The export target of $ 18.6 billion for the fiscal year 2006-07 was missed by massive $ 1 billion

Bureau Chief, Islamabad

July 16 - 22, 2007

The export target for the current financial year (2007-08) is the topic which is being heatedly discussed these days in the relevant circles engaged in finalizing the trade policy for the year likely to be announced by the end of this month. Despite the fact that the country has failed to achieve the set targets consecutively for the last two years, some enthusiasts are insisting on an enhanced target of about $ 20 billion for the current years while some are in favour of a realistic target keeping in view the performance of the last two years.

The export target of $ 18.6 billion for the fiscal year 2006-07 was missed by massive $ 1 billion. The situation was not much different in 2005-06 resulting to an alarming rise in trade gap. During the outgoing year, apart from textiles, a few other commodities like rice, leather and leather garments also fell short of estimated targets.

The Trade policy is unlikely to offer much to the export sector and is expected to remain within the parameters of the incentives already announced in the budget. It may offer some minor facilitation from the export Development Fund which cannot be expected to lead to a big jump in our exports. It is therefore considered expedient to set the export target at a lower side of $ 18 billion to avoid any future embarrassment for the government.

Those who are in favour of an enhanced export target for the year are of the opinion that, unlike previous two years, the prevailing regional scene is in favour of Pakistani exporters specially in the field of textiles. Pakistani exporters now have a 15 and seven percent currency advantage over their competitors in India and China, respectively. Indian and Chinese textile exporters have given a tough time to Pakistani exporters in the past two years due to better efficiency and numerous incentives provided by their governments. The Chinese have started opting out of low value textiles that Pakistan exports. The Indians filled that vacuum during the past two years, but appreciation of the Indian rupee has rendered them vulnerable to Pakistani textile products.

There are a number of ministries that are directly or indirectly involved in boosting exports, particularly the ministry of commerce, ministry of textiles, ministry of industry production ministry of food, agriculture and livestock, ministry of information technology besides newly established Trade Development Authority of Pakistan (TDAP), the Pakistan Software Export Board (PSEB), Small and Medium Enterprises Authority (SMEDA) and Engineering Development Board. But all of them are pulling apart rather pulling together to develop a comprehensive strategy to boost country's export.

The ministry of textiles is no more a newly established concern as it has been working for the last three years, but has failed to make any impact on the textile sector, or textile exporters. The ministry could not initiate any export-oriented project or devise any aggressive plan to procure or explore new markets as well as maintain indigenous markets. The projects inherited by the ministry of textiles from the ministry of commerce also have remained stagnant.

Similarly, the much-trumpeted TDAP, which is a favourite organization of President Musharraf, has proved a miserable failure so far. It has been working for over one years with all the infrastructure and staff of the defunct Export Promotion Bureau and yet it simply can not claim to have increased exports in any way.

The Engineering Development Board, a subsidiary of the ministry of industries and production, too, has foundly taken up the task of boosting exports of the engineering sector, and it has spent about a few hundred million rupees on participating in Messe Hanover in Germany over the past two years. But it has failed to boost engineering goods exports.

A source in the Commerce Ministry told this correspondent that the Pakistan commercial consular in India has sent a report to Pakistani government informing them about the turmoil in the Indian textile sector after revaluation of the India rupee during the past 12 months. The Indian textile sector, according to a report, has warned its government of losing the market share in many categories to Pakistan. The Indian government, according to financial experts, is helpless as it is already subsidizing the textile sector heavily. The simply do not have resources to further facilitate their textile sector.

The data from the US trade department shows that the Indians having realized their weakness as far as low value added textile exports are concerned have stepped up the marketing of high value textiles and have achieved some success.

Economic planners in Pakistan need to redesign their export strategy to benefit from this new development in the region. It may, however, be a short-term measure. On a long term basis the government should help bring down the input costs to make Pakistani product more competitive in the international market. In its proposals to the Ministry of Commerce for Trade Policy 2007-08, Federation of Pakistan's Chambers of Commerce and Industry has strongly recommended to reduce the input cost saying "if the cost of production in Pakistan is not reduced to the level of our competitors, the opportunities of globalization will remain elusive for us".

Several other problems impeding the growth of exports have also been identified in the proposals. These include high cost of production, non-tariff barriers, modern technology, lack of market research, inadequate transportation and procurement facilitates and shortage of manpower and insufficient training facilities. All these points need a sympathetic consideration to enhance exports and save the country from the alarming rise in country's trade deficit, which is likely to damage our economy.