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Export industries are being dumped

November 19, 2009

TODAY the role of exports in economic growth is an important issue for policymakers. After World War II export became an important tool of economic growth, i.e. Japan, Korea, Germany, Taiwan are good examples of it. Most of the developing countries are exporters of primary products, because they are lacking in technical innovations.

As far as Pakistan is concerned, 80 per cent of its exports consist of primary products and 60 per cent of its imports consist of consumer goods. Moreover, there is an unreliable foreign currency exchange rate that distorts the gain from trade.

The question is why is export elasticity for manufactured products of Pakistan lowered?

It can be said that devaluation has not played any distinguished role in stimulating exports of Pakistan, rather it has raised the cost of imported raw materials which cause to lift up prices of exportable goods, results in distortion of the competitiveness of Pakistan's exportable products in the international market, and domestic inflation.

Pakistan's massive foreign exchange earnings come from textile sector products, i.e. cotton, yarn, fabrics, readymade garments and related products. Our entire export receipt depends on a good cotton harvest which unfortunately is exposed to floods, bad weather, and virus attack.

Thus, a good cotton crop can only help in facilitating export targets. Moreover, the content of value addition in our manufactured export has remained low.

Our policy makers should take a lesson from the Ayub Khan era (1958-1969) when development efforts were aimed at rapid industrialisation through import substitution and encouragement of manufactured exports.

It was decided to use commercial policy to change the pattern of industrialisation from consumer goods industries to intermediate and investment goods industries. This was a time of swift industrialization and growth in exports.

Every government in Pakistan gave incentive to boost exports, whatever the economic and political conditions in Pakistan. But, unfortunately, these incentives could not help in making Pakistan competitive in international trade due to the fact that low quality expensive primary products were used in contrast to our regional competitors, i.e. India, China, and Bangladesh.

Since this is the era of openness and more suppliers are entering the international arena, tough competition, therefore, is created globally not only regarding the low price of a product but also regarding better quality, design and packaging, and an accurate delivery schedule makes it competitive in the international market.

Thus, in Pakistan there is a dire need to upgrade the learning process as a whole under quality standards organisations, i.e. ISO 9000 and ISO 9001, and promote innovation which can induce foreigners to buy Pakistani products.

Our policy managers also have to focus on factors which enhance productivity. The most essential among these is maintaining the cost of production at a minimum. In Pakistan, trade and industrial sectors are implicitly overburdened with multiple taxes, power supply shortage, unofficial payments, high interest rates and frequent surges in utility prices.

All these increase the cost of production which badly affects the competitiveness of Pakistan's export industries in the international market, leading to a downfall in Pakistan's export industries and giving rise to unemployment and crimes.

Via email