,particularly in agriculture and industry.
The Asian Development Bank has offered to assist the small and medium industries and agriculture. Japan has offered $30 million for the modernisation of the fishing industry.
All this is not the task of the government or the officials alone. Trade and industry and the labour unions have to take the initiatives. Quality should become the prime concern of the nation or an ideal.
Quality should be the hall mark of Pakistan as was the case of Germany when it came up or England and Japan earlier later. Without such a total pursuit of quality the country will not be able to withstand the coming heightened global competition and earn a name for our goods in the world.
