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Pakistan remains a commodity exporter

The caption may sound a little outrageous to readers, but it is a harsh reality. Over the years the country has failed in exporting value added goods. At presented whatever is clubbed under ‘value added’ items remains a commodity. The textile industry claims to be the biggest earner of foreign exchange, but the products can only be termed ‘low quality, low priced’. Overseas buyers are buying these products from Pakistan, because they have stopped producing these products, after terming these uneconomical. The point becomes clearer after one segregates branded and unbranded products.

Before deliberating further it may be pertinent to highlight that Indian exports consist of a significant percentage of items made these under ‘outsourcing’ arrangement. This means that the brand name may belong to an overseas company, but it certainly carries ‘Made in India’ label. The buyers buy a brand and seem least concern about the country where these were manufactured. They know the stringent quality standard followed by the owner of brands. Having said that, it is necessary to say that some local manufacturers are also doing this in Pakistan, but the number of such enterprises can be counted on the fingers of two hands.

Historically, Pakistan has been exporting cotton, rice and clinker which mostly fall in the category of commodities. An analyst even goes to the extent of terming yarn and unprocessed cloth commodity or at the best intermediate products. He also says that by exporting these commodities, Pakistani exporters are supporting their competitive. He refers to China and Bangladesh which buy Pakistani yarn in substantial quantity, which become Pakistan’s biggest competitors in the global markets. Ironically, Pakistan still produces 10 and 20 counts of yarn, which is negative value addition. The expression sounds a little amusing, but becomes clear when rate of raw cotton and these counts of yarn are compared in the international markets. Pakistani mills continue to produce these counts because they have failed in undertaking BMR or upgrading their production facilities.

Referring to fresh fruits will further explain the need for branding the produce. Bulk of fruits is still exported in wooden crates. When some of the countries imposed restriction on wooden creates, only then some branding emerged. It is on record that fruits packed in corrugated cartons attract higher price. However, it must also be kept that these exporters also do grading and waxing of fruits to make them free of insects etc. Therefore, it may also be said that exporters of fruits to high-end markets are more conscious about packaging/branding only because they wish to cater to the needs of these buyers, who are also willing to pay the premium for the fruits processed and packed/graded according to their specifications.

 

It has been quite some time that Pakistan joined the club of wheat exporting countries. At an average the country produces around 25 million tons of wheat, which yields up to 5 million tons exportable surplus. However, the country faces two contentious problems: 1) nearly 20% of the total produce goes stale before reaching the market and 2) around 2 million tons is exported to the neighboring countries due to highly porous borders. It may be said that Pakistan also must be getting something in return, which mostly remains undocumented. On top of all the foreign exchange earned remains unrecorded.

This year, it also became evident that ‘Made in Pakistan’ urea was uncompetitive in the international markets. However, some reliable sources say that every year up to half a million tons fertilizer is smuggled to Afghanistan. At some point in time the US raised the objection that certain types of fertilizers entering Afghanistan from Pakistan were used as explosive. However, the objection did not carry much weight because Afghanistan also has a strong agriculture base and needs fertilizers to boost the yield. It is also apprehended that some quantity of fertilizer is also smuggled to Indian cities enjoying common border with Pakistan.

The most disgusting example is sale of Pakistani Basmati rice in the international markets as an Indian product. In the recent past, Pakistani Basmati was sold in the Middle East as an Indian product. Pakistani exporters took note and approached the authorities with the simplest argument that Basmati rice is produced only in Pakistan and therefore it could not be registered and sold as an Indian product. However, they totally forgot that soil and climatic conditions of India are not vary from Pakistan and Basmati could be cultivated there. They also forgot that the average yield in India is much higher as compared to Pakistan.

Pakistan also produces about half a million tons exportable surplus sugar every year. A significant quantity of sugar is also exported to the neighboring countries, only because the government does not allow export of sugar officially. Industry experts say that since the annual production exceeds demand, the government must allow export of sugar. They say that permission to export sugar will encourage the mills to crush more sugarcane, which will in turn encourage the farmers to grow more sugarcane. This will help in improving yield at farm level and recovery at mills and in turn bring down cost of production.

It is feared that Pakistan will remain a commodity exporting country in the near feature. However, availability of exportable surplus will encourage the producers to go for branding and establishing these in the international market as ‘Made in Pakistan’ products. However, another approach could be allowing export of these commodities in retails/consumer packages – cement in bags and wheat and sugar in small retail packs.

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