World markets are becoming increasingly competitive with each passing day. The days have gone when just price competitiveness was enough to enhance or maintain a country’s share in the international market.
Things have gone far beyond price competitiveness as many countries have adopted various new and innovative measures to edge out their competitors. These include adoption of innovative marketing techniques, better packaging, reliability in terms of quality, consistency in being the source of supply, on-time delivery, hassle-free and quick clearance of goods from customs and port limits with minimal documentation involved. All these measures become even more vital, particularly for the countries, which find it difficult to improve or maintain their price competitiveness in the international market due to variety of reasons.
Pakistan is ranked among countries where cost of doing business is very high. There are a number of factors both exogenous and indigenous for this high cost-low efficiency regime in Pakistan. These include high labour costs, high utility rates, low skill of labour, poor infrastructure, etc. We will not go into the debate and details of what these factors are; why they are there; why the government is not doing anything to correct them; or if it is doing anything then why things are not improving? The bottom line is that Pakistan is finding it increasingly difficult to maintain price competitiveness for a number of its products in the international market and because of this reason its share in the world’s trade is stagnant around 0.2 per cent of the total world trade for last many years.
Now the question is: Are there any alternatives that can help improve our overall competitiveness in the world market. The answer is “yes”. We can try and improve our overall competitiveness by focusing more on things like trade and transport facilitation. This is an area, which has been part of policy debate for decades, however in recent years it has come under limelight. As liberalization has progressed the business community in both developed and developing countries has increasingly started focusing on trade facilitation issues and categorise them as major impediments to economic development and trade.
It is now widely believed that one of the major obstacles for the development of external trade of a country is the inevitable delays and costs associated with cumbersome trade and transport procedures and the amount of documentation involved. Recognizing this fact over the past 40 years countries that had a vision to develop their economies through trade, introduced mechanisms for simplification and reduction of formalities, procedures, documents and other requirements to a minimum level.
Trade facilitation is most often thought of as a simplification or streamlining exercise that involves applying standards to procedural requirements of trade monitoring institutions. Broad aspects of trade facilitation include: introduction of ‘single administrative document (SAD)’; adoption of facilities such as ‘electronic data transfer’(EDT); establishment of one-stop document centre operation procedure; simplification of rules, formulation of laws and regulations.
This view relates to the implementation aspects of trade facilitation. In most developed countries and NIC’s governments have provided the leadership for trade facilitation activities, even though the demand for such action came through the private sector. As a result, traders in developed countries continue to gain high profit margins for their products. In contrast, most developing countries have not realised their potential to develop through efficient trading. Instead they have concentrated mainly on expanding production and pushing their products through the supply chain and not on demand-driven marketing where the emphasis is on satisfying the needs of the buyers through efficient systems at minimum physical distribution costs.
Pakistan has been lagging behind many other developing countries in modernising its international trading processes and practices. The trading community has not displayed sufficient interest in “trade facilitation” since they have not perceived trade facilitation as a tool necessary for the development of their business.
The ministry of commerce has realised that Pakistani businesses are entangled in a vicious circle of not being able to add sufficient value to their products and services due to insufficient systems. As part of Pakistan’s goal to concentrate and lay emphasis on value addition, the ministry has very seriously taken up the issues of trade facilitation. In this regard a ‘national trade and transportation facilitation committee’ has been established with the help of the World Bank-funded UNCTAD Trade and Transport Facilitation Project.
The objectives of this project are to improve Pakistan’s competitiveness in international trade through simplified export and import documentary procedures; modernization of related legislation; and the creation of a national capacity to solve problems between the transport users, providers, and the public sector in an expeditious manner. In addition, the project proposes a well-functioning refrigerated produce “cold chain”, to reduce transport costs associated with Pakistan’s external trade.
The Trade and Transport Facilitation Committee (NTTFC) has been legally established and is fully functioning. The Committee has already formulated and approved a modernised and facilitated pilot-documentary. Similarly, administrative and legal instruments related to commercial trade and transport matters are approved and a detailed, time-bound, programme of further measures has been chalked out. The NTTFC secretariat staff has been thoroughly trained so that after the completion of the UNCTAD project they can smoothly run the operations of the Committee. After the completion of the UNCTAD project, the Pakistan National Shippers Council will meet the financial requirements of the NTTFC.
The trade and transport facilitation project will also enhance the technical capacity of officials from other sectors related to the project, and of the private sector’s employees. It is therefore expected that the NTTFC Secretariat and any entity directly involved with the trade and transport facilitation project will provide competent counterparts who will take advantage of the experts’ experience.
Recent research indicates that facilitation measures may yield greater welfare gain than incremental tariff reductions. Much of the gains from lower tariffs have been captured in the last 50 years and one would expect that further welfare gain from tariff liberalisation would be more difficult to achieve. Keeping this in mind multilateral organisations like the World Trade Organisation (WTO) and Asia Pacific Economic Cooperation have started exploring other areas for near-term success including trade facilitation. In fact the 21-member economies in APEC have identified trade facilitation as one of its three priorities.
Similarly in Doha Ministerial Declaration of the WTO the need and importance of trade facilitation as a separate issue was highlighted. Therefore it would be fair to acknowledge that Pakistan has also started thinking and planning in the right direction as far as exploring alternatives option to enhance its overall competitiveness in the international market is concerned.