DOUBLING PAKISTAN'S EXPORTS
Requires will and commitment of all the stakeholders
By SHABBIR H. KAZMI
Dec 13 - 19, 2004
One of the landmarks Pakistan achieved during last financial year was that its exports exceeded US$ 12 billion in a year for the fist time in its more than five decades long history. Achieving the landmark is applaudable, but sustaining the growth posses the real challenge. While some of the analysts are of the view that maintaining the export growth momentum will be difficult, others say Pakistan can double its exports in next five years. They also say that it is not wishful thinking but a very conservative target. Saying this, they also remind that all the stakeholders have to have the will and build commitment for achieving this target.
Dilating their point they say that Pakistan has to achieve around 15% growth in exports annually to double its value over the next five years. Historically and despite all odds the country has able to achieve over 10% growth rate. Therefore, achieving the proposed growth rate in the future is not the wishful thinking but meeting a realistic target. While there are certain threats, the opportunities are enormous. All those sceptical about the fate of Pakistan's exports need to count country's strengths rather than looking at the threats only. It is good to be fully aware of threats but ignoring the strengths diminishes the power to face the challenge.
First of all it is necessary to understand the much talked about 'WTO threat'. According to an analyst, "The textile quota regime may have helped Pakistan in the initial years in boosting exports of low valued-added products. But it became a serious constraint in enhancing export of superior quality textiles and clothing to developed countries. The average quota utilization of high yielding categories has always been at the maximum. Therefore, with the phasing out of textile quota regime Pakistan stands to gain, as it will be able to export more quantities of higher value-added products. However, the real threat is that developed countries will use other tactics to stop higher inflow of textiles and clothing not only from Pakistan but all the developing countries. The fact is that the textiles and clothing industry of developed countries cannot match the prices being offered by the developing countries.
(US$ in million)
Source: SBP annual report
If one looks at the figures for the last two years, it is evident that despite a synchronized global recession, Pakistan has succeeded in enhancing its exports. Pakistan managed to achieve exports worth US$ 11.160 billion for year 2002-03 and US$ 12.313 billion for year 2003-04. The export target for 2005-05 has been fixed at US$ 13.700 billion. Based on 15% growth the proposed target comes to US$ 13.800 billion. This does not look too optimistic by any standard and can be achieved if all the stakeholders make concerted efforts.
According to the proposed growth Pakistan has to enhance export of primary commodities by US$ 191 million, textiles and clothing by US$ 1,211 million and others by US$ 445 million during the first year. Keeping in view the possible shortfall in achieving target of the other two categories efforts have to be made to boost export of textiles and clothing to a higher level. This is possible because of improving unit price realization of most of the textile products.
For enhancing textiles and clothing exports Pakistan has to exploit the potential of its textile industry at the highest possible level. This can be achieve not by producing additional quantities of low value-added products but by increasing quantum and improving qualities of higher value-added products. This is not a remote possibility because huge investment has been made in the textile industry over the past few years. This is also evident from the improvement in unit price realization of cotton yarn, cotton fabrics, bedwear, readymade garments and towels. There are further prospects for improving unit price realization during the forthcoming years with more capacity coming online.
In the primary commodities category, Pakistan has to exploit its comparative advantage in cotton, rice, seafood and fruits and vegetables. Wheat and petroleum products also offer good prospects. The exports of most of these categories have remained subdued partly due to lack of promotional activities but more importantly due to ignorance of laws governing their import in the developed countries.
In others category Pakistan has not even realized its real potential. It has huge unutilised production capacity in sugar and cement sectors. The country exports molasses and with the increase in sugar production, higher quantity of this by-product will also be available for export or production of industrial alcohol. Pakistan has started exporting automotive parts and with additional capacity, capable of producing even better quality, coming online shortly, higher exports and improved unit price realization can be achieved.