EXPORTS TO RUSSIAN FEDERATION AND C.I.S.
Export target of more than 10 billion dollars is achievable
By Azhar J. Durrani
Apr 30 - May 06, 2001
The strategy of achieving the target of 10 billion dollar was made by the mutual understanding and advises of Govt. Representatives, Trade Representatives and experts of the relevant fields, now this target seems not achievable?
As far as the exporters are concerned they in the beginning warned that until and unless the issues faced by exporters like duty draw back, sales tax return and increase in export finance rate etc. etc. are not solved by the Govt. the target of 10 billion dollars will be difficult to achieve. Chief Executive General Pervez Musharraf took personal interest in solving the exporters problems and for this he held several meetings with exporters, Govt. representatives and CBR.
Now what should be our new strategy?
First of all lets find out what basic issues our exporters are facing. They are mainly two basic issues which, are as follows.
The most important hurdle on the internal front is non availability of funds. As we know that the monthly export of genuine exporter is from four hundred to five hundred thousands dollars. Furthermore due to big infrastructure and liabilities his expenditures are also very huge. To meet all these expenses our exporter needs funds every month without any delay. The source of these funds are off course from Duty draw back, Sales Tax return and from Export Finance. Today all these sources have become difficult for exporters. Beside these the implementation of SRO's Nos. 319, 417 & 818 have created tremendous problems and difficulties for exporters. The continuous increase in prices of utilities (Electricity, Gas, Water & Petrol) is increasing the cost of product and due to which our exporter is loosing the capability of being competitive in the International Market.
The U.S. and European Union have imposed some conditions on our exporters. If these conditions are not fulfilled than in this case they will either cancel the L/C or black list them. These conditions are as follows:
Child Free labor, Health hazard Chemical dyes, quality / standard product i.e. I.S.O. 900l, 9002 etc., Pollution free atmosphere (Specially for Food Products) and dumping duty etc. etc.
The new strategy should be to expand the export base by encouraging Small and Medium Size Exporters already exist in hundreds. They are capable to tackle the above mentioned issues.
The Small and Medium size exporter will export the goods worth of 20 to 25 thousands dollars monthly. To arrange such a small capital will not be a problem for him. He will manufacture his products by the help of Cottage Industries where he will bear no extra expenses of utilities and liabilities. In result the cost of his product will reduce to a minimum extent. Lets look at an example, if big exporter will manufacture 100% cotton men's shirts in his facility it will cost him 5 dollars and the same shirt will cost 3 dollars to a small exporter. This will make him competitive in the International Markets.
As far as external issues i.e. conditions imposed by U.S. and European Union is concerned, in this case the small exporter will switch over to the Markets where these conditions are not applied, as well as he will get rid of Quota purchasing. These markets are in C.I.S, Africa and Far East.
New markets for non traditional goods
C.I.S. i.e. Common Wealth of Independent States. This is a block of Ex-Soviet Republics consisting of 12 states including Russian Federation and 5 Central Asian Republics i.e. Tajikistan, Uzbekistan, Kazakhistan, Turkmenistan & Kirghizia. The other six states includes Azerbaijan, Armenia, Gorgia, Meldova, Ukrain and Belo Russia.
As these states got the independence only nine years ago therefore, the banking, finance, trade, import / export and the other trade relating sectors are still in developing stage. In these circumstances, the importers of these states are not in a position to work on L/C bases. The western and some Asian countries have found the solution of this situation i.e. they established Trade Infrastructure in Moscow and other capital cities. First of all they open their Trade offices then purchased warehouses, display centers and super markets & started selling their goods directly to retail and wholesale markets. Thus enabling the foreign exporters to get rid of L/C problems.
In Pakistan there are thousands of small and medium size exporters who wants to sell their goods directly in Russian Markets, but due to the non availability of Trade Promotion Infrastructure they are not able to enter into this market. If they try to sell their goods directly to these markets it means they will have to operate through their own offices which will cost them 2 to 3 thousands dollars monthly which is off course not feasible. The only solution is that the Govt. of Pakistan should come forward and must established a Trade Promotion Infrastructure to facilitate the exporter to exploit this vast land of opportunities.
Presently Turkey is exporting goods to Russia worth 8 billion dollars, 3 billion through Govt. sector and 5 billion through private sector. Here majority of exporters belong to small and medium size exporters. Same is the case of China where majority of exports belong to small exporters.
Possibilities to export 3 billion dollars to C.I.S.
Moscow is the main trading centre of whole C.I.S. Therefore the importance of Moscow for promotion of trade and export in C.I.S. can not be ignored. In Moscow there are 5 exhibition centres of International Level and 5 of Local Level. Here the Trade Exhibitions of products covering all sphere of life goes on round the year. Here our exporters can meet directly with the buyers, coming in thousands of numbers daily from 80 regions of Russian Federation and from C.I.S. Through these trade exhibitions Pakistan can offer to C.I.S. more than 70 traditional and non-traditional items.
Pakistan can export to C.I.S. more than 70 traditional and non-traditional items. If 2000 exporters (Small & Medium) will export to Russia goods worth 20,000/dollars per exporter monthly, then the export will be 40 million dollars monthly and half billion dollars annually. If this experiment is successful then the next year it may reach up to one billion dollars only to Russian Federation. If we include the rest of C.I.S. countries then in the next three years our export can reach up to 3 billion dollars (Presently our trade deficit is 3 billion dollars). The strategy mentioned above is being followed by China, India and Turkey.
The Govt. should establish the Trade Promotion infrastructure in Moscow and other capitals of C.I.S. states.
Amendments in the SROs 319, 417 and 818 are necessary to achieve the export target of 10 billions dollars by genuine exporters and Govt. must encourage the small and medium size exporters as well as to consider exploring new markets.