A Bridge Not Too Far

Now that the ec­stasy is over, it is time for Pak­istan’s ex­porters to do some soul-search­ing and work to­wards de­riv­ing max­i­mum ben­e­fits from GSP Plus.

Southasia - - SPECIAL FEATURE - By Ma­jyd Aziz The writer is for­mer pres­i­dent of the Karachi Cham­ber of Com­merce and In­dus­try.

Pak­istan’s ex­porters, as well as the Com­merce and For­eign Min­istries, were in a state of eu­pho­ria in the first week of De­cem­ber 2013, when the Euro­pean Par­lia­ment an­nounced that Pak­istan would be a ben­e­fi­ciary of the GSP Plus sta­tus from Jan­uary 01, 2014, sub­ject to gov­ern­ing reg­u­la­tions as stip­u­lated un­der Reg­u­la­tion 978/2012 of Oc­to­ber 2012.

Pak­istan has met the el­i­gi­bil­ity cri­te­ria of vul­ner­a­bil­ity (less than two per­cent mar­ket share), low di­ver­si­fi­ca­tion (less than seven prod­ucts con­sti­tut­ing more than 75 per­cent of its ex­ports to the EU), and sus­tain­able de­vel­op­ment and good gov­er­nance com­mit­ments (rat­i­fi­ca­tion and promised im­ple­men­ta­tion of 16 hu­man rights and la­bor rights con­ven­tions, plus 11 con­ven­tions cov­er­ing en­vi­ron­ment, anti-ter­ror­ism, anti-nar­cotics etc). The sta­tus also boosts the po­si­tion and im­age of Pak­istan in Europe, and, more im­por­tantly, sends a pos­i­tive mes­sage to the global mar­ket­place.

The coun­try’s ex­porters and pol­i­cy­mak­ers must un­der­stand that com­pla­cency would no more be an ex­cuse and that strict ad­her­ence to the EU reg­u­la­tions must be the key ob­jec­tive. The ini­tial ben­e­fit is only for three years, ex­tend­able to ten, depend­ing on Pak­istan’s per­for­mance within the pre­scribed frame­work. The fa­cil­ity could be with­drawn if Pak­istan is un­suc­cess­ful in im­ple­ment­ing any con­ven­tions.

It is im­por­tant to note that the scheme also de­fines a spe­cific role for third-party um­pir­ing to as­cer­tain strict com­pli­ance. Pak­istani ex­porters must also keep in fo­cus the fact that un­fair trade prac­tices could trig­ger neg­a­tive eval­u­a­tion. More­over, the global re­quire­ments of san­i­tary and phyto-san­i­tary and tech­ni­cal bar­ri­ers to trade would weigh heav­ily in fu­ture de­ci­sions. Over­all, Pak­istan must de­velop the mind­set of ben­e­fit­ing from GSP Plus and must en­sure that this is not vi­ti­ated due to in­cau­tious, in­ten­tional or in­ad­ver­tent ac­tions by stake­hold­ers. The dice is loaded prag­mat­i­cally of the 27

against Pak­istan and to even out the odds, the coun­try must be se­ri­ously ready to pluck the ripe fruit.

The ec­static phase is now over. Ev­ery­one who needs to be pat­ted on the back has been given the bear hug and the usual syco­phan­tic plau­dits. The me­dia hype, the ap­plause from stock ex­changes, the self­con­grat­u­la­tory state­ments of min­is­ters and party faith­ful and the usual brag­ging and boast­ing of ex­tra bil­lions to be earned have all been high­lighted and pro­jected. It is now time for in­tro­spec­tion. Does Pak­istan have the crit­i­cal mass to achieve the na­tional ob­jec­tives of de­riv­ing max­i­mum ben­e­fits from GSP Plus?

Stock must be taken of the in­gre­di­ents that make the foun­da­tion for achiev­ing these for­mi­da­ble ben­e­fits. It is time to fo­cus on the cru­cial phys­i­cal in­fra­struc­ture. In the tex­tile sec­tor, for ex­am­ple, Pak­istan has am­ple spin­ning, weav­ing and stitch­ing ca­pac­ity but it needs to de­velop the dye­ing and print­ing sec­tor. The de­fi­cien­cies in tex­tile pro­cess­ing are more a re­sult of short­ages of elec­tric­ity, gas and, in some ar­eas, wa­ter.

Thus hangs the prover­bial Damo­cles’ Sword on the tex­tile in­dus­try. The brag­gado­cio em­a­nat­ing from the por­tals of the Com­merce Min­istry or from the of­fices of some busi­ness lead­ers, who do not miss any op­por­tu­nity to make a state­ment, be­lies the ground re­al­ity. The oft­touted fig­ure of in­creased ex­ports of $2 bil­lion is, for some years, a piein-the-sky pro­jec­tion. Con­ven­tional wis­dom puts the num­ber within the $500-$550 mil­lion range, at least for 2014, and a promis­ing in­crease by $750-$800 in 2015.

There would be many who would term this as pes­simism ooz­ing out of the honey pot, but facts are facts. Power is the prime in­gre­di­ent. Ac­cord­ing to a re­port com­piled by the Swiss Con­sulate Gen­eral in Karachi, “Due to a fast grow­ing de­mand, high sys­tem losses, fuel sup­ply lim­i­ta­tions and sea­sonal re­duc­tion in the avail­abil­ity of hy­dropower, the gap be­tween the de­mand and sup­ply of elec­tric­ity is re­sult­ing in rou­tine load-shed­ding. In­ad­e­quate power gen­er­a­tion ca­pac­ity is just one of the fac­tors af­fect­ing power sup­ply. The present aver­age short­fall in the sup­ply-de­mand gap is be­tween 4,500-6,000 MW.” The in­stalled ca­pac­ity is around 22,000 MW al­though gen­er­a­tion is less than 60 per­cent.

More­over, cor­rup­tion, theft, and mis­man­age­ment are de­bil­i­tat­ing causes. Heavy re­liance on fos­sil fu­els and slug­gish­ness in de­vel­op­ing al­ter­na­tive re­new­able en­ergy fur­ther com­pounds the sit­u­a­tion. Ap­prox­i­mately 175 bil­lion tonnes of Thar coal re­serves are still years away while the Kal­abagh Dam continues to cre­ate a war of words among vested provin­cial in­ter­ests. New ini­tia­tives are an­nounced and umpteen MoUs signed.

Pak­istan also faces the nat­u­ral gas cri­sis. A lib­eral use of gas, with­out an eye on the fu­ture, is de­plet­ing the re­serves. Where in­dus­try should have been ac­corded pri­or­ity, pol­i­cy­mak­ers al­lowed CNG fill­ing sta­tions to be set up all over the coun­try. For­tu­nately, bet­ter sense has pre­vailed and there is now a man­aged clo­sure of CNG sta­tions on des­ig­nated days. Even to­day, cap­tive power plants in­stalled in var­i­ous in­dus­trial units have to suf­fer one to two days of clo­sure. Per capita gas con­sump­tion has in­creased from 150 cu­bic me­ters per per­son to 230 cmpp dur­ing the last ten years. The proven gas re­serves have reg­is­tered a dip in the last year by about 100 bil­lion cu­bic me­ters. In the mean­time, the Iran-Pak­istan gas pipe­line is still noth­ing but a ‘pipe’ dream. And the im­port of LNG has be­come a po­lit­i­cal shut­tle­cock in­stead of an im­per­a­tive al­ter­na­tive.

Karachi’s in­dus­trial ar­eas suf­fer from wa­ter short­ages. This, of course, is manna for the tanker mafia who ex­tract their pound of flesh from the hap­less in­dus­tri­al­ists. Al­though skilled la­bor is avail­able, there is a press­ing need to im­part train­ing to new work­ers and to re-train the ex­ist­ing work­force to op­er­ate the lat­est ma­chin­ery and equip­ment. An­other fac­tor that has made life mis­er­able is the law and or­der sit­u­a­tion that just does not al­low a peace­ful en­vi­ron­ment.

The de­pre­ci­at­ing ru­pee, es­ca­lat­ing in­fla­tion, pa­thetic roads net­work, high-hand­ed­ness of govern­ment bu­reau­cracy, fear of ris­ing dis­count rate, and ever-chang­ing govern­ment poli­cies are other dis­con­cert­ing fac­tors that re­sult in an un­bri­dled up­surge in the cost of do­ing busi­ness. Growth in ex­ports de­pends on a fa­vor­able do­mes­tic en­vi­ron­ment. Ex­ports must have na­tional own­er­ship as is the case in Bangladesh and China. All stake­hold­ers need to be on the same page, es­pe­cially if the GSP Plus ben­e­fits are to be reaped for a decade.

Den­nis Hastert, for­mer Speaker of the US House of Rep­re­sen­ta­tives, very cor­rectly said, “Trade cre­ates jobs and lifts people out of poverty. And when that hap­pens, so­ci­eties sta­bi­lize and grow. And there is noth­ing like a sta­ble so­ci­ety to fight ter­ror­ism and strengthen democ­racy, free­dom and the rule of law.”

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