THE ministry of commerce has come up with an ambitious draft strategic trade policy framework (2012-15) setting an export target of $100 billion for the next three years.
How the export earnings would be raised more than four times the current levels in three years remains an enigma.
Domestic production is constrained by a host of factors including severe energy shortage and exports markets are not growing fast. The policy has ignored the domestic market that could provide long-term impetus to exports.
As in the past, the focus will be on regional trade and diversification of markets and goods including for value-added food products.
The trade policy discriminates between export-oriented industries and domestic commerce. It aims at providing financial and regulatory support to export-oriented sector, but remains silent on industries catering to domestic commerce with export potential. This draft policy needs to be re-visited.
The Export Policy Order and Import Policy Order are to be revised to address issues of overlapping and redundancies in these regulations and to simplify them for facilitating the business community. The issues related to quality, standards, regulations, trade disputes and enforcement will be tackled on priority basis.
Policy initiatives are being designed to promote exports of agro-processed products, especially in the region. Global food trade stands at more than $361 billion, but Pakistan’s share in it is negligible owing to lack of globally recognised agricultural practices standards. There is a need to come up with product-specific measures to improve compliance to international standards especially for five important products - citrus, mango, dates, potato and onion. Compliance to international standards is also crucial for agro-food products like cotton, wheat, rice, sugarcane etc.
It is only possible if the government makes some changes in the existing rules regarding food safety through strict inspection and procedures, and upgrading laboratory systems to international standards.
For the first time, the new policy will introduce many schemes to exploit potential of exports from Balochistan, Khyber Pakhtunkhwa, Gilgit Baltistan and rural Sindh.
These regions have comparative advantage in many products but due to disadvantages such as under-developed processing facilities, poor trade facilitation, lower access to capital and technology, the export potential of these regions is far less exploited.
It is a good initiative to explore products in these areas for export but requires focus on domestic commerce. No plan or action has been proposed in the new trade policy to promote inter-provincial trade.
The ministry of commerce plans to set up institutional arrangements for doubling export of services over the next three years. While the contribution of services sector in the economy is around 54 per cent, its share in the global trade is dismal.
The regional trade would be one of the major policy objectives. The new policy will give high priority to trade with China, Iran and Afghanistan. Initiatives will be taken to double exports to these countries.
According to Economic Survey 2011-12, during 2005-06, 47.2 per cent of the country’s exports were concentrated in five markets—- the US, UK, Germany, Hong Kong and the UAE. However, their share declined to 35.2 per cent during July-March 2011-12 whereas the share of other countries increased to 64.8 per cent. This has happened because of increase in exports to China, Afghanistan and Bangladesh.
Market and product diversification rather old concepts, still remain highly relevant. The new policy focuses on introducing a number of initiatives for increasing exports to Asia from the present 46 pc to 60 per cent over the next three years.
The ministry of commerce is in the process of creating setups for three export promotion agencies. Also special incentives would be announced to encourage investment in the export-oriented industries, and in special economic zones.
There is a serious human resource problem in the ministry of commerce. Trade Development Authority of Pakistan (TDAP) is the implementing arm for trade initiatives. However, it is located in the extreme south of the country. Most of the officers are from the north and do not want to be posted in the south. So competent officers avoid posting in TDAP and instead serve in other offices on deputation. As a result TDAP has become a junkyard for politically motivated appointments.
There is a need to transfer posts of officers in TDAP to regions on the basis of products manufactured there. For example, officers posted in Sialkot should look after products like sports goods, surgical goods, etc which are manufactured there.
To ensure implementation of the trade initiatives, the ministry of finance will be engaged to enhance the funding allocated under Export Investment Support Fund and release it early in the year. This is a crucial area and a challenge for the commerce ministry. There is no regular forum to oversee and monitor the implementation of trade initiatives and as many as 70-80 per cent initiatives announced in the previous trade policy were never implemented.
Government ownership and credibility is important in terms of trade policy implementation. For example, the government announced an allocation of Rs35 billion for implementation of development initiatives under the strategic trade policy framework 2009-2012 but released only Rs2-3 billion. The government interventions need money which should be made available as per commitment.
On the other hand, the ministry of commerce, will put in place an integrated resource management system to address the issue of lack of integration amongst different streams of resources such as Export Investment Support Fund (from the regular budget), Export Development Funds, PSDP funds and donor’s assistance.
Successful trade diplomacy is important to ensure a level playing field for exporters and build special trade relations with some promising markets. However, it leaves much to be desired.
In short, it is not the well written and articulated arguments in a policy document but its effective implementation that can bring about a change. And for that the commerce ministry will have to improve its capacity for implementing its policies and improve inter-agency coordination. It must to focus on compliance issues and ensure quarterly monitoring of trade policy initiatives.