Despite having a share of over 30 per cent in GDP, domestic commerce has suffered for lack of policy initiatives and aggressive private sector investment. Domestic commerce has been under weak focus of the state despite the fact that international trade is built on its strength and efficiency.
If Pakistan has not emerged as a major player in the global export market much of it can be explained by neglected domestic market and subsidised inferior quality of low-value-added exports.
In 2006, the ministry of commerce had appointed Dr Nadeem Ul Haq as consultant on trade policy. He came up with a detailed study on domestic commerce with policy recommendations. However, the document is collecting dust in the ministry of commerce for the past six years.
No doubt this study, probably the first-ever on the topic in Pakistan, has raised the importance of domestic commerce vis a vis exports.
It flags bottlenecks like outmoded urban management and zoning for domestic commerce, demand for affordable retail and office space, inadequate transport and storage facilities, low levels of business sophistication, and legislative barriers and limitations.
The only attempt that the ministry of commerce had made was to include the concept of the domestic commerce reform and development in the Strategic Trade Policy Framework 2009-12. It proposed to establish a domestic commerce wing within its umbrella. However, the wing was yet to be established. The ministry is now working on another three- year trade policy framework.
The officials in the commerce ministry blamed the finance ministry for not providing funds for establishment of the domestic commerce wing.
They say finance ministry had spent more than Rs1.2 trillion on circular debt, but did not provide Rs30 billion for implementation of the last trade policy.
Deputy Chairman Planning Commission Dr Nadeem Ul Haq says: “I have made a very good policy on domestic commerce and its implementation is not my problem.” Please ask the ministry of commerce why they have failed to implement it.”
The sector has a heavy weight in GDP and is one of the biggest sources of employment after industrial and agriculture sectors.
Pakistan ranks poorly in terms of domestic commerce measures (business sophistication, goods market efficiency as well as property rights protection]. In the Global Competitiveness Report 2011-12, Pakistan’s business cluster development was ranked at 48th and market efficiency measures at 94th. In these areas Pakistan lacks behind the South Asian countries.
There is no sign of improvement, in the most basic areas of competitiveness, namely institutions (at 107th position) and infrastructure at (115th despite the scale advantages associated with Pakistan’s significant market size (30th).
According to the report, Pakistan will have to decrease regulatory rigidities in the labour market (now ranked 136th) and reduce barriers to domestic and foreign competition in order to render the markets for goods and services more efficient (93rd). Last but not the least, promoting latest technologies would allow for considerable productivity increases.
Consumer protection is almost non-existent and product quality is highly variable. Counterfeit items are readily available in some segments of the market.
Domestic commerce has to be developed parallel to the international trade. Policy initiatives are needed to develop domestic commerce so as to improve quality, value-addition, standardisation and competitiveness of products, and for simplifying regulation, cutting cost of doing business and adoption of modern business practices.
The good news is that big industrial groups like Gul Ahmad and Nishat have also opened up outlets for their popular brands across the country to cater to the consumer demand. Brands are generally developed in a competitive domestic market before they qualify for exports.
Many schemes can be introduced to promote inter-provincial trade of some traditional products of the four provinces, such as Peshawari chappal (shoes), Chitrali topi (cap), Sindhi ajrak, khussa (Punjabi shoes) etc.
However, no trade official or minister visits any city or market in the interior Sindh or in South Punjab or North of Khyber Pakhtunkhwa to interact with businesses to promote domestic trade. Instead they prefer to make international trips to the various foreign capitals of the world with very little outcome to justify their visits.