IN the current era, level of export growth is considered to be the touch-stone of sustainable economic growth. It is due to this reason that the export-led growth constitutes the corner-stone of the development strategy of every developing or less-developed country. Pakistan is no exception to it.

The efficacy of export-led policy, in case of Pakistan, can be assessed on two counts: (i) pattern of industrialization and (ii) the prevailing trends in world market. Pakistan’s exports are highly concentrated in a few items, namely cotton-based products, leather, rice, synthetic textiles and sports goods. These five categories of exports accounted for 79.3 per cent of total exports during 2003-04. The cotton-group alone contributed 62.3 per cent.

The same is almost the position during the current year. Pakistan’s exports, which are expected to touch the mark of $14 billions during this year 2004-05, stood at $12.9 billion during the eleven months of the current year, whereas imports were estimated at $ 18.3 billion. The imports mainly consist of petrol, machinery, edible oil, tea, plastic material, electrical goods, paper and paper board.

The export-base therefore, continues to be thin. Neither there is any diversification in manufacturing sector, nor in the exports. The predominant reliance is being made on low value added and labour-intensive goods, including cotton, cotton yarn and fabrics. The sports goods and carpet industries have yet to develop on modern lines. The percentage of exports to GDP is less than 15 per cent, while its share in the word trade is less than 0.2 per cent.

The edible oil-processing sector has already reached the saturation stage, but great potential exists in the extractions of oil seeds industry to substitute import of edible oil. Likewise, the performance of paper and paperboard industry remains depressing. Leather is basically an export-oriented sector, but has not been organized in that way. Out of around 2500 surgical instruments manufacturing units with a tremendous export potential, are in the unorganized sector.

The share of manufacturing sector in GDP is 18.2 per cent. However, there has not been significant change in the diversification of exports. The textile sector continues to contribute about 67 per cent. The country’s dependence on the import of capital goods and machinery continues to persist and even the modern machinery for textile industry, is not being produced in the country.

Pakistan Steel Mills hardly cater to the 25 per cent domestic requirements of steel and its products. Besides, most of the Small and Medium Enterprises (SMEs) fall within the purview of import-substitution. The mechanism for the promotion of export-based industries needs to be revised and updated.

Every industry must be set up to cater to the sophisticated demand of domestic market. When it starts producing surpluses, it could enter into the arena of export. Such industries like food, beverages, pharmaceutical, chemicals, tyres and tubes and software, engineering, electric, plastic industry, edible oil industries etc. have tremendous potential for meeting the domestic demand and for converting the same afterwards into export promotion.

The induction of zero-rated regime, both for customs tariff and sales tax, without any more involving the hassle of refund, has been termed as a land-mark and would, indeed, pave the way for acceleration of export of textile, leather carpet, surgical and sports goods.

It is all the more imperative that other foreign exchange earning sources, including banking, insurance, tourism, home-remittances etc. must be effectively exploited to meet the ever-growing demand of foreign exchange.

In the contemporary world, it is not capital and domestic raw material alone, which makes an industry more viable in the global market. In fact, it is knowledge-based industries, which possess more export-potential. Pakistan has delayed its entry into the software market, in a big way, but its potential is so wide and vast that pportunities can still be explored.

Meanwhile, modernization and technology cannot be restricted to large scale enterprises alone, but it must be taken to the door-steps of SMEs for employment-generation and poverty alleviation.

There is no escape from import-substitution industries either. Import-substitution did help the country in accelerating the growth rate of manufacturing sector during 60s. However, in 70s, nationalization of basic industries and the inefficiencies caused due to over protection, restricted the process of take-off in the industrial sector. In 80s and 90s, emphasis was shifted from import substitution to export promotion.

What is therefore, important, is to create a sophisticated demand of a product in the domestic market, and on that basis it must be developed. Exporting a low-valued goods or raw material on the basis of external demand, poses problem in the wake of their falling prices. If there is a domestic demand, they can be supported.

Pakistan lost $245.3 million on the export of major items, including raw cotton, raw yarn, during July-March 2004-05 due to lower export prices, prevailing in the international market as compared to corresponding period of preceding year. Meanwhile, export of meat, fruits and vegetable at the cost of consumer, is not a prudent policy.

The industrially developed countries have first developed domestic market, where consumer forced industries to improve their quality.

In case of export-led growth, the knowledge of an external market is crucial to make adjustment in their product line, according to changes in the technology and consumer taste. The question is, how to move up to the value chain.

The new era of globalization, being operated through World Trade Organization (WTO), and marked by liberalization of trade through elimination of all physical and fiscal barriers, has unfolded multitude of opportunities and challenges. The rich countries, which have attained self-reliant economic growth through rapid industrialization, based on sophisticated and advance technology, have now emerged champions of free movement of goods and services. The globalization negates the very concept of self-reliant economic growth and stimulates the emergence of inter-dependent economies.

The developed countries in order to prevent their industries form the adverse impact of liberalization of trade, have invented a series of visible and invisible trade barriers. The anti-dumping duties are excessively applied.

Similarly, the criterion of judging a product from the point of view of social standard, child labour and environment, is being effectively used. America and EU countries are providing subsidy to the tune of around $ 350 billion annually to their agricultural commodities and thus, the commodities, originating from the developing countries, like Pakistan face fierce competition, with heavily subsidized agricultural commodities in the world market.

Now every country attempts to maximize export and minimize import. The countries in Europe indicate a nominal surplus in their balance of trade. In Latin America, the major countries, Brazil and Argentina strive to gain more export surplus in order to pay off their debts. Although the role of Africa in the global trade is very nominal, many countries in Africa transformed their economies from subsistence to exports, under the pressure of multilateral lending agencies.

A study of United Nations Conference on Trade and Development (UNCTAD) reveals that the poverty in many developing and developed countries could be attributed to their phenomenal reliance on the export of raw material and low value added goods which are vulnerable to the price fluctuation in the world market. The price of cotton for example fell down by 39 per cent between 1971-2001.

The over allocation of resources to export causes over-dependence on export revenue, which could suffer largely in the event of falling prices. It is in fact the bulging trade deficit, jumping from $191 billion in 1996 to over $500 billion in 2004, which accommodate imports from various countries. The USA has been importing all kinds of consumer goods, including textile products, socks and shoes, cigarettes, clocks, pots and pans, sports goods, leather, etc. A situation has emerged, wherein too many sellers chase too few buyers.

This strategy is also termed as “Asian Growth Model”, because of its adoption by most of Asian countries. The foreign exchange reserves generally remain unspent or placed in safe investment like USA treasury securities by these countries. This kind of crude measures of hedging poses a threat to global trading system.

The export-led growth strategy is not an un-mixed blessing and its success is conditioned by the export of diversified capital intensive and value-added products.

Pakistan needs to diversify industrial base and ultimately to enlarge export-base, to avoid instability in export earnings.