TACKLING BOT DEFICIT THROUGH BOOSTING EXPORTS

 

During 2000-2001, Current Account Deficit of Pakistan has declined. This article will look at export boosting effort to reduce balance of trade deficit.

By Prof. Dr. KHAWAJA AMJAD SAEED
FCA, FCMA
Oct 15 - 21, 2001

SHARE 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 $ 10b. 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:

Table
Suggested Targets for Exports as % of Global Exports

Year

Target

2002

0.17

2003

0.19

2004

0.21

2005

0.23

2006

0.25

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 giant 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 3.82 in 2000. 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. SAARC should be re-energised to achieve major break through. All members of SAARC region must rise to their occasion and play productive role.

COMMODITY GROUP FOCUS

An analysis of the last ten years of Pakistan's exports reveals that there is a heavy reliance on a few commodity groups for exports.

Table
Commodity Group Analysis of Exports

S. No.

Commodity Group

Average

.
. .

1990-91 to 1999-2000

1999-2000

1.

Cotton

60

61

2.

Leather

08

06

3.

Synthetic Textiles

07

05

4.

Rice

06

06

5

Sports Goods

03

03

6.

Wool & Carpets

03

03

. .

87

84

7.

Others

13

16

 

Total

100

100

.Source: Economic Survey 2000-2001. p.123, Table 9.7.

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 FOCUS

Our export base in terms of number of exportable product is very thin. This can be seen from the following table:

Table
Major Export Products: 2000-2001(July-March)

S. No.

Product

Rs. Billion

%

1.

Ready Made Garments

64

.

2.

Cotton Yarn

43

.

3.

Cotton Cloth

45

.

4.

Rice

23

.

5.

Synthetic Textiles

23

..

6.

Carpets & Rugs

12

.

7.

Leather

10

.

8.

Fish & Fish Preparation

06

.
.

Total

226

59

9 .

Others

159

41
 

Grand Total

385

100
.Source: Economic Survey 2000-2001, Table 8.7, pp 95-100

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 (RMG). Association of Cost & Management Accountants can help reduce cost and enable exporters to become competitive globally. Value addition principle should be applied to raw cotton, 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 jump approach to capitalize on the large coastal belt in the Arabian Sea. Non-conventional items need to be given serious 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 this is done, 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:

Table :4
Major Destinations of Pakistan's Exports
2000-2001: July-March

S.No.

Countries

Percentage

1.

USA

24

2.

U.K.

06

3.

Dubai

06

4.

Germany

05

5.

France

03

6.

Saudi Arabia

03

.

Total:

47

8.

Others

53

.

Grand Total:

100

Source: Economic Survey 2000-2001, Table 8.11, pp. 106-07

Our spread in respect of destinations of exports is very thin. Six countries constitute 47% of our exports. A change in the outlook of the above six 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 Eastern countries are too low. Even amongst Muslim countries there is no significant happy news to be released. Some of these conclusions are apparent from the following Table:

Table: 5
Destinations of Pakistan's Export (1999-2000)

S. No.

Countries

 

Percentage

1.

Developed Countries (OECD)

.

57

2.

Developing Countries

. .
.

Region

%

43*

.

OIC#

16

.
.

Other Asian countries

13

.
.

SAARC

03

.
.

Others

11

.
.  

43

.
.

Total:

.

100

Source: Economic Survey 2000-2001 (Statistical Appendix), Table 8.11, pp. 104-113 #Organisation of Islamic Countries

Developed countries (OECD) absorb 57% of our exports. Vast scope exists in OIC and this needs to be translated to our benefit. SAARC has political and other problems. These need to be promptly addressed to boost intra and inter trade of SAARC region.

A country focused approach needs to be given top priority. The challenge to diversification has yet 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.

Suggested direction

For achieving prosperity for the masses, there is a dire need to use export led growth as a guiding policy. 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 weeded out. Time consuming and cumbersome procedures should be said good bye. We have already lost 54 years and we cannot afford the luxury of such continuity. Focussed 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, dignity 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 now to develop a healthy climate for attracting foreign investment from expatriate Pakistanis. This can be done through synergy amongst all the stakeholders. We must stay committed in this direction.

E-mail: kasaeed@brain.net.pk Emba@pgcnet.com

*Dean: Executive Programs, Punjab College of Business Administration, Lahore.

SOURCES OF DATA: Major sources of data used included: 1. Economic Survey of Pakistan: 2000-2001. 2. World Development Report 2000-2001. Till the writing of this piece, this is the latest available document. This includes export data relating to 1998.

Besides, relevant literature was consulted from other available documents.