FINGER-POINTING at the private sector or pulling out depressed global trade figures to justify Pakistan’s weak export performance can’t absolve the government of its responsibilities.
In the upcoming budget, exporters argue that PML-N has a chance to tackle the issues in falling exports. The future of export-oriented industry, now under stress, will depend on the government’s response to the challenge unless market dynamics change. Sadly, early signals are not promising.
A turnaround in trade is difficult but not impossible. The factors recounted by policymakers to explain the country’s falling exports — recessionary global environment, commodity price crash — did not deter Bangladesh and Vietnam from boosting exports.
The development partners attribute Pakistan’s under-performance to global price trend, energy deficit, weak investment growth, logistic bottlenecks and narrow export base in terms of markets and products
The policymakers, if they deem necessary, can review the country’s export-oriented growth model till such time they are expected to introduce a right mix of policy initiatives in the upcoming budget to stop the slide.
Experts feel that the problem lies in the approach towards commercial diplomacy. The value of technical expertise and serious home work, evolving flexible policies and their efficient management, closely monitoring, planning, guiding and facilitating private sector for global competitiveness, seem to be lost on the government functionaries opposed to innovative ideas.
The trade deals, bilateral free/preferential trade agreements (FTAs/PTAs) are treated an end in themselves and seem to be done in haste without intensive consultations with stakeholders, compromising national commercial interests.
The recent launch of Strategic Trade Policy Framework was more of a non-event for businessmen or traders. GSP Plus status did support the value-added textiles and the fall in overall merchandise exports was too steep to be moderated by marginally better performance of just one segment.
Pakistan exports dipped 13pc in the first three quarters of this fiscal year to $15.6bn from $17.9bn in the corresponding period last year, according to the Pakistan Bureau of Statistics data.
In its policy brief on trade, circulated in the relevant circles, the Pakistan Business Council (PBC) observes: “A proper exercise to develop a long-term trade strategy would perforce address the competiveness of domestic industries. In a country with a population of 200m people, industries should enjoy an inherent advantage of size and scale that could be deployed to limit imports and boost exports”.
“However, poorly negotiated FTAs have resulted in cheap imports which (through a combination of the misuse of Afghanistan transit treaty, smuggling, under-invoicing, defective import valuations, counterfeiting and widespread tax evasion) have so severely undermined local industries’ capacities and capabilities that the survival in the domestic market is a challenge and global competitiveness is far-stretched. Indeed, these negative factors have encouraged businesses to trade rather than manufacture, a trend that needs to be urgently arrested and reversed if we are to create employment opportunities for our growing young population”.
In a comment e-mailed to Dawn PBC CEO Ehsan Malik said, “Pakistan’s energy availability is poor and costs of labour and power high and it has failed to use the exchange rate tool as effectively as some of its eye-ball competitors it faces. Pakistani rupee depreciated the least vs China, India and Vietnam. Besides, large sums of sales tax refunds have been stuck with the FBR, impacting cash flow of exporters”.
Commerce Minister Khurram Dastgir was not available for comments. Federal focal person of the ministry of commerce Mohammad Ashraf attributed the disturbing trend of falling exports to a rare mix of exogenous and endogenous factors.
“On exogenous side: global commodity price crash (two commodities that constitute bulk of total Pakistan’s exports took beating in the global market, cotton average unit price is down 21pc, rice 23pc over the last one year”, he said “global recession suppressed demand for Pakistan’s export items; euro depreciation offset our advantage of GSP Plus status though exports to European market gained by 9pc in euro terms, the benefit was lost in dollar terms.
“And endogenous factors are: supply side constraints because of access and cost of energy; realising the local market potential the private sector seems to be focusing more on upcoming infrastructure and construction projects; the local demand has shot up and cement makers for obvious reasons are quick to respond as the four immediate neighbours, Afghanistan, India, Iran and China are inaccessible for geo-political and security reasons”, he elaborated.
The development partners attribute Pakistan’s under-performance to global price trend, energy deficit, weak investment growth, logistic bottlenecks and narrow export base in terms of markets and products.
Academics and experts identify the overvalued rupee and protective tariff regime — obstructing both inward and outward flow of merchandise — dependence on low value-added products, prohibitive entry in the global supply chain and low level of competitiveness — owing to technological backwardness — for falling exports.
Published in Dawn, Business & Finance weekly, May 30th, 2016