THE EFFECT ON PAKISTAN EXPORTS
The absence of fresh orders is a cause of great alarm
By Syed M. Aslam
Oct 15 - 21, 2001
If the external trade is any indication the national economy has started showing signs of disarray. For a country heavily dependent on a range of imported goods, from raw materials to finished products, on the one hand and pressurized to increase its exports base to narrow the incessantly uncontrolled trade deficit this means a disturbing scenario for Pakistan which has turned into a frontline state in US' war against 'terrorism.'
PAGE has already highlighted the substantial increase in War Risk insurance, freight charges, termination of operations by a number of foreign airlines and sliding dollar enhancing the cost of Pakistani exports in the international markets. It has also highlighted the fears expressed about the trickling of export orders by the overseas buyers and the long term impact it may have like foreign buyers opting to find substitutes in the markets of many competitors in the region. The attitude of overseas buyers is reportedly driven by the 'prevalent uncertainty' and the concerns about the timely delivery of orders.
The outgoing President of Karachi Chamber of Commerce & Industry (KCCI), Zubair Motiwala, said that retail sales in the US, the single biggest trading partner, has gone down by some 50-60 per cent after September 11. Similarly, retail sales in second largest export destination, the EU, has also declined by 20-25 per cent during the same period. The substantial decline in retail sales in the two major markets would definitely take a heavy toll on Pakistani exports, he added.
He said that the Pakistan has been declared as a war zone not so in words but rather in the increase of insurance premiums, freight rates and termination of flights by foreign carriers. He said that many of the shipping lines which were previously coming into the country are no more coming into the country to honour the commitments related to timely delivery. This in turn, he feared has already brought export orders to a trickle and may result not only in increased cancellation of orders but also in drying up of fresh orders.
He said that while the national flag carrier Pakistan International Airlines is doing all that is possible to fill the immense vaccum created by the termination of operations by foreign airlines it has only a limited capacity to fill the vacuum. This is more so as 'PIA is not customer friendly', he added. He said that the airline Managing Director's promise to the exporters to lease a large freighter from a CIS country has yet to be materialized a week after it was made on the day PAGE talked to him.
Zubair, who owns a textile processing unit, that lack of interest by the US buyers and their attempts to lessen outsourcing from Pakistan as well as the absence of fresh orders is a cause of great alarm for overall exports particularly cotton textiles group which make up 65 per cent of the total exports from the country. As is, he disclosed that a major textile unit, Afroze, has laid off 1,200 workers while another unit, Al Munaf has laid some 400 workers. The tricking of export orders has also resulted in the shutting down of design department at Diamond Textile, the textile processing unit owned by Zubair.
Asked what kind of adverse effect the prevalent situation would have on exports in terms of value, Zubair expressed fear that it would cost the country anywhere between $ 1.5 billion to $ 2 billion during the current fiscal ending June 30 next year. 'And it would a disaster if the situation developed after the US attacks on Afghanistan continue.'
He said that the US government should play a vital role to persuade its importers not to find a replacement to outsource their goods as increasing the social problems would mean more unrest in the region.
He said that the KCCI has presented four demands to US to help the local exporters. Number one, instead of rescheduling the debts Pakistan should be allowed a 30-year interest-free moratorium. Secondly, Pakistan should be allowed market access to the US like many other countries it wants to help. This means that there should be no quota and no duty on textile exports from Pakistan unlike at present — there is a 17 per cent duty on textiles from Pakistan compared to concessionary duty of 7 per cent on Bangladesh and zero rate of duty and no quota on Jordan. Thirdly, the US government should launch a drive to undo an environment of hatred created by vested interests comprising enemies of Pakistan not to buy made-in-Pakistan logo. Fourthly, free travelling should be allowed between the two countries.
He said that the prevalent situation has also taken a toll on imports due to the drying up of the local markets as people inclined to buy only the necessities to save money for fear of hard times. He said that the imports have also registered a substantial decline of 11 per cent since Sept. 11.
Meanwhile, the former chairman of Insurance Association of Pakistan, M.I. Ansari, told PAGE that the foreign reinsurers are declining to provide the Political/Terrorist cover 'at any cost.' It may be mentioned that this particular risk has always remained the part of all marine insurance previously. He said that the refusal on the part of international reinsurers pose a real challenge not only for the local insurance industry but also for the external trade. The IAP, he disclosed has called a meeting on the 15th of this month to discuss the situation.