WILL THERE BE A TRADE SURPLUS?
TARIQ AHMED SAEEDI (email@example.com)
July 28 - Aug 03, 2008
Howsoever the present government is determined to reduce the gigantic import and export gap by limiting import in this fiscal year to only food and export-oriented items, given its intention of allowing inflows of high priced imported finished products in the country and awarding tax relief to raw materials [even if] required for manufacturing exportable products mentioned in the Trade Policy 2008-09 speech it will not be unusual if export target of $22.10 billion, though maybe achievable, set for this fiscal remains far below the possible overstretching import bills in the end due to declining trend in industrial production.
This export target is pitched 15% higher than the last year's $19.2 billion, which was drastically outdone by almost $40 billion imports of mainly petroleum, machinery that includes mobile phones, raw, and food goods. It is interesting to note that while export target for the current fiscal year was mentioned in the trade policy, no estimate or guesstimate regarding import amount was given there, giving space to thought that import bill will be sizzling at the end of current fiscal year.
According to trade policy for this fiscal year, plant, machinery, equipment imported to set up industrial units will be exempt from duty and taxes. According to the new importation strategy, five years old buses will now be permissible under transfer of residence scheme in contrast to present TR that only permits import of three years old models. Notably customs duty on the import of CNG buses had already been brought from 15% to zero in the budget 2008-09. To broaden the volume of import of disposal trucks, prime movers, cement bulker, etc., it has been decided that import authorization will be expanded from the ambit of traditional import channels. Undoubtedly, all this will lead to enlargement in import bill.
Apart from this, too it has been decided to allow import of cryogenic containers to reduce the cost of manufacturing of liquefied gases. 'If it does the price of LPG may go down," said Fasih Ahmed, spokesperson of LPG marketing association. "I have not reviewed the trade policy, it may not have any thing special related to the LPG sector," he replied when asked about the affect of cryogenic cylinder import on local energy sector. He says the cylinder is helpful in storing large volume of gases in one go. Import permission will certainly be a good sign of price relief for consumers, he adds.
In his trade policy speech, Commerce Minster, Ahmed Mukhtar underlined the objectives for the historically hard-pressed fiscal year 09 to create employments in the industries through reducing in cost of doing business and improving business competitiveness in the international arena; to encourage appropriate integration of business houses; to leverage benefits from the free trade agreements signed with China, Malaysia, Sri Lanka, etc.; and most importantly to promote diversification of exportable products, which again closely ascribe to content operation of trade and industry across the nation.
As an export enhancement strategy, it has been decided that direct and indirect government financial assistance to major exporting sectors especially textile would be directed into capacity building and skill enhancement of human capital. In this regard, government will realign its support programmes to promote vocational trainings in major industries. There is no denying the fact that productivity of Pakistan's principal revenue generating sectors is terribly low and despite agriculture and manufacturing large contributions in national GDP and GNP, the outputs from these sectors are not significant. In spite of that emphases on technical assistance to improve production efficiencies in these sectors can enhance productivity the desirable results can never be attainable immediately.
The shift in focus in terms of import of this government looks a good alternative to previous obsessive free trade regime, but the ambition of revolutionising agro-industrialisation is neither possible in short span nor can it be achieved by reshuffling desultorily industrial service provisions; rather pulling off helping hands from performing industries can deter the goal making achieved. "It would become crucially difficult for the textile industry to stand up with the sadistic foreign competition in the wake of spiralling cost of production of textile inputs," replied Yasin Sadik, spokesperson of All Pakistan Textile Mills Association when asked comments about the trade policy, adding "much rhetoric and nothing in practical is taking place at present".
"The measures initiated to refurnish the estimates of external trade can produce results only in long instead of short terms," said he, saying effectual ramifications of these will come forward slowly. He says operation of textile business has been greatly hampered due to ever rising cost of basic inputs. "Closure of textile factories may occur if immediate remedial action is not adopted by the government," he said. In last six months, situation has been worsened enough to force millers to decide wrap up or attrite employment size or production scale as last resort since "how long could they bear capital loss". "Only in Sindh three large scale textile companies have been shut down," he informed.
"What positive can be pinpointed in this scenario," he prompted when asked about any textile trade catalysis encapsulated in the trade policy. However, he said, permission of import of polyesters from India at preferential duties was a good decision. He says textile industry wants government's subsidy to overcome pressures exerted out of inflation. Textile export generates largest foreign exchange revenue in the balance of payment statement of the country. It is estimated that export revenue from this industry is decreasing gradually and slowly. Once contributed 65 to 70% in aggregate exports, its share was slashed down to 55% in the last fiscal.
It would be more practical to extrapolate sustainable source of earning to compensate outflow of foreign exchange in importation. By suppressing emerging energy and petroleum sector and revenue generating textile sector to build up treasures as easy way, government may be desolate in hitting hard on export target let alone in cutting down import bill.