Commerce and Industries Minister Razak Dawood has been candid in admitting that utility rates in Pakistan are high and make the country’s exports less competitive.This is a long-standing complaint of industrialists and exporters which the government is usually reluctant to admit openly while the IMF and the World Bank continue to press for still higher power and gas rates.

In fact, because of the relatively high gas rates the Oil and Gas Regulatory Authority (Ogra) has reduced the gas rate for the gas distributed by Sui Southern Gas Company by 32 paisa for a 1.000 cubic feet or a symbolic 0.3 per cent.

And last week when the government raised Wapda’s power rates by 12 per cent or 24 paisa per unit for domestic consumers it did not raise the rates for commercial, industrial and bulk consumers. But now it has been reported that the rates for the three groups have been raised by 10 to 20 paisa per unit to make up for not raising domestic consumers power rates high enough. And the exporters and industrialists will protest again, and talk of a fall in the otherwise growing exports.

Evidently that is a concession to the World Bank and the IMF whose delegations are coming to review the performance of Wapda as well as the government’s revenue collection and deficit reduction strategy. All that will cause a great deal of unrest among the users of power both for industrial and domestic purposes.

While Razak Dawood has identified power and gas for their high rates, shortage of water and the high cost of getting it through tankers, too, add to the cost of production.

High interest rates have also inflated the cost of production and exports, but export credit has now been reduced to nine per cent from the earlier 13 per cent. and yet the exporters complain that their competitors are getting credit at lower rates and so can compete with them better.

While wages in Pakistan are apparently low they are not low in real terms when computed in terms of productivity. Most of the workers are uneducated and unskilled, and we have too many holidays and holy days as well as frequent work interruption due to strikes , which make the cost of production higher. And Pakistani industries need larger number of workers per unit than factories in advance countries. All that raises the unit cost of production. The government had for long sought to help the exporters by devaluing the rupee constantly or letting the rupee float down in the free market so that they can get more rupees for each dollar of exports. And that made the rupee go down to 60 to a dollar while the Indian rupee is 48 to a dollar and the Bangladesh taka 58.50 to a dollar after having fallen recently. But the constant down-slide of the Pakistan rupee has stopped for some months now and the exporters have been upset.

The government has sought to make up for that partly by reducing the interest on export credit to 9 per cent from the earlier 13 per cent and has promised further relief.

It is also trying to make refund of sales tax paid by the exporters and other taxes paid quicker. A special committee set up by Finance Minister Shaukat Aziz has suggested refund of the tax for a special category of gold card holders within 72 hours. Earlier he had spoken of the refund within 48 hours. Now the exporters complain some of their refund is delayed as long as one year.

The finance minister says the government does not have the money to repay them, but the exporters protest they are asking for the money they had paid and there should be no hitch in repayment. But the government has a real liquidity problem.

There can be other new irritants to the exporters. A special committee set up by the government to deal with cotton prices has recommended a regulatory duty of 10 per cent on cotton imported by the textile mills. And that is utterly contrary to the principle of no duty on cotton exports or imports so that the growers get world prices for their cotton and importers, too, get the cotton they need at world prices.

But now growers and ginners want more than world prices for their cotton. Hence the demand for the 10 per cent regulatory duty on the cotton imported. If Pakistani textile mills pay the 10 per cent regulatory duty on cotton imports their textile exports will become less competitive. And yet they need more cotton than the 10.5 million bales production by Pakistan in view of the expanding textile exports and the billion dollars invested on balancing and modernization of the textile industry.

The agreed principle of no duty on cotton exports or imports should be respected now instead of new controversy on cotton prices being created. After all, the textile mills will be paying not only the world prices for the cotton they import but also the shipping and insurance cost.

Pakistan’s exports have been rising steadily since February. And the exports increased in July by 19.3 per cent, while imports rose by 17 per cent. This trend should be kept up. Nothing should be done to upset that if we want a 15 per cent rise in exports this year, as targeted.

When the cost of production and sale is high there will not only be less exports, and even less of the value added, but also a rise in smuggling in of such goods. We see plenty of proof of that in the market.

A committee set up by the government has now reported that smuggling in of goods to the extent of Rs. 35 billion has been taking place annually. In fact, this amount is lower than the earlier larger estimate of smuggling. Only 10 per cent of that is intercepted says the committee.

That means that when the cost of production goes up the smugglers have a field day and they evade taxes to the extent of Rs15 to Rs20 billion, all inclusive. And more industries become sick and the banks have more defaulters.

Globalization may not be something we like with its gross imperfections and aggressiveness of the rich states. But we have to live and trade in such an imperfect world. So as we go on lowering our import tariff - the average tariff has been lowered to 25 per cent now - we have to strengthen the hands of our exporters and make exports cheap by helping them lower the cost of production.

Cheap energy, cheap credit and lower taxes are the means through which we can achieve higher exports and face international competition more effectively.

That was the secret of success of the East Asian tigers. China is making vast headway in exports because of lower wages, an educated work force that is disciplined as well. So Chinese goods are all over our markets.

Agriculture Minister Khair Mohammad Junejo wants to expand agricultural exports in a big way. We should. There too what matters is quality products and competitive prices. The government has to assist the agriculturists in a big way to expand agricultural exports. And if we cannot capture the Gulf markets, as we had planned earlier, we should at least increase our market shares there significantly.

An IMF report says that export industries in developing countries are more competitive and cost-effective than industries meeting local demand.

We may argue the high electricity rates are because of the vast theft and loss of power. But the world is not interested in our explanations or our handicaps but in our products which have to be cheaper and of good quality and well packaged.

Globalization has its serious drawbacks, more so for developing countries like ours but we have to live in that imperfect world and compete effectively with the products of other countries, more so textiles which too many countries produce and more are joining in. We have to maintain world standard for our goods and give our exporters the facilities which the world gives to theirs.

We have to do serious research in this area instead of working on the basis of guess and presumptions. and we have to act quick as the textile quotas for export to the Wet would vanish with the beginning of 2005. There is too little time to lose or waste. The times to come can be very tough, but we have to stand up to them and move ahead doggedly.