Some innovative thoughts
By Prof. Dr. Khawaja Amjad Saeed
Feb 19 - 25, 2001
Pakistan is facing several challenges on socio-economic front. Currently three gaps need proper handling namely:
Budget Deficit gap.
Saving - Investment gap.
Current Account Deficit gap.
This article will look at export boosting effort to reduce current Account deficit gap.
Shares in global exports: Based on the data available in the World Development Report 2000-2001, global exports for 1998 were $ 6.67 trillion. Our reported exports in the above publication is US # 10. Accordingly our share in global exports was 0.15%. there is a need to develop strategic targets for at least next five years to stay committed for higher exports. Suggested targets are as under:
Targets for Exports as % of Global Exports
Logistics needs to be fully mobilized to create exportable surplus to achieve the above targets. The Government must take all the stakeholders into confidence and develop commitment to achieve the above targets.
Regional setting: In the last few decades some regional grouping has emerged for promoting external trade. NAFTA (North American Free Trade Area) consists of three countries namely, US, Canada and Mexico. Their export share in global exports was 19.39% for 1998. G-8 is yet another powerful group of economically strong giants consisting of US, Germany, Japan, France, UK, Italy, Canada and Russian Federation. Their export share in global exports was 50% for 1998. D-8 is a grouping of eight Muslim countries namely, Malaysia, Indonesia, Turkey, Iran, Egypt, Pakistan, Nigeria and Bangladesh. Their export share in global export was 3.49 for 1998. SAARC consists of seven countries i.e. Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka. Although their population is 22% of the world, yet their share of exports of the global exports was 1.03% in 1998. This indicates vast scope of expanding exports and tapping the potential for exponential growth.
Group focus: An analysis of the last nine years of Pakistan's exports reveals that there is a heavy reliance on a few commodity groups for exports.
Commodity Group Analysis of Exports
Average 1990-91 to 1998-99
Wool & Carpets
Source: Economic Survey 1999-2000.
Pest attack on cotton can have disastrous implications on exports. Growing competition from India, China and several other cost-effective approach countries can have serious adverse implications. We have to be on firm footing to achieve higher results.
Product analysis: Our export base in terms of number of exportable product is very thin. This can be seen from the following table:
Major Export Products: 1999-2000
Ready Made Garments
Carpets & Rugs
Fish & Fish Preparation
Source: Economic Survey 1999-2000
While diversification should be pursued as a strategy, it is highly important that quantum jump with quality orientation should be achieved in respect of each of the products indicated in the above Table. There is a vast scope to increase production of ready made garments (RM). Association of Cost & Management Accountants can help reduce cost and enable exporters to become competitive globally. Value addition principle should be applied to cotton yarn and cotton cloth. This will serve as a backward linkage to increasing the exportable surplus of RMGs. In turn forward linkages can be established in higher exports of RMGs.
In rice, major thrust should be to increase production of basmati rice. A leap forward in sports goods is the crying need of the time. Bottlenecks for increasing exports of carpets and leather be removed to pave the way for achieving higher exports. Moreover greater and really serious home work needs to be undertaken for increasing the export of fish. SMEDA has made a modest beginning. We need to achieve higher results with a quantum approach to capitalize on the large coastal belt in the Arabian Sea. Non-conventional items need to be given special attention. Exports of fresh vegetables and fruits need to be expedited. This requires development of processing industry and solid and reliable logistics in terms of air services. The present Government of Pakistan is in the process of developing Industrial Policy. This aspect be given a serious attention. A synergistic approach is the crying need of the hour. The earlier we do it, the better.
Destination analysis: If one looks at the globe one finds around 250 countries in the world. We are however exporting to very few countries as is apparent from the following table:
Major Destinations of Pakistan's Exports
Source: Economic Survey 1999-2000
Our spread in respect of destinations of exports is very thin. Seven countries constitute 54% of our exports. A change in the outlook of the above seven countries or capture of export market by competitors can have serious adverse consequences. The private sector ought to be encouraged and fully motivated to unleash their capacities to tap market in various continents. Now E-Commerce can be used as a vibrant tool to achieve the above objective. African Continent is an unexplored area. Our exports to Far East are too low. Even amongst Muslim countries there is no significant news to be released. Some of these conclusions are apparent from the following Table:
Destination of Pakistan's Export (1999-2000)
Source: Economic Survey 1999-2000 (Statistical Appendix)
Developed countries (OECD) absorb 60% of our exports. Vast scope exists in OIC and this needs to be translated to our benefit. SAARC has political and other problems.
A country focused approach needs to be given top priority. The challenge to diversification has to be met by us. When shall we do it?
Diversification: a key driver: We need to use diversification in respect of products and countries to achieve higher targets of exports. The strategy of diversification can be used as a key driver for export boosting effort through achieving a break through of a quantum jump in exportable surplus. Lot of home work is needed to achieve the above goal. A sound strategy should be developed and its implementation should be carefully monitored with utmost care.
Institutional framework: At present there are some massy institutions hopefully for export promotion including EPB which officially is called as Export Promotion Bureau. Some choose to call it as Exports Prevention Bureau. There are committees and high powered Export Councils which hardly meet regularly to address the real issues of exports. We need to restructure the institutional framework to consolidate these into one institution which should be fully functional. The Export Promotion Bureau should be revamped to be developed on inverted pyramid. Currently it follows normal pyramid. Pro-active interaction should be used with stakeholders and we must achieve high results. The Eighth Five Year Plan targeted achieving exports of US $13 billion in 1997-1998. We have yet to cross $9 billion and now for 2000-2001 our export target is $ 10 billion.
A strong, vibrant and dynamic institutional assignment can be instrumental for achieving the higher targets and boosting exports.
Strategy: Our Government is on the right track for accelerating exports. For achieving positive results, a nine-point strategy is suggested below:
Nine-Point Strategy for Boosting Exports
For quantum jump
Targeted increase over a period of five years.
Areas: Commodities and countries.
The critical single factor for accelerated surplus increase in exports.
New Bread of
Human Resource Development.
RMG value addition to primary goods and semi-manufactured items.
Tap D-8 and SAARC on country to country basis via counter-trade approach.
To be introduced on war footing.
Concluding comments: For achieving prosperity for the masses there is a dire need to use export led growth. This will have strong backward linkage and industrialize Pakistan. Exportable surpluses need to be increased to ensure that exports are possible. Red tapism should be needed out. Time consuming and cumbersome procedures should be said good bye. We have already lost 53 years and we cannot afford the luxury of continuity. Focused approach in terms of main strategies should be followed. The foreign missions must be persuaded to switch to export orientation rather than political alone. Export processing zones should be opened in each divisional headquarters of all the provinces of Pakistan with no interference from any Government agency. Pakistanis living abroad be assured of full respect and fair deal. They will perhaps think of investing in Pakistan. The past is a story of lack of confidence and confidence building measures need to be undertaken to develop a healthy climate for attracting foreign investment from expatriate Pakistanis. Challenges are big but can be met if a war footing priority is given to introduce export culture in Pakistan. This can be done through synergy amongst all the stakeholders. We must stay committed in this direction.
Major sources of data used included:
1. World Development Report 2000-2001. This includes export data relating to 1998.
2. Economic Survey of Pakistan: 1999-2000.
Besides relevant literature was consulted from other available documents.
The author is Dean, Executive Programs, Punjab College of Business Administration, Lahore.