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Lacklustre trade policy

February 03, 2013

The trade development initiatives announced in the second three-year strategic trade policy framework for the fiscal 2012-15 have drawn a positive response from the trade and industry.

However, doubts about the implementation of the framework and the achievement of the cumulative export target of $95 billion over its life remain.

“Pakistan is a graveyard of policy. We make policies not to implement them but to bury them in the files of bureaucracy,” says Akber Sheikh, who runs a construction company, in an obvious reference to the non-implementation of the first strategic trade policy framework 2009/12.

He cautions against attaching ‘too many hopes’ with the new trade framework because these are used by politicians and bureaucrats to grab newspaper headlines rather than give a direction to the economy. The new policy framework will promote regional trade, strengthen institutional framework to boost exports, create regulatory efficiencies, launch export development initiatives, reform and develop domestic commerce. It will also encourage participation of women in trade and industry.

Major initiatives that the government intends to launch include formation of Pakistan Land Port Authority to develop regional trade, set up Exim bank, establish services export development council, promote services exports and revamp export promotion agencies and trade monitoring committee. It also promises to provide interest rate and other subsidies to certain sectors to bring down their cost of capital investment and production as well as protect domestic industry from hazardous and cheaper imports. The total cost of implementation of the framework is estimated to be over Rs26 billion.

“The trade policy framework’s focus on non-traditional sectors for boosting exports is a welcome step, and we hope it also includes the engineering sector,” Syed Nabeel Hashmi, a leading vendor from Lahore, says. He is also appreciative of the measures announced in the framework to bring down capital investment and productions costs, but laments that it largely left the issue of poor country perception of Pakistan as an insecure and unreliable destination for trade in the international markets.Ijaz Khokhar, chief coordinator of the Pakistan Readymade Garments Manufacturers Association, praised the initiatives to set up land port authority, Exim bank and export promotion councils. “These initiatives will go a long way in removing the bottlenecks in the development of regional trade, bring down costs of investment and production and boost overall exports from the country,” he says. The development of domestic commerce should also indirectly push exports, he says.

But he is sceptical of the implementation of most of the initiatives announced in the policy framework. “We have seen the government baulking at executing the initiatives announced in the previous trade policy framework as well as in the five-year Strategic Textile Policy Framework for 2009/14,” he argues. He points that the government had so far released only Rs5 billion for the implementation of the textile policy package out of the estimated cost of Rs40 billion.

“What happens if the finance ministry again refuses to release the funds that the government has promised to provide to different sectors for helping them reduce their investment and production costs? The ministry has done so in the past and there is no guarantee that it will use the weakening financial position as an excuse to deny the money to the commerce ministry?,” he asks.

While the initiatives proposed in the policy framework are being appreciated, many showed their scepticism about meeting the export target, which envisages increasing exports to $27 billion in the first year of the implementation of the policy, $31 billion in the second year and $37 billion in the third year.

“The target is far below the potential of our economy,” says a former president of the Lahore Chamber of Commerce and Industry Irfan Qaiser who is in the chemicals business. “But where is the energy — electricity and gas — to run factories?” he asks. The government has wasted five precious years without doing anything to plug energy shortages in the country that are costing in excess of $6 billion or 2.5 per cent of gross domestic product (GDP) to the economy every year and rendered more than 800,000 wage workers jobless in Punjab, he says.

In his brief comment, executive director Nishat Mills Ahmed Jehangir says, “You cannot export what you cannot make”.

Sheikh sums up his feelings on the proposed cumulative export target of $95 billion by saying: “It is better to miss a higher target than a smaller one. With the 40 per cent manufacturing capacity lying closed in Punjab, how can you even think of increasing your exports?” He says it was due to the rising commodity prices that the country had achieved the 27 per cent growth in exports to $24.8 billion in 2010/11. When the prices fell, the exports also dropped by 4.7 per cent in 2011/12, he points out.

“With the gas supplies to the industry in Punjab suspended since December 5 last year and electricity supplies cut by eight to 12 hours a day you should not be making over-optimistic export targets,” contends Qaiser. “Unless the trade and industry are ensured uninterrupted supply of affordable energy, we will not be able to achieve our true economic potential.

“Let me say if affordable and continuous supply of energy to the industry is ensured and infrastructure bottlenecks addressed, our annual exports can go up to $95 billion or even more. But neither the trade policy framework nor any other government policy has so far focused on these issues.”