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Inherited balance of trade deficit result of neglected Pakistan’s market

Pakistan Tehreek-e-Insaf (PTI) government with many other challenges inherited a trade deficit. Government has to first accept challenges and identify the resources Pakistan has right now. As per 2017 trade export data, Pakistan managed to export textile articles, sets, worn clothing worth $3.96 billion (18%), cotton $3.50 billion (16%), articles of apparel, knit or crocheted $2.52 billion (11%), cereals $1.75 billion (8%). All other items Pakistan exported in 2017 include leather, animal gut, harness, travel good, sugars, medical apparatus, food items, salts, beverage, spirits, vinegar, edible oil etc. Plastic exported by Pakistan worth $271.98 million , machinery, nuclear reactors boilers $199.05 million.

If we see import data category wise, Pakistan spent $13.71 billion (24%) on the purchase of minerals fuels, oil, distillation products, $6.86 billion (12%). Spent on the purchase of machinery, nuclear reactors boilers $4.7 billion (8.3%) on electrical and electronic equipments $3.42 billion (6%) on iron and steel $2.67 billion (4.6%) on vehicles other than railway and tramway $2.37 billion (4.1%) on organic chemicals $2.37 billion (4.1%) on animals, vegetables fats and oil, cleavage products $2.3 billion (4%) on plastic $1.40 billion (2.4%) on oil seeds, oleagic fruits, seeds, fruits, other items where Pakistan is already self sufficient is edible vegetable and certain roots and tubers worth $981.98 million, cotton worth $974.98 million, article of iron or steel $805.45 million.

There is a long list of items in import data category but I tried to mentioned high dollar amount of items where current PTI government has to drill down and assess the necessity of import. From the above 2017 export and import data one can look and assess there are many areas where Pakistan has to improve to increase our export especially in the area of textile and clothing and steel industry revival. Pakistan has the capacity to produce iron or steel. But due to past government negligence Pakistan steel and engineering industry could not export of machineries, reactors boilers and only managed to export worth $199.05 million, whereas Pakistan spent $13.71 billion (24%) on the import of machinery, nuclear reactors boilers.

In order to meet the demand for boilers used in HVAC Pakistan has the capacity. Pakistan Shipping and Works Limited during the slump period in shipbuilding industry added new engineering items in its portfolio. Pakistan Shipping and Works Limited has the major area of business include sugar plants, machineries, overhead cranes (up to 100 tons capacity), industrial boilers and pressure vessels, cement plants, flood light and wind turbine towers, equipment for petroleum and petro-chemical industry, drilling rigs, structure of power plants, barrage gates.

Government should identify the resources they have which can be best utilized in order to completely reduce import. 24% of total spending on machineries is the huge amount that can be reduced if given priority.

Beside this Government of Pakistan facility, there are many private companies who have expertise in fabrication who can also contribute their part to meet the demand in Pakistan market. The revival of steel/iron/fabrication industry is vital and at the same time focus on research project at university level, opening of technical schools that will help government to produce skilled labor and engineers in Pakistan.

Other sub categories in import of machineries are vapor-based boilers. Pakistan spent $534.4 million in the import of this type of boiler. Vapor-based boiler also called water base boiler in which water under pressure circulate at high velocity through a set of nested parallel connected coils while forced draft combustion gases travel across coils.

If government of Pakistan could have paid attention on the revival of Government of Pakistan facility (Karachi Shipyard), this $534.4 million could saved and earned by Karachi Shipyard Department. Vapor-based boiler spending increase by 54.7% from 2016 data. This is very significant amount of increase that Government of Pakistan could tackle by focusing on Karachi Shipyard revival with high budget and government technical help where required.

Pakistan also spent $469.1 million on the import of turbo jet engines which is 0.7% high compared to 2016. Of course this spending was made for our beloved PIA that have been showing losses in past. Unless government take some serious measures to completely re-structure PIA, government will not be able to reduce spending of turbo jet engines. Maintenance has been the problem in PIA. Lack of skills and merit based hiring leading to the collapse of PIA.

Air and vacuum pumps were imported in 2017 worth $400.5 million, which increased up to 22.9% compared to 2016 import data. Quaid-e-Azam University department took initiative to start academic program in National institute of vacuum science and technology. Government can take help from these resources and plan to reduce $400.5 million spending on vacuum pumps. Without the government guidelines no department of organization can be uplift. Pakistan Engineering Council, National Institute of Vacuum Science and Technology, Pakistan Vacuum Society, National Training Bureau and Government of Pakistan together can overcome these challenges for capacity building, training of skilled labor force in Pakistan. In result more jobs will be created and import can be reduced over the time.

Another alarming area which the current government can fully eradicate import spending is electronic and electrical item spending. $3.42 billion spent on phone system devices, including smart phones ($1.3 billion, up 7.1% from 2016), electrical generating sets, converters ($686.9 million), solar power, semi conductor ($662.3 million, up 27.2% from 2016), electrical/optical circuit boards, panels ($249 million, up 50.3% from 2016), insulated wire/cable ($180.1 million, up 19.3% from 2016). Pakistan Cables, Burq Cables has the capacity to produce these kind of insulated wire/cables. Government with some guide and help could save $180.1 million spending on import of this item. Other import items in electric and electronics are unrecorded sound media ($166.6 million up 54.6%), electric motors, generators: $121.5 million (up 36.5%), filament/discharge lamps $105.1 million (down -1.6%), lower-voltage switches, fuses $104.5 million (up 36.8%).

Current government has to identify areas where they save spending and lower the balance of payment deficit. Iron/steel industry, engineering industry and electrical goods industry has to flourished in Pakistan. Not only help government creating jobs in these sectors but help cut spending on selected imports.

Writer is a Marketing Manager
Email: muhammadalisiddiqui79@gmail.com

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