Pakistan’s Exports Dilemma
Pakistan’s wheat exports crossed 300,000 tons in April 2018, a record high in monthly terms since Pakistan’s creation in 1947. This is all very good but does it apply to Pakistan’s export sector as a whole? It is a fact that Pakistan’s exports have been on a declining path for the last couple of years, especially during 2017, when the exports registered a decrease of over four billion US dollars just in a few years and the trend is continuing. The exports of the country were US dollars 25.11 billion in 2013 following the general elections and since then there was no improvement in the exports level, rather Pakistan’s remained were headed on downward trend. At the start of financial year 2015-16, the exports of the country were around US dollars 25 billion but just in six months , these exports decreased and hit US dollars 20.44 billion. On the other hand, imports which were US dollars 44 billion in 2013-14, were continuously increasing and at the start of financial year 2015-16, Pakistan’s imports were US dollars 44.95 billion and at the end of the year reached US dollars 47 billion. The trend of increasing imports continued in the first six months of fiscal year 2017-18. There was a wide gap in the imports and exports and if efforts are not made boost exports of the country, Pakistan will be in a very difficult position
Pakistan’s major exports are textile, rice and leather but their contribution in the exports has been decreasing due to various factors including the increase in the prices of inputs, shortage of energy, load-shedding of power and gas, increasing in taxes, political crisis in the country, corruption of the political leaders and strong competition from the international markets. The share of these products, is more than 70 percent in the exports of the country so when there is less export of these products, the overall export targets are not achieved. Pakistan has also failed to improve its share in the international market and the only exports to already available markets in USA, China, UAE, Afghanistan and European Union have declined due to lack of interest of the PML(N) government. The cost of production in Pakistan is constantly increasing due to increase in energy tariff, increase in interest rate, highest corporate taxes in the region, highest rate of duties, taxes, surcharges on export and less installed capacity utilization in the region. It is also felt that slowdown in the economies of many countries and overall decline in international exports has also affected Pakistan’s exports. The FTAs between Pakistan and many countries have also had a negative impact on Pakistan’s exports as all these agreements were in favour of the countries with hom the Free Trade Agreements were reached instead of Pakistan due to the concessions given under the FTAs. Pakistan has Free Trade Agreements with Sri Lanka , China and Malaysia but the trade balance with all these three countries is not in favour of Pakistan. These countries are getting benefit from these FTAs and their exports to Pakistan have increased while Pakistan’s exports to these countries reduced after signing the agreements. Pakistan has also signed the South Asian Free Trade Agreement, but due to presence of India in this agreement, there has been very limited scope for Pakistan for improving its trade in the South Asian region. Pakistan has also Preferential Trade Agreement (PTA) with Indonesia, Iran and Mauritius but due to lack of proper and comprehensive negotiations, these three PTAs are not helping Pakistan to boost its trade, especially the exports to these countries. Despite duty drawback, zero rating of sales tax for exports and removal of import duty on cotton, Pakistan has failed to increase its exports in the last couple of years. Petroleum products, machinery, food, metals, textile and transport sectors are at the top in the list of imports into Pakistan. The share of these products has a major percent in the total imports of the country. Maximum increase was seen in the import of machinery, which was Rs. 6 billion in 2014 and increased to Rs. 11.5 billion during 2017 indicating over 82 per cent increase.
The country’s economy with an abysmal level of exports causes a negative chain reaction effect on the entire system, impacting the benchmark annual GDP growth rate and export-to-GDP ratio. With annual exports below six percent in the 1990s, rising to 9.9 percent in the 2000s and dipping sharply to 1.94 percent after 2010, the GDP growth figures for corresponding periods remained well below par. The fall of export-to-GDP ratio from 15.53 percent in the 1990s reflects the steep decline in exports and is lowest in the region, with Iran (22.4 percent), China (19.64), India (19.17), Sri Lanka (21.44) and Bangladesh (16.64 percent). Immediately tied with a vibrant export regime is international value of the domestic currency .In sharp contrast to this dismal performance, most Asian economies are flying high based on their highly competent and vigorous export-powered and oriented strategy, which provides the vital competitive and technological edge in production to the entire economy.