KARACHI, Sept 10: It could not be easily claimed that one year after Sept 11, the country’s economy has gained or suffered on a host of developments that took place thereafter, including war against terrorism in Afghanistan.
Though the economy for the last so many years was kept under oxygen tent to keep it get going, the 9/11 incident in a way, did help in gaining stability at the macro level with foreign exchange reserves swelling to over $7.5 billion, current account balance showing improvement of $2.7 billion from $0.3 billion of previous year because of significant rise recorded in overseas remittances that crossed $2.4 billion mark, and grants and loans from multilateral agencies.
But it is most unfortunate that the much needed and desired results at micro level of the economy could not be witnessed where problems are still as grim as they had been ever before. There is unprecedented unemployment in the country, the cost of living is going higher on each passing day because of rising trend in POL prices and utilities resulting in high cost of manufactured goods, thus giving a crippling blow to the middle class.
Being a single crop (cotton) economy the textile industry is the largest industrial sector of the economy contributing over 65 per cent to exports and 38 per cent to the employment and nearly nine per cent to the GDP.
The new investment being made in the textile industry for Balancing, Modernization and Replacement (BMR) and at some places for expansion as well has been going on for last three years, and it has nothing to do with 9/11 incident. The removal of textile quotas by the year 2005 as a matter of fact compelled textile industry to upgrade its plants and machinery to produce quality textile goods at competitive prices, meeting the challenges of open market competition.
Consequently, such investments in no way are creating new job opportunities rather at some places they are further shrinking the job market with the introduction of new technologies and computerization in the industry.
However, the most irritant part of the entire 9/11 scenario is that Pakistan on becoming US ally in war against terrorism had to suffer immensely, particularly when its external trade received setback on cancellation of large scale orders from the US and the European buyers on the fear that exporters would not be able to fulfil their commitments.
Similarly, the unilateral imposition of War Risk Surcharge by foreign shipping companies on vessels calling at Pakistani ports as well as increase in insurance charges on cargo made the country’s export uncompetitive in the world market.
Though the country did not participate directly in the war, yet the foreign buyers stopped visiting Pakistan which resulted in cancellation of export orders. The worst part of the entire scenario was that all the diplomatic missions of Western countries also stopped issuing visas to Pakistani businessmen that further aggravated the situation and made many export houses to either close down or reduce their production line.
The only redeeming factor came from the European Union which gave greater market access to Pakistani textile products by 15 per cent and also removed tariffs on other products. As a result of this textile exports to the EU up to August 24, 2002, increased to $678.49 million as compared to $584.58 million in the corresponding period a year ago. Furthermore, there had been rise in export of non-quota goods by around $250 million. The greater market access does not only give space to more exports but also generates employment and other economic activities.
On the other hand the US for whom Pakistan took all the risk on becoming front-line state in war against terrorism gave no market access and instead allowed 25 per cent swing in slow moving categories of textiles. And around 8 to 25 per cent swing in some fast moving categories. However, these categories are not being imported from Pakistan as US buyers have already changed their source of supply.
Contrary to great expectations, Pakistani textile exporters were disappointed over the US attitude particularly in giving trade concession which were of no consequence. As for the US grant of $600 million as budgetary support and rescheduling of $3 billion debt are such concessions which do not have any bearing on common man, who is looking forward to get some relief by improving his kitchen budget or a space to get his children education and better health facilities.
The US could have lifted ceiling on category 666S and 666P because Pakistan is the only country in the world that is faced with such a situation. All other countries do not have ceiling on both the categories. It is said that if a quota enhancement is to the tune of $100m, a benefit of around $400m comes through increased export of non-quota items.