The long-term benefits
such as incentives offered by the EU and the US may outweigh the
short-term costs
By AMANULLAH BASHAR
May 20 -June 02, 2002
Pakistan's improved creditworthiness especially at
macro-economic level has paved the way for a better, rather a handsome
profile of its external trade in the days to come.
Better results of the better economic policies are
reflected in the respectable foreign exchange reserves and surplus
balance of payment position of the country.
Obviously, the sudden outbreak of border tension
may cause some adverse effects on the external trade which is quite
natural, notwithstanding as early as the dust settles down, things are
likely to move smoothly.
In the first half of the current financial year the
situation in the area of exports presented a gloomy look due to lagged
impact of cancelled export orders and less than anticipated access to
western markets (especially the US). It was officially admitted that
the export may not hit the revised target of $9 billion set for the
current year, however the situation gradually improved giving strong
signals to reach the goal at the fast approaching end of the fiscal
year.
LARGE-SCALE MANUFACTURING
During the first half of the year, large scale
manufacturing sector registered an overall growth of 2.9 per cent over
the first half of the previous year, up from 2 per cent.
TRADE ACCOUNT
During the first half of the financial year
2001-2002, Pakistan's external trade suffered the most serious short
term setbacks in the shape of imposition of War Risk Surcharge and
reported cancellation of orders for exports.
The long-term benefits such as incentives offered
by the EU and the US may outweigh the short-term costs. Most
importantly, Pakistan may benefit from the reconstruction and
rebuilding of Afghanistan, generating new trade activity in future.
The wheel of industry in the cement sector was moving at a slower pace
due to low demand in the domestic market. The reconstruction process
in Afghanistan accelerated the pace of production as the industry is
getting orders from Afghanistan.
NEW OPPORTUNITIES
Despite persistent drought like conditions in
Pakistan, the nature is kind to Pakistan by giving another bumper
cotton crop this year too. According to estimates the cotton crop has
registered a record production of 10.9 million bales surpassing the
original target of 8.66 million bales set during October 2001-2002. It
is a pleasant surprise that the bumper cotton crop is coinciding with
a massive demand of textile products in the United States as the US
industrialists are shifting from textile to hi-tech industry.
According to some textile industrialists, the US is emerging as a huge
market for supply of the textile products from Pakistan as well as a
good source of used textile plants as a result of shifting from the
textile industry to some other sectors.
The US market for textile includes clothing and
other products is estimated at around $60 billion a year. It is the
time for the textile industry in Pakistan to concentrate on quality
products in accordance to the market demand if it has to grab a major
share out of US market in the face of its competitors like India,
China and Bangladesh etc.
Pakistan's major exports including POL, leather,
readymade garments, towels, tarpaulin and other canvas goods, bed
ware, surgical instruments, footwear, cotton fabrics and yarn were
able to show moderate to impressive quantitative increase during the
current year.
IMPORTS
Imports during the first half of the year amounted
to $ 4.8 billion registering a 9.6 per cent decline over the
corresponding period last year. Lower imports of food items especially
refined sugar and a reduction in the POL import resulted due to lower
international oil prices as well as reduced import quantum of
petroleum products were mainly responsible for this decline in
Pakistan's total import bill. In addition to the increased
availability of petroleum products in the country, the economic
slowdown after the September 11 events, conversion of some power and
cement plants to gas and conversion of cars and other vehicles to CNG
from petrol resulted in lower import of petroleum products. Greater
reliance on hydel power generation by WAPDA due to improved water
situation reservoir level in the first half of the year and suspension
of operation by foreign airlines coupled with reduction of flights by
PIA immediately after the September 11 events.
Deficit during the first half of the current
financial year was only $48 million, showing a contraction of $718
million over corresponding period last year.
FUTURE
Leaving aside the present tense situation, which
has affected all sort of economic activity not only in the country but
also on the other side of the border, the handsome future trade fever
seems to be in the stock.
Pakistan's trade volume has gone up from 39 million
tons to 42 million tons this year, which is reassuring trend despite
tense environment in the wake of September 11 and its repercussions on
Pakistan's economy.
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