GOVT LOWERS THE BENCHMARK TO CLAIM SUCCESS
EXPORTS TARGET CANNOT BE ACHIEVED WITHOUT ADDITIONAL EFFORTS
SHABBIR H. KAZMI
Aug 10 - 16, 2009
The government has announced a three year medium-term (2009-12) Strategic Trade Policy Framework, setting an export target of US$18.84 billion for 2009-10, a 6% growth over last year. The policy also envisages an export target of $20.724 billion for 2010-11 (growth of 10%) and $23.418 billion for 2011-12 (growth of 13%).
The three-year framework focuses on reviving and reforming domestic commerce, diversifying export markets with the European Union, the US and countries, which have signed free trade agreements and promoting trade in services sector.
A fund of Rs3 billion is being established for product research and development for enhancing competitiveness either by technology up-gradation and skill development or by improving system management.
Some of the business leaders say, in view of prevailing global economic recession and financial meltdown, the 6% export growth target is realistic and achievable. The trade and industry is also of the view that the three-year trade policy would allow exporters to chalk out business plan on long-term basis.
However, some of the foreign trade experts and industrialists termed the projected exports target of $18.8 billion with 6% growth 'irrational' in anticipation of further devaluation of Pak rupee against the US dollar and other major currencies in the upcoming months. Experts said the Ministry should have projected exports target of over $20 billion for the current fiscal year keeping in view the declining trend in the size and share of Pakistan's export in the global trade.
The government had projected an export target of $22 billion for 2008-09, which fell short by over $4 billion because of the global financial crisis. Some of the experts say that fixing a target of $18.84 billion for the current financial year is a bad reflection on the performance of the economic managers. In fact, the target is even lower when compared to the initial target fixed for the last year. The 6% growth is based on the actual exports made during last financial year.
The dollar-rupee exchange parity has declined massively since the beginning of last financial year registering a fall of more than 35%. Mian Zahid Hussain, Chairman Korangi Association of Trade and Industry said that in the fiscal year 2007-08 Pakistan's exports were $19.5 billion while dollar was traded at Rs60. During recently concluded financial year exports amounted to $17.7 billion and dollar was traded Rs80. It is important to note that currently the US dollar is hovering around at Rs83.
The new policy offers few incentives to non-textile sector (traditional products), which accounts for 40% of trade revenue. However, it is only a cliché because the past record shows that except a few products/sector not much success has been achieved and whatever has been achieved is only due to efforts of a few exporters. Pakistan's exports are still concentrated in a few products and a few countries. It is often said that Pakistan does not enjoy the desired access level in certain countries but it is only a myth. The real issue is eroding competitiveness of Pakistan in many of the markets. At times Pakistani exporters just cannot compete with Chinese and Indian exporters. While these countries provide many incentives to the exporters, at times policies in Pakistan are against exporters. Despite loud talks for years, the economic managers have not been able to make exports zero rated, no duties and taxes and no rebate.
SEPARATE POLICY FOR TEXTILES
Minister for commerce announced that separate policy would be evolved for the textile sector. Share of textiles and clothing in total export is 60%. The commerce ministry has traditionally been responsible for the promotion of exports while the textile ministry was set up to improve competitiveness and production. It is, however, for the first time that the government has allowed textile ministry to look after exports of the sectors, reducing the commerce ministry's involvement in this sector. It is yet to be seen how the textile ministry meets expectations of the textiles and clothing exporters.
The commerce minister further said that the government recognizes the importance of the textile and clothing sectors. To provide a foundation for sustainable growth, various initiatives are being planned through a separate and first ever Textiles Policy, to be announced shortly. The major thrust of the Policy will be to enhance domestic capabilities and capacities for efficient use of resources through skills development, technology up gradation and provision of infrastructural facilities. Measures are also envisaged for diversification of fibre use and mix. The Policy will take a holistic approach and will contain short-term and long-term measures to support the textiles and clothing manufacturers overcome the current problems created by the global downturn and equip them with necessary ingredients to meet the growing competitiveness challenges of the future.
It must be kept in mind that the policy has been announced in the backdrop of a number of challenges that include infrastructure deficit, particularly in energy, poor innovation and technological infrastructure, low labour productivity, low levels of manufacturing value-addition, little foreign direct investment in manufacturing and export-oriented sectors, anti-export bias in taxation, increasing costs of exports as compared to import and lack of product, and geographical diversification in exports.
The Strategic Trade Policy Framework has to be complemented by detailed policy. However, sector specific policies have to be prepared in consultation with all the stakeholders. In the past, various sectors were offered incentives at the cost of other sector.
One of the key issues is high cost of doing business and financial cost. Tight monetary policies have caused more damage to the trade and industry rather than containing the inflation. It is heartening that lately the central bank has linked interest rate of export refinance with the actual performance. The policy provides reward for better performance. However, there is an urgent need to gradually remove the facility on the export raw materials and intermediate products and offer new incentives for enhancing greater value addition.
A fear shared by many experts is that Pakistan may find it difficult to achieve the export target fixed for the current financial year without restoring the competitiveness of the local manufacturers. The environment is a little hostile but target could be achieved by putting in extra efforts.