Pakistan may miss the export target of $27bn for the current fiscal by a billion dollars. The duty-free access to Europe under the GSP Plus has led to a diversion of merchandise exports to the region, but done little to boost the country’s total exports, early indicators suggest.
Pakistan’s exports have been stagnant for the last four years (since FY10-11), vacillating in a narrow band of $24-25bn. During the first seven months of this fiscal (July 2014-February), exports stood at $16bn. Bangladesh’s exports surpassed the $30bn-mark last year and is set to hit the current year’s target of $34.5bn.
According to a recent UN study covering a 30-year period (1980-2011), India’s share of world exports improved from 0.43pc to 1.7pc; Bangladesh’s from 0.04pc to 0.14pc; Malaysia’s from 0.74pc to 1.34pc; and Thailand’s from 0.37pc to 1.35pc. Pakistan’s share, however, remained stagnant at 0.15pc.
Since January 2014, when duty-free access under the GSP Plus was granted, Pakistan’s exports to Europe spiked 20pc, but this was at the cost of other markets. The trend will become more legible when the final annual trade data pools in by the end of the year.
Locating reasons for Pakistan’s under-performance, former Commerce Minister Razzak Dawood expressed disappointment with the policy orientation of the country’s current economic team, which, he believes, is more committed to the outdated concept of import-substitution.
‘The global economic slowdown, policy shortfalls and the lack of preparedness of the private sector to plug into the global supply chain have together compromised Pakistan’s export potential’
“The policy thrust has to change for results. We have to re-emphasise an export-led growth strategy. Look at Thailand, Korea and Turkey. That is the way to go to improve the competitiveness of the economy,” Razzak reluctantly agreed to comment.
“The potential is grossly under-rutilised. I believe Pakistan can hit the $50bn target if the government gets mobilised and strives for it; it is doable,” he made a point.
Shabbir Dewan, a businessman, also hammered on the need to re-evaluate the government’s priorities. He quoted examples from the region to support his point of view that finished products that consume local inputs should be given preference in the export policy.
Amir Siddiqui, an economist at the Trade Development Authority of Pakistan (TDAP), blamed the global economic slowdown and the international commodity price slump for the anaemic export growth.
“Last year, crop failures in some countries perked up our agricultural exports. This compensated for the ground lost in textiles and made-ups. The situation is different this year and agriculture commodities may not achieve what they did last year,” he said.
A senior commercial officer, who wished anonymity, was dejected. He saw little hope as long as ‘the commercial policy is kept hostage’.
Explaining his statement, he said “It is the duty of any government to mobilise revenue, but the wisdom to compromise the base of the economy to this end is counterproductive. When did we have the census of manufacturing (CMI)? How can a country of 200m people justify ignoring agriculture and industry, which absorbs a major chunk of the labour force? How can you let commerce be subservient to finance?” He also cited last year’s falling tax-to-GDP ratio (9pc).
Another expert said the signing of preferential trade agreements (PTAs) and free trade agreements (FTAs) with trading partners in haste did not help the economy either.
“Trade negotiations in modern times are extremely complex exercises. They require expertise, which the country lacks. The culture of patronage and unmerited postings and transfers of officials damages trade prospects in a highly competitive environment,” he said, while mentioning the posting of a PML-N loyalist as the country’s permanent representative to the WTO.
Another expert felt that the private sector had also failed to mount pressure on the government to take the right course.
“The chambers just vie for free rides to join business teams travelling with leaders. The trade bodies are comparatively better as they articulate the interests of their members and their lobbies whenever they get a wind of bilateral or multilateral talks,” he said.
“The Pakistan Bedwear Exporters Association (PBEA) went to court some years back to challenge a ministry’s decision regarding the affairs of commercial counsellors. The case has not yet been decided, but the PBEA showed courage and independence and took a stand on the misuse of the government’s discretionary powers,” he told Dawn over telephone from Islamabad.
“The global economic slowdown, policy shortfalls and the lack of preparedness of the private sector to plug into the global supply chain have together compromised Pakistan’s export potential,” said another senior source in the commerce ministry.
Commenting on the role of the federal commerce ministry and several trade promotion departments such as the TDAP, an insider said they are tasked with facilitating the private sector behind the border, at the border and beyond the border.
This means, he explained, that the aim is to ease the supply-side constraints by projecting and promoting the interests of local manufacturers and suppliers. The second task pertains to the development of logistics, and the third deals with market access.
“Yes, the ministry lacks the capacity, but more than that it lacks power. Before passing judgment, one should assess its independence. At the current turnover rate (about eight months in grades 20, 21 and 22), developing a team of professionals to handle commercial affairs looks improbable,” another expert told this scribe.
The response of Commerce Minister Khurram Dastagir was not received before the deadline for this article.
Published in Dawn, Economic & Business, March 30th, 2015
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