ISLAMABAD, July 26: The availability of efficient export processing arrangement could help in attracting a huge export-oriented foreign investment to Pakistan, says a report. “In developing its exports today, Pakistan faces the problem that it is not perceived as an acceptable investment environment by most export-oriented foreign investors. And, though to a lesser extent, global buyers do not see Pakistan as an acceptable place in which to operate,” according to a research study titled “Innovative Proposals for Pakistan’s Trade Policy 2004-2005” by Dr John Thoburn of the Overseas Development Group University, UK.

The study cited examples of Indonesia and China which were able to organize their export processing export promotion system (to allow exporters access to imported inputs free of import duty) in such a way as to minimize corruption and reduce input cost of production.

China’s exports, nearly 60 per cent of which are processing exports, show what can be achieved if export processing arrangements work well. In the medium- to long-term, Pakistan’s investment climate can be improved subsequently.

The researcher made his policy recommendations for implementation in three phases. In the long-term policies, he recommends that it is important to distinguish between policies that genuinely only can be implemented in the long run, and policies that should be implemented sooner but are constantly delayed.

Pakistan’s adult literacy rates, by international standards, are very low. Moving towards universal, compulsory and free (or low cost) primary education would yield great dividends in all aspects of development, not just export development.

Lowering Pakistan’s high crime rate, and raising the morale and effectiveness of its police force, would do much to make Pakistan a more attractive place for foreign investors and for foreign buyers. If more major global buyers could be persuaded that Pakistan is a good place or even an acceptable place from which to operate, a quantum leap in exports could be achieved despite the other issues that bother Pakistan’s exporters such as high power costs, widespread low level corruption and inefficiently operating ports are less important.

The report says in the medium-term policies, Pakistan should negotiate for better (preferential) market access into key markets like the EU and the US. It further says to pay particular attention to the China market, now that China is greatly and unilaterally reducing its import barriers under the WTO. The report suggests a reduction of tariff on raw materials and resolution of the issue of refunds of leading exporters.

The researcher further suggests that Pakistan should try to lessen the burden of bureaucracy on exporters, reduce direct contact between tax officials and companies, improve the internal transport infrastructure; for example, rail freight connections between Karachi and important centres inland, like Lahore, monitor recent cluster’s developments to learn lessons for new clusters, and do investment appraisals for clusters for particular exports, such as carpets, investigate the feasibility of airfreight and of domestic transport and storage facilities for exporting high value agricultural products that require refrigeration.

It further says to study the export potential of the chemical industry and the engineering industry, both of which offer potential for exports into rapidly growing world markets. “Also pay more attention to the employment and poverty reduction aspects of trade and export development policy.”

Realise that in becoming competitive in order to export to the world market, Pakistani firms may have to shed labour, so labour-intensive export expansion can be disappointing in terms of employment creation.

In the short-term, the government should resolve the issue of sales tax refund of exporters, arrange regular meetings between the EPB, commerce ministry officials, and leading exporters from the main export sectors. “This will be a channel through which exporters quickly can bring to the attention of policy-makers exporting problems as and when they arise. Do not confine these meetings to trade and industry associations, who may not always be representative, but pick key exporters as well as a sample of small firms.”

If arranging such meetings is beyond the scope of the commerce ministry or the EPB, then local consultants could be hired to interview such firms and regularly report their findings to the ministry and the EPB. But direct contact between the EPB/ministry and exporters is much better, the report concludes.