Incentives given by the EU
are expected to give a quantum jump to exports from Pakistan
Mar 18 - 24, 2002
European Union (EU), is the second largest market
for Pakistan products after the United States. Exports from Pakistan
to EU estimated at $2.5 billion, which constitute about 30 per cent of
Pakistan's total exports.
After September 11, the EU has increased quota for
Pakistan products besides lifting all sorts of taxes and allowing
enhanced market accessibility to Pakistani products.
These incentives given by the EU are expected to
give a quantum jump to exports from Pakistan provided the market
players used their best intellect, maintain timely delivery and above
all ensured quality products.
Tariq Ikram, Minister of State and the Chairman of
Export Promotion Bureau told PAGE that Pakistan's trade with EU
has already started showing positive results and so far an increase of
20 million dollar has already been noticed.
Tariq Ikram feels that an increase of about
$400-500 million is expected in exports to EU which means Pakistan's
total exports to EU countries will reach the mark of $3 billion. In
order to make the process of transactions of this respectable size of
exports; Pakistan will have to allocate its foreign exchange reserves
in the matching size of the trade with EU.
Pakistan exporting to the Euro-zone countries is
increasingly under pressure from their buyers to denominate
transactions in the single currency Euro.
Dr. Ishrat Hussain, Governor of State Bank of
Pakistan when asked about Central Bank's programme in shifting some of
its reserves into Euro, the governor said that the State Bank of
Pakistan has constituted a reserves management committee with the task
to make recommendations that how much of our reserves should be
converted into Euro. He said that the State Bank would take the
decision after the report submitted by the committee.
Regarding impact of the single currency on
Pakistan's exports, the government said EU certainly is a major
trading partner of Pakistan after the United States. He said that
after September 11 events and the economic policies and their
effective follow up, the economy in Pakistan is improving and
Pakistan's reserves have crossed the mark of $5 billion.
As the Central Bank chief he avoided to make any
prediction about Euro or Dollar, however he was of the view, currently
the Dollar enjoying the leading position will retain its position in
future also. However, after doing away with the Deutsche Mark and
other currencies of the 11 European countries, a considerable size of
reserves of the central banks of these countries naturally replace the
Dollar. He said that China has reserves of $215 billion and Hongkong
and Thailand etc have the reserves of over $100 billion. In order to
get some of these handsome reserves converted into Euro, leaders from
EU have visited China twice. Naturally these countries will have to
convert their reserves proportionately for trade transactions with the
EU countries. This indicates that the Euro is heading towards carving
at least second place in the financial world around the globe.
However the two markets have quite a different
nature as far as the market demand was concerned. He said that as
against the homogenous nature of the US market, the nature of market
demand differs on country to country basis in the EU. Out of the 11 EU
member countries many of them can be described as the middle class
markets which ideally suit to our manufacturing sector. He was of the
view that now the ball is in the private sector of Pakistan to take
maximum size of the market in EU. They should frequently visit these
markets to exploit the situation, as Pakistan exports have not even
the scratch of the total size of the imports taking place in the EU
The fact that 11 European economies have bound
themselves to a single currency and with the possibility of more
countries joining in, the Euro will have multifaceted implications for
macro-economic environment, financial markets and exchange rate and
It is therefore logical that the Euro's rise will
be fiercely contested.
In order to evaluate the potential benefits of Euro
on Pakistan and its exports there is the need to know the expected
long and short term benefits; Euro brings for Europeans themselves.
Some of the short term benefits like development of European capital
markets, private and government bonds and equities.
In the long term Europeans are looking forward to
more robust growth of the member economies, more choices for their
consumers, more efficient enterprises that can compete and sustain
themselves in a globalize world.
Pakistan's biggest export to Europe is textile and
made-ups. These are usually through buying houses and large store
chains in Europe. Even though the item maybe made in Pakistan, the
buyers are unaware of the fact as no efforts had ever been made to
increase the exposure of Pakistani goods with Pakistani label. The new
border-less Europe, with single currency and unfettered access to
markets presents a tremendous challenge and an opportunity to commence
work on this aspect of our trade.