Home / This Week / Cover Stories / Pakistan needs a homegrown policy to boost exports

Pakistan needs a homegrown policy to boost exports

Since Pakistan got independence it has been a key beneficiary of multilateral financial institutions. The World Bank, Asian Development Bank and Islamic Development have been offering grants and soft-term loans. International Finance Corporation (IFC) has been actively providing loans to the private sector and also contributing equity in the mega size private sector projects. The International Monetary Fund (IMF) has been actively playing the role of ‘lender of the last resort’. Despite all these favors, Pakistan’s GDP size and growth rate have remained dismal, exports are proving paltry for financing imports and the country is still exporting commodities, raw materials and intermediate products. The value-added products are of low quality and can only attract low end consumers. On top of these most of the industries in Pakistan operate below optimum capacity utilization, cost of production is high and companies as well as country suffer from poor image.

The top of the agenda item should be improving Pakistan’s soft image. The world has to be told that the country does not support or export terrorism. In fact the world has to be convinced that the country is the worst victim of terrorism originating from Afghanistan. Experts have been pointing out that ‘safe havens’ for terrorist exist in Afghanistan are supported by many countries who are exploiting natural resources of Afghanistan. A point to ponder is that the land-locked country Afghanistan produces nearly 95% of opium produced in the world, how it reaches the developed countries, the US being the biggest consumer of drugs. Pakistan offers the shortest and most cost effective land route to Afghanistan, which should be used to expand international trade between the two countries. Afghanistan can be a key market for wheat, rice, maize, sugar, cement, iron, fertilizers, POL products and textiles and clothing produced in Pakistan. In exchange Pakistan can buy rugs and carpets, fruits, minerals for further processing and export. However, each transaction has to be documented and the biggest advantage is that this trade between the two countries can be done in local currencies without having any impact of foreign exchange of both the countries.

Pakistan will have to develop short, medium and long term policies. A special care will have to be taken that these policies a have to be developed keeping in view the national interest and not to protect the interest of a few ‘blue eyed boys’ or serve the vested interest. Since the biggest impediment in boosting exports is high cost of doing business, the government will have to stop making money by taxing energy products, particularly POL products, electricity and gas. Despite industry demand to discontinue it and return the amount, the government continues to collect ‘Gas Infrastructure Development Cess’. Construction of gas transmission and distribution infrastructure is the responsibility of the government and penalizing the existing consumers is violation law as well as human rights. Why can’t the government settle circular debt? Releasing the stuck funds of all the value chain participants will improve the cash flow on energy companies and these companies would be able to undertake infrastructure maintenance and expansion work more efficiently. The will not need to borrow funds and pay interest on the borrowed amounts.

 

Lately, it was noticed that despite government making promise to pay subsidy on export of wheat, sugar cement and fertilizer, little success was achieved. It is pertinent to mention that the government announced to pay subsidy on export of fertilizer but did not fulfill its own commitment. If one also adds billions of rupees ‘refunds’ still stuck, it may be said that by delaying refund payments, the government is saving interest payment that it may to pay to the lenders. However, the wiz kids sitting in the ministry of finance fail to understand two points: 1) if an amount has to be refunded, it should not be collected to begin with and 2) these amounts belong to exporters and delay in payment of refunds force them to borrow from banks, pay interest, which also increase cost of doing business.

Pakistan produces over one million tons of exportable surplus wheat, despite nearly two million tons going stale before reaching the market. If necessary arrangements are made Pakistan could earn up to one billion dollars by exporting 3.5 million tons wheat. Similarly, Pakistan can export up to half a million tons of sugar which can also fetch around one billion dollars. Additional dollars can be earned by exporting cement, fertilizers and POL products. According to the sector experts, exporting POL products has become mandatory to improve capacity utilization and reduce cost of production through synergy.

Pakistan has been exporting fruits mainly to low end markets, which offer lower price. According to the experts country’s export earnings from fruits can be doubled simply by waxing, polishing and better packaging. According to experts, the country needs improvised warehousing and logistic facilities. It is disappointing to note that loans are being offered at lower interest rate for the construction of warehouses but local entrepreneurs have not been able to take advantage of the facility.

The government should also focus on boosting seafood export. Over the year country has been facing ban due to unhygienic storage and processing facilities. Another serious issue is that ‘deep sea trawlers’ often intrude into Pakistan’s territorial waters and deprive local fisherman on their legitimate share. It must be kept in mind that certain types of fish found on Pakistani coastal line are not consumed by Muslims but enjoy huge market in South East Asia. A little focus and extra effort can boost seafood export manifold.

Moral of the story

If the Government of Pakistan is serious in boosting exports then installed capacities, utilization percentages, impediments have to be identified and right policies to be introduced in true letter and spirit. The sooner the government comes up with right policies the better it will be for the people of Pakistan.

Check Also

Remittances-Poverty Nexus In Pakistan

Remittances-Poverty Nexus In Pakistan

Remittances play a very important role in eliminating poverty of a nation. Remittances not only …

Leave a Reply