DIVERSIFICATION FOR INCREASING EXPORTS
TARIQ AHMED SAEEDI - email@example.com
Dec 29 - Jan 04, 2009
When trade deficit is signalling a sign of being ratcheted up in next few years and current account wait loosing despite improving indicators for foreign reserves is putting in doubt invulnerability of economy to synergetic force which means depletion of reserves in anyway, that one solution keeps intact is enhancement in production capacity of exporting industries and, essentially, diversification of exportable products in as many destinations as possible.
Taking later first, improved production capacity has direct impact over economic growth of a country and is sacrificed at the behest of inflation controlling agents in capitalistic model of economy. That is too often in practice since long in Pakistan. Although, growth contraction is a grim aftermath of inflation-restraint measures it happens certainly as a result of monetary tightening stance of central banks. State bank of Pakistan has advocated the international forecast that Pakistanís economic growth will be not over 3 percent in the next financial year or so. Unemployment is another cruel some progeny of that, not only unleashing social disharmony such as poverty but also causing widespread affects on an economy.
Slowdown in commodity producing sector and industrial outputs owing to numbers of internal and external factors: for instance, high cost of doing business, inflation, expensive resource mobilization, and high cost of imported raw materials and energy crises all have disturbed the fundamentals of Pakistanís economy. Hike in interest rate, though slightly contributed in performance decline according to an argument, intensifies forceful intrusion at the industrial progress. Double digit lending rate in Pakistan of almost 20 percent is highest in the region including India, China, etc. Alone in first quarter of this fiscal year, growth in large scale manufacturing sector decreased to 6.2 percent over a corresponding period of FY08.
Agriculture being the largest contributor to GDP and prime for earning exports revenue presented no different picture during the period under review registering negative growth in manufacturing of main textile products be it cotton yarn (0.6%), cotton cloth (0.9%), and other five items (2.4%) and overall to have recoiled back to 1.5 percent in fiscal year 2008 in a radical contrast to target of 4.8 percent.
During last fiscal year and first quarter of current fiscal year, more or less the causes emerged out of heterogonous sources foremost of them were apathy and ineptitude to implement agriculture policies and reduction in productivity of major crops. Put together performance of industries is hampered due to escalating toll of headline and core inflations, in average hovering around 25 percent at present.
Given the disappointing circumstances, can exports be increased to offset possible and threatening challenges to economic stability? Finding new markets and diversification of exportable products are correlated to full-bodied industrial production and adequate international marketing structure. Becoming a transit to re-export and re-import is different apart.
Until producers are facilitated production cannot be increased. Apart from targeted subsides to agrarian sub-sectors prone to corrosive foreign competition and incentives to production-oriented industries for expansive production by only ensuring unbreakable and consistent supply of inputs positively government can get the maximum out of limited resources and within present situation. Bringing agriculture under the limelight and special focus of policy making has become vital for government if it wants to catalyse exports and reduce trade deficit gap.
Besides, spreading focus to other potential importing economies and regional blocks like Australia, Africa, and ECO can be helpful in achieving desirable goals. Among them Australia can become main trade partner of Pakistan. They can explore trade ties in number of sectors such as food and agriculture goods and automobile and in services sectors tourism and education will be effective starter to strengthen bilateral trade relations. At present, volume of Pak-Aus bilateral trade has worth not over $657 million with Pakistanís trade deficit of $379 million according to trade statistics FY08.
In last financial year, amongst 42 nations and east European region where products were exported from Pakistan the only country where lowest export of $3.9 million was recorded was Nigeria. Ocean region including Australia, New Zealand, and others and African region accounted for lowest exports from Pakistan of $178 million and $1.13 billion respectively can give considerable boost to countryís exports in future. An aggregate imports from these regions amounted approximately $1.9 billion.
Export diversification is needed to minimize the impact of staggering trade deficit that has swelled to $6.6 billion in July-Nov FY09 as compared to $4.8 billion in the corresponding period FY08. Even then tumbling in prices of imported commodities were noticed major reason behind this whopping gap was told Pak-dollar disparity that pulled import cost of petroleum products up to $5.6 billion in July-Nov FY09 from $3.4 billion in the same period FY08.
While the government rushed to emergency actions to abridge imp-exp gap initially and devised trade policy the actions ineffectiveness and failure of policy has manifested itself in almost year midway. For example, imposition of regulatory duties on products quasi-luxurious or assumed luxurious seemed to be pretending efficiency of finance ministry to get rid of for a while reaction of executive who was overwhelmed with the figment to prove his efficiency henceforth. Obviously, nothing such import restriction bore fruits.
Despite that food exports earned government relatively substantial revenue of $1.2 billion as compared to earlier $769 million import payment against foods also increased sharply to $1.8 billion during five months of current fiscal from $1.13 billion in the similar duration FY08.
To harness local potentials and expand exports from the country genuine intention and chaste implementation of policies are required. Pakistanís exports have lucrative markets in many other regions beside Europe and America.