June 04, 2007	Monday	Jamadi-ul-Awwal 18, 1428

The affairs of the Trade Development Authority of Pakistan (TDAP) are being run under an ordinance rather than by a law passed by the National Assembly (NA) and the Senate after a thorough debate on export strategy and policy. Since the term of the Legislature is due to expire later this year, the government may move a draft of the TDAP bill along with the Finance Bill 2007 in the NA. The government got labour- related laws approved with the Finance Bill 2006.

But what happens when the ordinance lapses? Is it reinforced immediately on expiry or some formalities are warranted before a notification of reinforcement of ordinance is issued? What is the legal status of the TDAP decisions when ordinance lapses and if there is no proper legislation by the NA for a long time to come?

Attempts were made to seek answers to these questions from senior officers in the TDAP. However no one had the answers but one thing is clear. The TDAP business is tentative. Exporters blame that the TDAP officials have become casual and have adopted an indifferent attitude towards them. The exporters feel alienated.

Hardly two dozen exporters attended the formal inauguration of Trade Development Authority of Pakistan (TDAP), performed by President General Musharraf at the Governor House in Karachi on May 27, although more than 200 businessmen were invited. The third Expo 2007 early this year also proved a flop because local industrialists were not willing to set up stalls even at the discount rates. The TDAP has succeeded the earlier Export Promotion Bureau (EPB)..

Exports recorded an insignificant growth of 3.5 per cent in nine months of the current fiscal year. Coming after 18 per cent increase in 2005-06, this slump in growth is abrupt and a matter of concern. The prime minister has said that this year's export target will be missed.

Early this month, the prime minister chaired a high-level meeting to identify the causes of this slowdown. On May 31, the Federal Commerce Minister, Humayun Akhtar Khan, publicly blamed the government policies for it. The minister's statement indicated that the 68--member cabinet does not seem to be a cohesive unit. The minister also refused to offer any comments when asked if exchange rate has anything to do with slow growth in export.

Textile exports too witnessed a slumped growth in the initial 4-5 months of the current fiscal year. The textile industry is now importing about three million bales of cotton as its appetite for raw material has increased after capacity expansion.. As dependence on imported cotton has grown, textile exporters do not want a rupee devaluation. ``Devaluation of our rupee value will increase production cost because of our dependence on imported cotton and of the value added sectors on imported accessories,” Akbar Sheikh, a senior APTMA leader from Lahore argued.

The State Bank of Pakistan in its third-quarterly report--2006-07 considered the sluggishness in export growth as a source of disquiet. The report discusses the causes and wonders how appropriate it would be to attribute it to (1) a conspiracy by exporters to force exchange rate adjustments, (2) a fall in “spurious'' exports following a reduction in export rebates and, (3) the loss of competitiveness as a result of high domestic inflation and rising funding cost. But then the SBP found little evidence for any of these claims.

According to the SBP, the sluggishness in exports growth originated from a combination of factors including those of supply shocks, EU specific preferences and safeguards, as well as some competitive pressures. ``In any event, whatever the causes, there is no denying that the magnitude in slowdown in export growth is worrisome'', is the punch line of the SBP report. It then proposes for drawing up a comprehensive export promotion strategy that should address; (1) export diversification, (2) supply side constraints, (3) low labour productivity, (4) low quality of products, (5) delay in adoption of international standards, (6) lack of scale of economies and inefficiencies caused by bottlenecks.

“We hope to make some improvement in coming months as Indian currency has appreciated by 10 per cent exchange value in last one month and China has expanded its band within which the exchange value of its currency fluctuates'' Shafqat Elahi, Chairman of All Pakistan Textile Mills Association (APTMA) said on telephone from Lahore. The Indian currency has appreciated by 15 per cent in few months and the APTMA leader felt confident that with some support at home, textile exporters can make substantial gains in the international market in coming months.

Conditions in Bangladesh are still far from normal. Exporters say that Pakistan now stands a chance to make a fresh leap and recapture the lost shares in the export markets as they are comfortably competitive against India, China and Bangladesh. But exporters want a cut in refinance interest rate to three per cent that should be capped for at least next five years, research and rebate facilities for all the value-added products across the board, improvement of infrastructure facilities by the government on war footing to ensure normal electric, water and gas supply at the earliest.

What the exporters fear is a rising wage bill from July next as the government is all set to raise the minimum labour wages in the budget. Next year being an election year, the government has already announced a fourth raise for the government employees since Musharraf took over in 1999. The factory and office workers are also expected to be given some raise.

While the problem is acknowledged by all, there is confusion all round when it comes to finding the causes and their solution.. The SBP blames the exporters and more particularly the textile exporters for benefiting from more than Rs328 billion loans on discounted interest rates, Rs40 billion rebates and many other concessions. The commerce ministry blames the industrialists of low value and low quality products and lack of management and marketing skills while the businessmen believe that government promotes banking and ignore manufacturing.

Tight monetary policy means high interest rates which has rendered business uncompetitive. ``The government has built up foreign exchange reserve of $13 billion but the infrastructure has crumbled'', a local textile leader said. He wondered as to why a reliable electric generation and supply has not been put into place in last seven years with some government support when the private sector did so in early nineties. The commerce minister has himself blamed the policies of the government of which he is a part.

The coming months offer good prospects for export consolidation but much depends on the domestic situation to ensure a constant and steady supply of production. Elections years are stormy and turbulent. In fact, the current period is far from normal. There is tension but the business is still going on as usual. Any major disturbance can cause upset and this may prove disastrous for export business.