Declining exports

Published Mar 18, 2012 10:44pm

The Trade Development Authority of Pakistan is mandated to evolve marketing strategies for selling goods in international market, but its consultants appointed on political grounds are not delivering. And most of the funds meant for export promotion are being used on foreign trips by bureaucrats. - File photo

Exports have decelerated for the fifth consecutive month owing to slack international demand and falling output of trade surpluses because of energy shortage.

The over-all exports proceeds fell to $15.189 billion over July-February from $15.263 billion over the same period last year. And this steep fall will make it difficult to achieve this year’s export target of over $25 billion.

The fluctuating export earnings are generally debated in context of current issues like prevailing international market price, erratic energy supply, and rising input cost. However, the real underlying problem is concentration of exports in few commodities and fewer markets worsened by the lack of product competitiveness in terms of quality, price and value-addition that restricts export growth.

No doubt, the export volume has increased over the past few years, but it has remained focused on few items like cotton manufacturers, leather and rice. These three categories alone contribute more than 70 per cent to the total exports. More than 80 per cent consist of cotton manufacturers,  which makes exports more vulnerable to external shocks.

Last year, textile and clothing export reached $14 billion from $10.221 billion over the previous year. This increase was mainly driven by surge in international cotton prices. This year cotton prices declined impacting on value of cotton and textiles.

Chairman All Pakistan Textile Mills Association, Mohsin Aziz says the target of $16 billion for textile and clothing is not achievable. He projected the actual earning at around $12 billion. While export volumes have continued to grow, the terms of trade (ToT) have declined.

The share of manufactured goods first remained stuck around three-fourth of exports for many years. Since the past few years, a continuous decline in their share in the overall exports is being observed. The share of manufactured goods has decreased from 78 per cent in 2005-06 to 70 per cent in 2010-11.

The performance of the export-oriented industrial enterprises with regard to upgrading productivity, lowering cost and improving the quality of products has remained largely unaddressed, especially in the textile sector.

It is believed that an investment between $3 billion to $5 billion has been invested in the textile and clothing sector but mostly in low value added sector. Bulk of the investment has gone into spinning, weaving and knitting processing.

Exports are also concentrated in few markets. The US continues to be the leading destination with 16.1 per cent share in overall exports when its share is falling since 2005-06 mainly due to weakening economic activity there. However, exports have somewhat increased to regional countries including China, Bangladesh and Afghanistan.

Exporters are expecting a 25 per cent drop this year in textile and clothing alone to the sluggish European Union markets. The combined value of exports to the EU market crossed the $6 billion mark in 2010-11, up by over 30 per cent from almost $4.6 billion in the previous year because of high cotton price. Approximately, 90 per cent of the total exports to the EU countries include readymade garments, knitwear, bedwear and cotton cloth.

There are also some administrative issues which also need to be addressed. The Trade Development Authority of Pakistan is mandated to evolve marketing strategies for selling goods in international market, but its consultants appointed on political grounds are not delivering. And most of the funds meant for export promotion are being used on foreign trips by bureaucrats.

While the government has created 62 posts for commercial attachés in diplomatic missions across the globe to promote marketing of Pakistani products, there is no benchmark to check their performance. In most cases, their performance leaves much to be desired.

In a fast changing global export market, both the exporters and relevant officials need to be agile to evolve right market strategies to divert sales of goods and services to fast growing economies/markets and capitalising on the potential of much neglected regional trade.

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