02 January 2005	Sunday	20 Ziqa'ad 1425

KARACHI, Jan 1: The Asian Development Bank has identified five key Pakistani industries where, potentially, increasing pressure for implementation of social and environmental standards by the foreign buyers could have adverse impact on export business.

These are textiles, leather, sports goods, surgical instruments and carpets, which have been identified after detailed consultation with the stakeholders and review of the available literature by an ADB team that prepared a report on "Social and Environmental Issues" in September 2004.

"The textile and leather industries are amongst Pakistan's most polluting industries," the ADB study observes while identifying cloth production in textiles and leather tanning as "extremely polluting."

The ADB has observed general level of awareness 'low' on social and environmental standards in Pakistan. "Since buyers have not forced the issue of compliance, the response by the industrial sector especially among the small and medium enterprises is lukewarm." The ADB is also not happy on lack of basic data on the country's exporting companies. It has suggested a comprehensive survey of Pakistan's industrial sector and that a databank should be established with either industries or commerce ministry.

Pakistan's active participation in the US-sponsored war on terrorism is presently putting a pressure on foreign buyers, particularly those in European countries and the US, not to pursue the issue of social and environmental compliance with zeal and vigour. But a change in perception of the American and European buyers can threaten more than $10 billion annual export trade of manufactured goods. In such an event there could be massive unemployment on unprecedented scale.

The ADB has proposed to enforce an environmental regulation as textiles and leather industries are major source of industrial waste water that is polluting rivers and lakes and causing environmental problems in major cities of Pakistan. "Only a small fraction of total industrial waste water is treated," the study observed. The resulting impact on human health and environment has been severe. It refers to Pakistan Human Rights Commission report in 1998 which quantified loss to Pakistan economy by the environmental degradation at $1.65 billion. This loss is in addition to the impact of environmental degradation on health and lives.

Cloth production, the ADB study points out require the use of a large number of detergents, dyes, acids, sodas, salts and enzymes which lead to a large amount of wastewater. In leather tanning, a large amount of chemicals such as sodium chloride, ammonium sulphate, pigments and dyes are used. If not treated, waste-water from both cloth manufacturing and leather tanning has serious consequences for environment and human health.

For humans, it is carcinogenic and allergy inducing and for environment, effluents pose a threat to inland and coastal fisheries while seepage into water table introduces toxic chemicals into soil and food chain.

Textile export netted over $8 billion in fiscal year. Cotton fabric was the single largest component of textile that earned $1.71 billion or 16.7 per cent of the total textiles export earnings. Textiles constitute 46 per cent of Pakistan's total manufacturing activities employing 38 per cent of the total industrial labour and its value addition contributes 9 per cent to the GDP. Textile exports share in Pakistan's total export has risen from 76.2 per cent in 01 to 76.7 per cent in 02, 77.3 per cent in 03 and finally to 78.9 per cent in 04.

Carpets, surgical instruments and sport goods have been subjected to severe scrutiny because of involvement of child labour for last several year and their share in Pakistan's total export has gradually been falling. The share of carpet exports have come down from 16 per cent in 01 to 10.2 per cent in 04. That of sport goods has come down from 15 per cent in 01 to 14.4 per cent in 04 and surgical goods from 6.9 per cent to 5.7 per cent.

A number of donor funded projects are now being taken up in Pakistan to address the environmental and social standards issue. The $300m Asian Development Bank trade and export programme has three attached technical assistance loans. One of these loans is to assist Pakistan in establishing Pakistan National Accreditation Council, the National Physical Laboratories and Pakistan Standards and Quality Control Authority.

The EU, UNIDO and other agencies are also assisting Pakistan in building up capacities for the institutions.

The ADB study has also identified the markets, which absorb Pakistani products. It found that EU absorbs 27.5 per cent of Pakistan's exports, US 23.5 per cent and other developed countries like Canada, Japan, Turkey, Korea and Australia import 9 per cent of goods. It means that 60 per cent of Pakistan's exports are marketed in 21 countries. Equally important are Asian markets Hong Kong, China, and Middle Eastern countries UAE and Saudi Arabia. "Although, buyers in these countries may demand compliance with some environmental and social standards, they will, on the whole, may be less exacting that those to be met in the OECD markets.

The World Trade Organization (WTO) has no specific agreement dealing with the environment. In fact the WTO has made it clear that "it is not an environmental protection agency and does not aspire to become the one." However, the preamble to the Marrakesh Agreement, which set up the WTO in 1995 does state that WTO should seek to "both protect and preserve the environment and to enhance the means for doing so in a manner consistent with members needs and concerns at different levels."

A Committee on Trade and Environment was set up in 1995 with a mandate to cover all areas of the multilateral trading system: goods, services and intellectual property.

It is composed of all WTO members and meets about three times a year. It reports directly to the WTO General Council.