Apr 27 - May 10, 2009

While it has started to appear that exports target of fiscal year 2008-09 would be unattainable, what government of Pakistan can do at this point is to set practical and attainable exports target for the next financial year in the upcoming trade policy under the limelight of global trade emerging scenario. On the other hand, ministry of commerce must prime means that can diversify basket of exportable products, instil product-line innovation, and explore various thresholds for Pakistani products in non-traditional markets.

Last year, government set $22 billion exports target for the current fiscal year. However, exports results of nine months exhibited that it would be near impossible to touch the whole year benchmark by fiscal yearend. During July-March, total exports amounted to $13.41bn. Alone in March, exports earned government $1.3bn while in February $1.2bn. Remaining three months would not add much to exports revenue to bring it at par with year target. Perhaps, it would be less than the previous year's $19bn.

While slowdown in exports is attributed to endogenous setbacks including energy shortfall, political instability, and precarious law and order conditions that adversely hampered the industrial production during the period, global economic crunch simultaneously was responsible for the negative growth in cross-border trade that had seen $13.43bn exports during the comparable period last financial year. The situation will continue to deteriorate further in the coming years, as recession would push back global trade in volume terms by nine percent in 2009, according to the World Trade Organization (WTO).

Exchange rate depreciation benefits exporters whose revenue in local currency swells on in the effect. For instance, while exports revenue decreased in dollars by 0.13 percent during July-March over comparable period, it increased in rupees by 26 percent as per data of federal bureau of statistics. Conversion rate is Rs80 per dollar in contrast to Rs62 in March last. "For the last 30 years trade has been an ever increasing part of economic activity, with trade growth often outpacing gains in output. Production for many products is sourced around the world so there is a multiplier effect as demand falls overall, trade will fall even further. The depleted pool of funds available for trade finance has contributed to the significant decline in trade flows, in particular in developing countries," said WTO Director-General Pascal Lamy in a press release last month.

While Pakistan's exports share in global trade is not over 2 percent and it can possibly continue to grab its diminutive portion amidst even sagging demands, its cumbersome reliance on European zone and USA for generating major export revenue can make the exports vulnerable to their economic downturns.

According to the IMF's April World Economic Outlook, global economy would shrink by 1.3 percent in 2009. Growth is projected to remerge with slow speed of 1.9 percent in 2010 for economies representing 75% of the global economy. It forecasts slow recovery to take hold for the next year unless strong policy measures are taken. However, it suggests that recovery may be slower than in other recession, titling the present worst than post-World War-II. Among the advanced economies, which are expected to witness growth whittled down by 3.8 percent, the worst hits will be the United States of America and the European zone. USA will see contraction in economic expansion by 2.8 percent.

The decline in growth in developed economies remained historical during the fourth quarter last year and it was an average 7.5 percent. The projection for first quarter of this year is that gross development products would tumble down with the similar pace. The IMF report released on April 22 expects emerging economies will experience average growth of 1.6 percent that would shoot to four percent next year. "Sub-Saharan Africa will remain in positive territory at 1.7 percent in 2009, recovering to 3.9 percent next year." China, India, and Middle East are expected to defy the financial and economic downturn and continue to experience outputs build-up by 6.5 percent, 4.5 percent, and 2.5 percent, respectively.

A lesson for Pakistan is that there is an urgent need that ministry of commerce gears its endeavours towards exploring international markets, which somehow managed to escape global recession spillovers. This is in addition to expand range of non-traditional exportable products. Comprehensive trade policy is needed to increase exports. Pakistan's exports to African region was $1.13bn in FY08 while to American region including USA, Canada, Mexico, Argentina, etc. and Western European region including UK, Germany, Italy, France, etc. it was $4.40bn and $5.02bn. While, Middle East that included Saudi Arabia, UAE, Turkey, Kuwait, etc. imported $3.86bn worth products from Pakistan.

East European region is a potential market for Pakistani products. Trade Development Authority of Pakistan, which is recently mobilized to integrate Pakistan with world's economy, has recognized African, East European, and Middle East countries as potential markets for Pakistani products. Especially, food exports can be increased manifold to Middle East region besides many other untapped foreign markets. While, trade policy 2008-09 brought under discussion the key sectors that are main drivers of export earnings, it did not shift its focus to non-conventional trade initiatives.

Agriculture sector that if restructured can enhance the volume of exports of the country. While restructuring would require heavy investment, infrastructure building, and human resource development, under present circumstances this can be done through promotion of value addition. Pakistan, which is a merchandise exporting country, may spurt its global trade share and insulate itself against global economic doldrums by innovating exportable products. Volatility in commodity prices may affect the economy from import side, but ever-expanding export base readily offsets imbalance of trade, bringing prosperity to the economy.