A NEED FOR STRATEGIC APPROACH TO BOOST EXPORTS
EPB must setup display centres in CAS and Middle East to help exporters
By Akram Khatoon
Former President FWBL
Dec 03 - 09 , 2001
Despite positive results obtained through concerted efforts on the part of Export Promotion Bureau and exporters themselves to boost exports during the year ending June 2001, country is yet faced with new challenges arising out of China's entry into World Trade Organization and expiry of Agreement on Cotton & Textiles (ACT) in 2005 and above all situation emanating from 11th September's act of terrorism in USA and Afghan War which needs strategic approach not only to maintain the present growth rate in exports but also to achieve long term objectives of rectifying country's balance of payment position and eliminating external debt burden.
China's entry into World Trade Organisation would entirely change the pattern of global trade.
Pakistan having major reliance on exports of cotton & cotton textiles items may find China as a strong competitor and it is rightly apprehended that any further shock to this sector would upset entire economy of the country.
A foreseeable set back looms out of likely move on the part of China and our neighbour India who are major cotton consuming countries to export cotton and cotton yarn from America and other cotton exporting countries finding Pakistani market of these products less competitive.
The obvious fact that Agreement on Cotton & Trade will expire in 2005 and trading in textiles will not be under constraint any longer, China now being in WTO would explore the market for these products and Pakistan is likely to loose the market unless concerted efforts are undertaken to have more cordial, political and economic relations with China. In this regard apart from move to have bilateral trade agreements with China, contracts at lower level or in other words through private sector should be entered with India, Russia and China (all despite being cotton producing countries have vast consumption needs for cotton and cotton yarn for their indigenous industry) to retain country's market share.
Apart from protecting existing volume of exports of cotton & cotton yarn, Export Promotion Bureau must move to make greater alliance with China for exporting fashion garments as China has vast fashion garment industry mostly dominated by foreigners. Accordingly Pakistan can have indirect access to worldwide export market of fashion garments through China which has emerged as a strong member of WTO.
It is the prediction of experts that China in order to enhance its market share in export of cotton textile items is likely to concentrate its textile industry in western provinces which are nearer to Pakistan through Karakuram Highway. This necessitates Pakistan's immediate move to have bilateral trade agreements with China as apart from importing cotton, cotton yarn and gray cloth from Pakistan involving minimum transport cost, China would like to have access to Middle East and European markets through Karakuram highway.
Further Pakistan can have more collaborations with China in the field of Information technology which apart from being beneficial to Pakistan would help China for removing language barriers which are needed for diversification of its software exports.
Due to cancellation of export orders after September 11, 2001 country is faced with a gap of about US$ 2 billion in incremental rate for reaching the target of US$ 10 billion for the year ending 30th June 2002. In order to recoup the immediate loss thus arising and also to accelerate the rate of growth of exports following product and export destinations diversification is suggested.
-Sincere efforts should be made to recapture the Russian and Central Asian markets which we had lost in the past and presently they are importing those items from China, Europe and Malaysia. African and OIC countries are also need to be tapped on priority basis. In this regard all exportable items must be made cost effective in relation to similar items in competing countries.
-Major reliance on export of cotton and cotton textile items (being almost 60% of the total export volume) need to be reviewed. A major chunk of textile exports comprise of gray cloth and yarn. Efforts should be accelerated to produce value-added products. Further focus should be shifted to other items like export of Fruits and vegetables, plastic goods, electric items, sanitary goods, denim fabric garment. The fresh flowers and dry flower arrangements have vast potential export markets.
The engineering goods especially automobile spare parts have ample export potentials. During the last three years export of auto-parts have risen from US$ 10m to US$ 25m. The Export Promotion Bureau have a very ambitious plan to raise the export volume of this item equal to US$100 million at the earliest. Further market for electrical goods especially for export of Electric fans can be explored in UK, Canada, Australia and African countries. These facts if taken care of would not only boost our exports but also would give impetus to SMEs (Small and medium size industries) which in turn would generate substantial employment opportunities in the country.
For promoting small & medium size industries producing value added exportable items their problems regarding non-availability of institutional credit without or with inadequate collateral and indiscriminate imposition of taxes and other government tariffs should be looked into on priority basis. It is hoped that SMEs Bank starting operations from 1st January 2002 will have special focus on those entrepreneurs who are not in a position to offer tangible collateral for acquiring loan.
No doubt, right from seventies Government has been providing cheaper credit to exporters both for their preshipment and postshipment needs, but for small exporters non availability of adequate collateral poses a problem both for financing Bank and exporter himself. For that proposed Export Guarantee scheme should be floated at the earliest.
The major problem being faced by small exporters of Textile items is non-availability of quota. Since in order to compensate the loss accruing to Pakistan after September 11 and further sufferings for longtime to come for being a frontline state on borders of Afghanistan European Union Countries have enhanced the quota for Pakistan by 15% and have abolished tariffs. Similar announcements have come from the side of USA and Canada also alongwith promises for providing greater market access to Pakistan.
In this regard it is essential that for distribution of additional quota thus made available preference should be given to new and small exporters.
The problem of liquidity faced by textile goods exporters also needs immediate attention. The cases of refund of sales tax and rebate should be settled at the earliest. It would be in the fitness of things that their demand of having a separate Ministry to manage the affairs of textile sector is acceded to.
For helping exporters to explore markets for their products, Export Promotion Bureau must set up product display centers in Regional Capitals of central Asian States, and Middle Eastern countries . In this regard EPB 's plan to set up Export Houses in USA, Far East and European countries in near future will go a long way in introducing nontraditional items to this part of the globe.