Pak­istan’s Ex­ports Dilemma

Enterprise - - Editor’s desk -

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.

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