Pakistan would miss the export target of $35 billion this year by June 2018 set in the three-year Strategic Trade Policy Framework 2016-18, but after failing to meet the target the government will try to achieve the target in the new trade policy, but this time the timeframe will be for five years from 2019 to 2023.
Experts see major causes of the policy failure are lack of diversification of exports, little innovation and value addition in export goods, insignificant research to know latest consumer needs and failure to find new markets. If the same level of growth is maintained in the rest of months of the year, then Pakistan’s exports will reach $23 billion by the end of current fiscal year.
Leading traders say that exports of $36 billion would be achieved if the current average growth of 10-11 percent was maintained in all months throughout the next five years. They say that 10-11 percent growth is very moderate approach. There is a lot of potential Pakistan can achieve a higher growth of 15-20 percent per year.
Seventy percent of exports comprise three traditional products including textile. Pakistan mostly exports commodities in bulk instead of shipping them in packages. About 74 percent of food items and 40 percent of textile goods are exported in the form of commodity. Value addition may attract higher export values
A review of free trade agreements (FTAs) with two countries and signing of FTAs with more countries were on the cards with the objective of reviving exports under the new trade policy. FTAs with China and Indonesia are being reviewed these days whereas talks have been going on with Turkey and Thailand for free trade deals which are believed to give a boost to trade with them.
The new trade policy would promote meat exports and in that regard the government would soon announce a package for the poultry industry. The policy will also promote those sectors that have been under pressure due to liberal imports like that of steel.
The government had addressed exporters’ concerns through rupee depreciation against the dollar in December 2017 when the State Bank of Pakistan let the rupee weaken 4.8 percent to Rs110.64. The depreciation, along with the Rs180-billion PM export package, has started reviving exports and the trend may continue in coming months. Initial reports suggest the growth in exports in December 2017 was much better than the 10-11 percent average so far this year.
For the first time in history, Pakistan is organizing a buyers’ conference in Islamabad to know about their demands and expectations.
Pakistan is consulting with exporters and importers to address their grievances and to learn what they want. This would be for the first time Pakistan is inviting buyers. Falling export earnings needed to finance import of capital goods. The concern is shared by businesses, independent economists and policymakers alike.
The adverse balance of payments is turning into an obstacle in realizing the potential for foreign trade and investment. The problem is exacerbated by a heavy loan repayment and debt servicing cost.
Declining world trade is worsening imbalances in bilateral trade. Export earnings need to match the import bill to reduce foreign dependence.
Pakistan needs to eradicate its trade deficit and ensure that the balance of trade becomes favourable for the country.
The industrialist suggests setting up heavy, basic and engineering companies for value added exports.
This is by imparting export orientation to the economy and improving quality and quantity of production by using latest technology; and a policy of self-reliance to reduce debts.
To achieve this entire enabling environment the government should create to accelerate exports. It should reduce cost of doing business and improve investment to GDP ratio by enhancing tax credits and reducing the tax burden on the already taxed, including timely payments of exporters’ refunds.
Four factors have affected the country’s export performance during 2009-2015. The world trade effect, commodity composition effect, market diversification effect and competitive effect. There has been general fall in private investment across the globe.
According to the research report, the problem of export growth is much more deep-seated. It notes that the country’s export performance has been weak over the past two decades.
Pakistan most of the regional competitors were able to transform their export base from primary commodities to high value added products. Product and market diversification focused on education and research, have played a key role in making a difference in these regional economies.
In case of Pakistan the impact of commodity and market diversification has been marginal. According to the IMF’s direction of trade statistics, Pakistan has slightly diversified its destinations over the last decade. Pakistan also trades heavily with members of the Gulf Cooperation Council. But it appears to be under-exporting to large and fast growing economies.
The number of products exported during 2011-2015 dropped by 169. In contrast Bangladesh, Sri Lanka and Cambodia witnessed an addition of 267, 508 and 330 products respectively in the same period.
Regional countries have significantly gained from improvements in export competitiveness in the recent past. Their gain from competitiveness was large enough to offset the loss they faced through inadequate commodity and market diversification.
The competitiveness effect includes the impact of trade policy, changes in the real exchange rate, tariff structure and structural reforms. It is estimated that around 20-30 percent imported inputs have been used at different stages of production in Pakistan.