08 November 2004	Monday	24 Ramazan 1425

Since the beginning of the last decade, Pakistan has been borrowing quite a few of Malaysian strategies at least for rhetorical purposes. Among the key slogans were, "Look East, down sizing/right sizing, vision 2020 and the long-term perspective planning, "etc. That Malaysia implemented most of their visions and Pakistan used it only for rhetoric is an unfortunate reality. This paper aims to analyse whether we can do what Malaysia did , in at least one area, viz, exports.

In 2003 both Malaysia and Pakistan achieved a major milestone in their exports. Pakistan for the first time, crossed the $10 billion mark and Malaysia crossed the $100 billion. While the Export Promotion Bureau went berserk with celebrating the moment when a container falsely claimed to fetch the dollar beyond the $ 10 billion was placed in a ship in Port Qasim, the Maltrdae (Malaysia's export promotion agency) coolly went about their job of worrying about further assistance to exporters who may need it.

There is no point in reminding again ourselves of where we were economically and where Malaysia and its neighbors were 30-40 years ago. It is important to focus on their success strategy and to analyse whether we can apply some of their strategies in Pakistan. Suffice to say that at the time of commencement of the WTO in 1995, Malaysia's GDP was only $ 6.4 billion (in terms of 1987 $ ) accounting for 0.32 per cent of world's GDP. It is noteworthy that in 1995, Malaysia's GDP was lower than that of Vietnam, Algeria and Thailand

In the words of Mr. Mahatir, "In 46 years, from a country which depended only on rubber and tin, we have become an industrial nation" and further progressing to become a sophisticated IT-based industrial nation. In the past 30 years, Malaysia has successfully sustained rapid economic growth, curtailed high poverty rates, and reduced income inequalities. Its real GDP grew by 5.2 per cent in 2003, up from 4.1 per cent in 2002.

The prospects for the next two years are promising. The economy is projected to grow at around 5.5 percent in 2004 and 2005. Its per capita was $3800 and $9000 on 2003 based on Atlas and the purchasing power parity basis respectively, and in terms of global ranking it was 84th. The comparative figures for Pakistan are $470 and $2060 with global ranking of 166 out of a total of 206.

In 2003, Malaysia's external trade balance recorded a merchandise trade surplus of $19.7 billion, up by 45.6 per cent compared with $13.6 billion a year ago. In nominal terms, the total exports increased by 8.0 per cent to $100.6 billion while imports rose by 1.5 percent to US$ 80.9 billion in 2003. In the world merchandise export in 2002, Malaysia ranked 18th with exports of $93.3 billion accounting for 1.4% share of global exports.

In import terms by a coincidence it also ranked 18th with total import value of $80 billion accounting for 1.2 per cent of the global imports. The impressive part of Malaysia's export, based on its 2002 figures is that more than half its export comprised of IT-based products and home electronics like transistors and valves (20 per cent) computers and office equipment ( 10 per cent each) telecommunication equipment (5 per cent), electric circuits (3 per cent) television tape-recorders (5 per cent), and radio broadcast receiver (2 per cent). Measuring equipments formed 1 per cent of its export.

The remaining major export comprised of petroleum based and gas products (10 per cent) and the traditional Malaysia export, vegetable (palm) oil formed only five per cent. The famed rubber formed only 1 per cent. Malaysia in the same year exported around $ 15 billion worth of services accounting for 1 per cent of the global exports and imported $16.2 billion of services.

Malaysia's export success is a combination of its economic and industrial policies and marketing help provided by Maltrade. Like Japan and most pther countries in the region it has a ministry of trade and industry (MITI). This is a major difference between Pakistan and these countries. Trade policies cannot be divorced from industrial policies. It is the trade imperatives which determine the industrial policy.

In our context, the commerce ministry should have been so powerful that it should have been forming the trade, industrial and investment policies. But political expediency being what it is, these are dealt in three different ministries. In fact, since July 2004, a fourth ministry, viz, ministry of textile industry has been added to the list . Thus it becomes almost impossible to emulate the Malaysian model.

Malaysia has no trade policy that it can boast about. What it has is an integrated economic and industrial policy formulated by trade specialists designed to promote industrial exports. That is why it has such a large industrial and IT-related exports.

Malaysia's policy thrusts are derived from the Vision 2020. Its present 8th plan covering the period 2001-2005 ,forms a coherent part of these long-term plans and is the first phase in the implementation of the Third Outline Perspective Plan 2001-2010. and this itself embodies the National Vision Policy .Some of the key objectives of this vision are:

* enhancing competitiveness to meet the challenges of globalization and liberalization;

* developing a knowledge-based economy as a strategic move to raise the value-added of all economic sectors and optimizing the brain power of the nation;

* strengthening human resource development to produce a competent, productive and knowledgeable workforce.

The export and industrial policies are designed to be interlinked .The government's manufacturing strategy aims to shift the whole value chain to a higher level through productivity-driven growth by utilisation of high technology (automation/robotisation) and increasing total factor productivity (TFP) with emphasis on knowledge, capital-intensive manufacturing, application of new technology, innovation, best management practices and more efficient utilisation of resources. It has also set up very successful industrial clusters.

The money is channellised to companies to encourage automation, R&D and competitiveness. The key difference between Pakistan's export marketing funding and the Malaysian funding is that in case of Malaysia, the money is directly provided to the industries and exporters using the government's incentive programmes whereas in Pakistan it is used by the export agency for irrelevant self-concocted programmes . All these policies are supported by sound macro economic policies which are synchronized.

Fiscal incentives for exports are also designed and monitored by the MITI. The equivalent procedure in Pakistan leaves them to the mercy of the CBR. Even though Pakistan has come a long way from depending on import duty as a major source of revenue, the dominance of the CBR over the export sectors remains. Its tight control on import of raw material for exports is based on alarming the government that relaxation will lead to misuse and smuggling by exporters.

That the CBR keeps failing in controlling smuggling through non-exporters is perhaps attempted to be disguised by choking the export sectors. All matters pertaining to such duty-free and temporary imports be it under DTRE, SRO 410, Bonded warehouse scheme should be the responsibility of the EPB and not the CBR. All the criticism of the EPB notwithstanding, it is universally accepted that the EPB is at least exporters friendly and this singular administrative change will make the EPB function better than its Malaysian counterpart.

In short, Pakistan can follow the Malaysian model only if the ministry of industry and textile industry and the BOI are merged with the ministry of commerce. Under the present political circumstances, it is least likely to happen. Thus at least an0 inter-ministerial committee headed by the commerce minister should be formed in which, besides the present ministers of these industries, the minister for labour, chairman CBR, chairman EPB , governor SBP. and deputy chairman Planning Commission should be members. This body should have all powers to decide on any matter relating to exports and matters need not go to the ECC of or to the Cabinet itself.

The annual ritual of announcing trade policies should be done away with. The annual announcement is in itself a symptom of underdeveloped countries. No developed countries announce such policies annually. The Malaysian MITI or the Maltrade website has no such thing as export or trade policy posted. Announcement of a five or 10 year industrial, trade and investment policy should suffice. Each year the government comes under pressure to otherwise announce something that will sound new with the result that previous policy measures are all but forgotten.

The second important restructuring required is in the export assistance. All financial assistance may be provided to exporting and manufacturing units themselves rather than used by the EPB. These should focus on priority areas like increasing competitiveness, automation, upgradation of technology and manufacturing process. Manufacturing of knowledge based products should be the priority followed by engineering sectors including small home-based electronic appliances.

Third, all matters relating to exports be implemented by the EPB. Presently, it is the CBR which decides which products and under what ratio etc are to be allowed even under the export SRO 410. All claims of refunds relating to customs duty and sales tax should be dealt by the EPB.

Fourth, the labour policy has to be synchronized with export needs. A country that primarily depends on cheap labour for exports is by definition ensuring a large segment of society living at the threshold. The labours' representatives, exporters and NGOs which take interest in labour welfare should be involved in designing of the Labour policy. NGO's like SDPI have been recently giving much attention to these issues, particularly the gender-equation in the employment paradigm.

The above are some of the equivalent measures that will have to be taken if we are to follow the Malaysian model.