PM’s direction on trade policy formulation ignored

Updated September 08, 2019

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Prime Minister Imran Khan had directed the Commerce Division to draft a five-year plan with a deadline of Dec 31, 2018 to accelerate exports. However, the division not only missed the deadline by nine months but put the whole process on cold burner. — Photo courtesy Imran Khan Instagram/File
Prime Minister Imran Khan had directed the Commerce Division to draft a five-year plan with a deadline of Dec 31, 2018 to accelerate exports. However, the division not only missed the deadline by nine months but put the whole process on cold burner. — Photo courtesy Imran Khan Instagram/File

ISLAMABAD: The Commerce Division has delayed the finalisation of proposed five-year Strategic Trade Policy Framework (STPF) document despite clear directions from Prime Minister’s Secretariat to enhance export competitiveness and productivity of the domestic industries.

Prime Minister Imran Khan had directed the Commerce Division to draft a five-year plan with a deadline of Dec 31, 2018 to accelerate exports. However, the division not only missed the deadline by nine months but put the whole process on cold burner.

The policy was touted to provide much-needed boost to the country’s exports which have remained range bound between $20-25 billion during the last decade and have declined in the last few years.

An official document, available with Dawn reveals that the division has almost completed the preliminary work on the draft and also sought feedback from all stakeholders.

Despite multiple attempts by Dawn to reach the director to seek his official position on the reason for delay in the STPF through his cell phone, no reply was received till the finalisation of the story. Similarly, official spokesperson of the Commerce Division Muhammad Ashraf also did not respond to written queries.

In the last decade, the Commerce Division has notified three STPFs in 2009-12, 2012-15 and 2015-18 respectively, but none of these were successfully implemented to achieve the desired objectives due to various reasons. Moreover, the policies also failed to alter export paradigm over the last decade.

The 2009-10 STPF failed mainly due to mismanagement, whereas the 2012-15 framework suffered due to government’s failure to release the allotted funds. Further, the 2015-18 STPF was announced after a delay of more than nine months and suffered from financial crunch as the government only released Rs500 million of the total budget of Rs20bn leading to poor implementation.

The ultimate target of the last STPF was to enhance the country’s annual exports to $35bn by 2017-18.

The new framework is expected to revolve around four pillars – competitiveness, trade related investment, production sophistication and diversification and trade facilitation. The ultimate goal of the policy is to increase exports at a minimum compound annual growth rate of 12pc annually till FY23.

On the other hand, an official document estimates serious threats to the country’s export sectors in case government fails to take corrective measures in a timely manner.

One of the major threats faced by the exports comes from looming de-industrialisation mainly due to absence of a proactive industrial policy since the 1990s, over 58pc tax burden on manufacturing sector, high cost of energy, and higher tariffs on industrial inputs.

Additionally, the export sector also faces sectoral distortions as over the years, exports have remained concentrated in three major commodities — cotton, rice and leather. Other distortions include cannibalisation of the land and water resources of cotton by the sugarcane crop.

As a result, annual cotton production has fallen short of the target by 4-5m bales, whereas Pakistan continues to produce surplus sugar which is uncompetitive in international market due to procurement price mechanism.

A review study of the past three STPFs identified various shortcomings in the implementation of the proposed frameworks. One of the major interventions of the policies was to extend cash support to exporting enterprises without linking it to boost their competitiveness. The move led to increase in number of corruption vases.

An attempt was made to introduce reforms in the existing trade support institutions and create new ones where institutional gaps exist. However, the results were mixed and not very encouraging.

Furthermore, restructuring exercise for the existing institutions such as Trade Development Authority of Pakistan has encountered strong resistance to change and establishment of new institutions i.e. Exim Bank, Land Port Authority has taken longer than anticipated, due to internal bureaucratic impediments.

Published in Dawn, September 8th, 2019