Stimulating exports

The government is taking new initiatives to push up exports. According to a report, the government has allocated Rs18 billion to increase exports to $35 billion annually. In this connection two key markets, UAE and Saudi Arabia, are to be specially explored to push the sale of fashion wear, mangoes, high-tech electronics and top-grade pharmaceutical and other exportable products.

At present, the UAE's share in Pakistan's exports is only 4 per cent. It is relevant to mention here that UAE not only imports a large number of items for its own use but also serves as a transit point for import goods from Pakistan for shipment to other countries in the Middle East, Africa and even South East Asia.

The government's efforts to increase exports make eminent sense in the context of constant fall in our export income over the last three years. Pakistan's exports dropped to an eight-year low of $20.8 billion in the previous fiscal year (2015-16) despite preferential access to European markets and other incentives.

The exports have been in decline since the current government took over, falling from $24.460bn in 2012-13 to $23.667bn in 2014-15 to near $21bn now. This is almost the same level we achieved in 2007-08. The trade downtrend is not unique to Pakistan as our regional competitors are also facing the same dilemma. The factors that impinge on the situation include low inflation in advanced economies, lacklustre global economic growth, uncertain equity and currency markets and weakening growth in China. As a result of a steep fall in exports, the trade deficit has reached an all-time high of $23.96bn in 2015-16 as against $22.16bn a year earlier.

To arrest the decline in exports, the government some time back formulated the Strategic Trade Policy Framework (STPF) 2015-18 which envisages a number of support measures for exporters. To stimulate exports, the budget 2016-17 has also outlined a number of measures, including a lower rate for Export Finance Facility (from four and a half percent to three percent), continuation of the LongTerm Financing Facility with a reduced rate from last year's 6 percent, reinstatement of the "no tax, no refund" facility to the five export sectors - textile, leather, sports, carpets, surgical and medical goods, continuation of the Drawback of Local Taxes & Levies (DLTL), release of refunds by August 2016, duty free import of machinery for textile and garment and concessionary duty for import of man-made fibres. The annual plan also mentions Technology Up-gradation Fund for the textile sector that would help SMEs to invest in new technologies.

The government also announced in the latest budget the release of withheld refunds of exporters by August. The move will help to resolve the cash liquidity issues faced by exporters.

A primary reason for declining exports is a strong rupee which makes our products uncompetitive in the international market. Independent economists are of the view that the rupee is overvalued to the extent of 15 percent and have urged the government to allow the rupee to reflect its real value.

Other reasons are continuing law and order problems and the energy crisis. In addition, Pakistan's ranking in ease of doing business remains low and the government's focus on reducing the budget deficit as opposed to fuelling growth through higher development expenditure is compromising the growth rate and export promotion.

One of the major reasons causing a decline in exports is the appointment of undeserving ambassadors, high commissioners, commercial and other concerned officials in various Pakistani embassies and high commissions.

Provision of extra incentives to exporters of value added and quality goods can greatly help to raise exports.