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Towards export diversification

June 17, 2012


AMID difficult global and domestic economic environment, Pakistan’s exports are likely to miss the annual target of $25.8 billion. Exports are projected to reach hardly $24 billion mark by end of June 2012.

The lacklustre performance is attributed to higher exports base of last year, energy shortages, increase in the cost of doing business, crises in the Eurozone, and stiff competition in textile products from China, India and Bangladesh. Almost 17 per cent of the country’s total exports is destined to the eurozone.

However, some positive changes are noticeable in exports basket which has witnessed some structural changes like reduced reliance on textile and clothing products and diversion of international sales to regional markets.

The non-textile products’ share in overall exports also increased by 3.9 percentage points. Jewellery, chemicals and pharmaceutical products, surgical goods and medical instruments, guar and guar products and engineering goods remained the prominent categories among the positive contributors to the overall increase in exports.

During July-April, these five products collectively fetched $668.6 million. Jewellery export witnessed a significant $335.6 million increase over the same period last year and its share in non-textile products group also increased from 10 per cent to 17 per cent. Moreover, cement exports rose by 3.5 per cent, mainly due to higher unit values—up 12.9 per cent.

Perhaps, the decline in export quantity by 8.3 per cent has prompted the government to further reduce federal excise duty on cement which may facilitate its export to India and Afghanistan.

Non-textile products also witnessed negative growth in exports of some products. Foreign sales of carpets declined by 5.9 per cent in July-April, leather garments 15.6 per cent and cutlery 6.3 per cent. Exports of carpets, rugs and mats dropped due to increased competition from the neighbouring countries.

On the other hand, fruit exports witnessed a major increase during July-April over comparative period last year. In absolute terms, fruits exports increased by $70.5 million.

Following last year’s trend, rice export declined by 3.2 per cent during the first 10 months. This fall is due to the overall quantum by 9.1 per cent because of a glut in the international rice market and also because of higher proportion of non-basmati rice in exports. Indian exports have lowered the price of the commodity.

As a result of increase in exports of items other than textile products, the concentration of exports in few items witnessed a decrease. The share of ‘other items, in overall exports surged to 39 per cent against 28.5 per cent in 2006-07.

In spite of these developments, the major share of export is concentrated in a few items with cotton, textile manufactures, leather and rice making up 61 per cent. The commerce ministry will have to come up with more facilitation measures in the upcoming trade policy for increasing exports of non-traditional products.

Pakistan has also witnessed some geographical diversification in exports. During 2005-06, 47.2 per cent of the country’s exports were concentrated in five markets—-US, UK, Germany, Hong Kong and UAE. However, their share declined to 35.2 per cent in July-March whereas the share of other countries increased to 64.8 per cent.

This happened mainly because of liberalisation of trade regime with India, free trade agreement with China, Sri Lanka and increase in exports to Afghanistan and Bangladesh. —Mubarak Zeb Khan