FRENZY TRADE ACTIVITY IS IN THE STOCK
The long-term benefits such as incentives offered by the EU and the US may outweigh the short-term costs
By AMANULLAH BASHAR
May 20 -June 02, 2002
Pakistan's improved creditworthiness especially at macro-economic level has paved the way for a better, rather a handsome profile of its external trade in the days to come.
Better results of the better economic policies are reflected in the respectable foreign exchange reserves and surplus balance of payment position of the country.
Obviously, the sudden outbreak of border tension may cause some adverse effects on the external trade which is quite natural, notwithstanding as early as the dust settles down, things are likely to move smoothly.
In the first half of the current financial year the situation in the area of exports presented a gloomy look due to lagged impact of cancelled export orders and less than anticipated access to western markets (especially the US). It was officially admitted that the export may not hit the revised target of $9 billion set for the current year, however the situation gradually improved giving strong signals to reach the goal at the fast approaching end of the fiscal year.
During the first half of the year, large scale manufacturing sector registered an overall growth of 2.9 per cent over the first half of the previous year, up from 2 per cent.
During the first half of the financial year 2001-2002, Pakistan's external trade suffered the most serious short term setbacks in the shape of imposition of War Risk Surcharge and reported cancellation of orders for exports.
The long-term benefits such as incentives offered by the EU and the US may outweigh the short-term costs. Most importantly, Pakistan may benefit from the reconstruction and rebuilding of Afghanistan, generating new trade activity in future. The wheel of industry in the cement sector was moving at a slower pace due to low demand in the domestic market. The reconstruction process in Afghanistan accelerated the pace of production as the industry is getting orders from Afghanistan.
Despite persistent drought like conditions in Pakistan, the nature is kind to Pakistan by giving another bumper cotton crop this year too. According to estimates the cotton crop has registered a record production of 10.9 million bales surpassing the original target of 8.66 million bales set during October 2001-2002. It is a pleasant surprise that the bumper cotton crop is coinciding with a massive demand of textile products in the United States as the US industrialists are shifting from textile to hi-tech industry. According to some textile industrialists, the US is emerging as a huge market for supply of the textile products from Pakistan as well as a good source of used textile plants as a result of shifting from the textile industry to some other sectors.
The US market for textile includes clothing and other products is estimated at around $60 billion a year. It is the time for the textile industry in Pakistan to concentrate on quality products in accordance to the market demand if it has to grab a major share out of US market in the face of its competitors like India, China and Bangladesh etc.
Pakistan's major exports including POL, leather, readymade garments, towels, tarpaulin and other canvas goods, bed ware, surgical instruments, footwear, cotton fabrics and yarn were able to show moderate to impressive quantitative increase during the current year.
Imports during the first half of the year amounted to $ 4.8 billion registering a 9.6 per cent decline over the corresponding period last year. Lower imports of food items especially refined sugar and a reduction in the POL import resulted due to lower international oil prices as well as reduced import quantum of petroleum products were mainly responsible for this decline in Pakistan's total import bill. In addition to the increased availability of petroleum products in the country, the economic slowdown after the September 11 events, conversion of some power and cement plants to gas and conversion of cars and other vehicles to CNG from petrol resulted in lower import of petroleum products. Greater reliance on hydel power generation by WAPDA due to improved water situation reservoir level in the first half of the year and suspension of operation by foreign airlines coupled with reduction of flights by PIA immediately after the September 11 events.
Deficit during the first half of the current financial year was only $48 million, showing a contraction of $718 million over corresponding period last year.
Leaving aside the present tense situation, which has affected all sort of economic activity not only in the country but also on the other side of the border, the handsome future trade fever seems to be in the stock.
Pakistan's trade volume has gone up from 39 million tons to 42 million tons this year, which is reassuring trend despite tense environment in the wake of September 11 and its repercussions on Pakistan's economy.