Economists in Pakistan find the $3 billion trade deficit in this financial year unacceptable or totally unpalatable after a deficit of $3.2 billion last year against the targeted $700 million.

If the gap between the target and the reality in the year that has just ended is so much, how large will be the actual deficit this year? For one thing, Commerce Minister Humayun Akhtar and his aides have been realistic enough to target a deficit of $3 billion instead of the unrealistic target of $700 million for last year. Hence there should be small surprises at the end of the year.

The first bullet against the a small deficit has been fired by the international oil lobby by raising oil prices to $42 a barrel on Wednesday. If the oil price keeps on soaring not only Pakistan but also all the exporting countries, not excluding China, will be in trouble as the cost of production soars all around.

The question Pakistan will face is whether to achieve the export target of $13.7 billion at any cost or reduce the imports and curtail the import bill, if other options are not available.

Pakistan has several handicaps when it seeks to be a large exporter. Its exportable surplus is very small, while its population at 151 millions is very large and is increasing steadily at 2.5 per cent per annum.

Many European countries are small but their exportable surplus is very large; and the value-added component of their exports is very high. Hence their import bill to feed their exports is only to some extent, and their exports gains are very large.

Pakistan, until recently an exporter of cotton, now imports cotton-fine American cotton- to feed the export market. It has plenty of sugar but the cost of production is too high. Hence it is always stuck up with large stocks, while its domestic prices are very high. Exports mean very heavy subsidies which the government cannot afford beyond a point.

Rice is plenty and last year earned a record 600 million dollars. An agricultural country, Pakistan is now deficit in wheat and has to import over a million tonnes of wheat to meet the current shortage and bring down the high prices.

The large population not only consumes what it produces but also calls for a variety of imports, particularly edible oil which last year cost about $800 million. The major reason for the large trade deficit now is the large oil import which once cost over a billion dollars but now costs $3 billion.

And if the tendency which has raised market price to $42 a barrel is sustained the oil spurred-trade deficit of Pakistan can be very large. Pakistan is trying to substitute natural gas for imported furnace oil to reduce the cost of production, but the available supply of gas is limited.

Determined efforts have been made to increase the supply of edible oil, including sun flower oil, but the quantum of increase is far smaller than the need of the times.

In an agricultural economy land is available for agricultural production but water is not. And misuse of water by the rich and powerful results in water-logging salinity and soil erosion.

The country is not organised enough to promote agro-industries. And corporate farming is too slow to come up. Crop insurance is attempted in fits and starts without real and sustained efforts in that direction.

Pakistan can export far more fish than the small quantity it does. Smaller and less advanced countries than Pakistan are doing far better in this export area; but Pakistan is lagging behind for one remediable reason or another.

It could also develop its livestock and poultry sector and gear them for large sale export; but very little has been done in that direction and the people prefer the conventional path.

As a result, the import content of Pakistan's exports are very large, beginning with the oil-based energy produced at very high price while a half of that is stolen or wasted.

As a result when Pakistan's exports go up the imports rise along with it or far more. So instead of the deficit of $700 million last year we had a bumper deficit of $3.2 billion.

The machinery we use for manufacturing for exports is imported as are the spare parts. The energy in the form of furnace oil with its higher prices is imported. The chemicals and dyes are imported.

As a result, the question arises whether Pakistan really earns any foreign exchange by exporting low count cotton textiles at low prices, using so much foreign inputs. The question arises whether we should try to export as much as we can, using a large variety of costly imported inputs or focus more on the value-added exports.

Anyway it is important for us to focus on enhancing value-addition in our exports and try to earn more per unit of export.We are told we can earn three times more by concentrating on shrimp exports.

If we can, why does the government not try and promote the shrimp industry instead of helping the fishermen net the fish during the breeding season every year without fail out of mistaken sympathy for the fishermen? There is more focus now on banning foreign trawlers than on developing coastal fishing.

Humayun Akhtar has come up with quite many initiatives and expert reforms. And he has retained most of the good reforms introduced last year. And trade and industry has welcomed his policy.

When it comes to exports China is the best example for us. It has made foreign investors in China set up major export houses and develop a global market for China-made goods in the world, and thus made the Western companies in China its prime export drivers.

It is now for our major export houses to develop their own brands and make them popular around the world. If Finland could do that with its Nokia mobile phones there is no reason why Pakistan's brand names cannot acquire popularity over the years.

Of course, when it comes to exports, quality is a major factor along with price. China is leading the world in offering its products at highly competitive prices. The government of Pakistan and the businessmen should study how China has been able to achieve spectacular success with their products within a short times.

If Pakistan does not do that, Chinese goods will be offering far more competition for our products within Pakistan itself. Of course, we do not have like China highly educated and trained technical manpower at moderate wages. We have to focus on human development earnestly to achieve that. Manpower is the key to economic success. Without that all else will be a failure.

One of the reasons for the large trade deficit last year was the higher import of machinery to make up for the neglect of earlier years. Along that we had to import more industrial raw materials, chemicals and dyes.

Having paid so much for the import of machinery we should make full use of that instead of using the machinery far below capacity and then abandoning them as sick industries.

The banks which lent money for the machinery are more watchful and so the industrialists cannot easily declare their industry sick and fail to return the loans. What is essential is full capacity utilization that will reduce the cost of production per unit and make our products more competitive abroad, particularly after the quota system expires by the end of the year and throws the textile trade wide open for all and the survival of the fittest.