KARACHI, July 5: Thanks to Pakistan's U-turn after the 9/11, exports continue to maintain growth momentum mainly in the US and EU markets and have comfortably exceeded the $12.1 billion target set for the fiscal year 2003-04.

Pakistan has already been declared a non-NATO ally by the US administration that has motivated Pakistan's business to convert this political relationship into meaningful trade links. Pakistan's export business thrives so long as the political honeymoon goes on with the western countries.

Driven by the textile products, mainly being marketed in the US and the EU, Pakistan's exports have maintained a steady growth tempo for the last two years. Pakistan's exports increased from $8.17 billion in 2001-02 to $9.90 billion in 2002-03 and are now being estimated at around $12.2 billion in 2003-04.

A close look at the export markets reveals that an expanded EU is now absorbing more goods from Pakistan than from the US. One reason for growth at accelerated pace in the EU is the downward slide in the rupee against the euro and a rise in exchange value against the US dollar.

No wonder than Pakistan exporters are now increasingly demanding from their European buyers to open letters of credit in euros rather than in dollars. The share of euro-related exports in Pakistan was calculated at 10 per cent during the period July-December 2003 as against 5.8 per cent in the same period of 2002.

Market analysts say that this share is showing a further increase in the second half of the current fiscal year. Currency rate fluctuations are reflected in Pakistan's textile export quota trade during January-June 2004.

As against an increase of about 10 per cent in quantity, the European buyers of Pakistani goods offered about 30 per cent more price. The US absorbed 12 per cent more Pakistani goods in terms of quantity but offered only a six per cent rise in value.

In terms of dollars, Pakistan's textile exporters netted more than $884 million from the EU and $630 million from the US in the textile export quota trade during the last six months.

It indicates that Pakistan's total earnings from the textile export quota trade in the EU would be close to $2 billion and about $1.5 billion in the US. Almost 50 per cent of Pakistan's export trade is focussed on the US and EU markets after the 9/11.

It is a plus point as these are growing markets and they offer a lot more potential for further increase in Pakistan's exports. But it is equally a weak spot as the exports in these markets are linked with the political support of governments in Washington and European capitals and any shift in regional diplomacy will make Pakistan vulnerable to unbearable shocks.

The government is setting an export target of $13.5 billion for the current fiscal year. But encouraged by more than $1 billion export during June, quite a few exporters now confidently claim to net $14 to $15 billion this fiscal year (2004-05) provided the government considers reducing production cost by cutting down on energy and transport cost.

The State Bank of Pakistan has already commissioned a study on cost of doing business in Pakistan to determine the export competitiveness. "The State Bank has itself pushed export refinance interest rate to 3.5 per cent in June and it has given a bad signal," an executive of a top export house remarked.

Officials say that except for garments, Pakistan maintains a comfortable export edge in a number of textile products - coarse yarn, fabrics, bedwear, towels and a few other items.

"Garments secure market by brand names," Waqar Monnoo, chairman of the All Pakistan Textile Mills Association, said. But he was confident of netting $1.5 to $2 billion more export earnings in the current fiscal year than that of the outgoing fiscal year.

He was confident that dismantling of textile export quota barriers by next December and demand of the US and EU importers on compliance of labour and environment related conditions would not pose much of a problem.

A rise in demand of chemical items in textile, leather and other industries is another indicator in rise of export products. Qazi Sajid Ali, chief executive of German giant multinational BASF, said that there was now a total demand of Rs5 billion worth of chemical items in Pakistan. The local production is worth hardly Rs1 billion and the remaining is imported or smuggled.