PRODUCING EXPORTABLE SURPLUS
FOCUS HAS TO BE SHIFTED TO HIGH VALUE ADDITION
SHABBIR H. KAZMI
Aug 10 - 16, 2009
In an attempt to contain trade deficit the successive governments have been changing their policy stance from import substitution to trade concessions. However, the record shows that the countries which were far behind Pakistan in the past have succeeded in enhancing their market share in the global markets whereas Pakistan is still struggling to maintain its market share. This has been mainly because Pakistan's trade policy has always remained tilted towards the favorite groups, which have failed in delivering what they promised. Their demands have increased and often the governments became hostage but always failed in coming up with 'out of the box' policies.
This is also evident in the comments of the business community on the latest trade policy. Chairman, Pakistan Industrial and Traders Associations Front (PIAF) Irfan Qaiser Sheikh, Vice Chairmen Iqbal Baig Chugtai and Khawaja Shahzeb Akram said that business community was ready to supplement all government efforts aimed at revival of the economy but it is writing on the wall that without due consultation of real stakeholders even the easiest targets become hard to achieve. They rightly pinpointed that the government had to revise the export target as the same could not be achieved because of unrealistic approach and ignorance to ground realities. Had the people sitting at the helm of affairs had a little idea of the economic situation they definitely would have consulted the business community well ahead of setting any economic target. It should be a revelation for the policy makers that Pakistan is the only country in the region registering two per cent growth while the growth rate in Bangladesh is five per cent and in India it is 4.5%. They said that tax to GDP ratio in Pakistan is also the lowest in the region which is 15% in Bangladesh, 16% in India, 21% in China while in Turkey it is 28%.
If Pakistan has to enhance its exports it has to identify new exportable products and find new market for these products. While textiles and clothing is likely to remain the major foreign exchange earner, focus has to be shifted from low quality and low price products to higher value addition. Many of the yesteryears' manufacturers and exporters of textiles and clothing have become the net importer of these products. Some of them are still outsourcing production. While India and Bangladesh have made extensive investment to achieve higher value addition in the textile industry, Pakistan continues to export raw cotton, lower counts of yarn, semi fished cloth and stock lots of made ups often fetch very low price.
To identify new exportable products one may not be a rocket scientist but a person blessed with 'common sense'. It has been pointed out repeatedly that Pakistan has the capacity to become a major exporter of sugar but bad policies have made the country sugar importer. Pakistan has the potential and has been exporting sugar in the past. The country has become sugar importer mainly because the industry is working at less than 50% capacity utilization. It has mainly remained a single product industry and exporting one of the most precious product molasses.
Low capacity utilization is mainly due to acute shortage of sugarcane. It is because of two factors 1) cultivation of sugarcane in areas not enjoying favorable climatic conditions and 2) getting half of the yield achieved in India.
During year 2008, Pakistan imported nearly half a million tons of urea fertilizer. It was only because of delay in addition of new manufacturing capacities. Some of the gas fields produce low quality gas (having low BTUs, and relative higher quantity of nitrogen and carbon dioxide). While burning of low quality gas in thermal power plants may yield poor efficiency, this quality of gas is good for urea manufacturing. However, Pakistan has not been able to exploit the benefit of low quality gas despite dedication of Mari gas field for the fertilizer industry. Pakistan can finance the DAP import cost by exporting urea.
Lately, Pakistan has achieved self sufficiency in some of the POL products. Despite this foreign investors are setting up three more refineries, mainly for export. It is true that Pakistan's refineries will use imported crude but the advantage is that the country is surrounded by energy deficient neighbors that include China, India, Afghanistan and even Iran.
Auto sales have declined to nearly half in the domestic market. This provides an opportunity to the local assemblers as well as parts and accessories manufacturers to export CBUs as well as parts and accessories. However, to improve competitiveness of the local manufacturers smuggling of parts and accessories has to be contained. Besides this import duty structure has to be tailored in such a way that cascading does not hit any of the stakeholders.
A comprehensive strategy has to be evolved that enables adding new manufacturing capacities; 2) improving existing units through BMR; 3) regaining Pakistan's competitive advantage; 4) producing exportable surplus and 5) containing cost of doing business. However, the objective cannot be achieved by introducing trade policy in isolation. The strategy must encompass monetary and fiscal aspects.
'Pakistan enjoys enormous potential' is not a cliché but a fact. However, to turn the potential into reality all the stakeholders will have to play their due role. However, the biggest responsibility rests on the shoulders of economic managers. They have to stop criticizing the past governments and make difficult decisions. The added advantage is that international donors are willing to support Pakistan's economic recovery plan.
DR. ANWAR ALI SHAH PRESENTS PAPER IN INTERNATIONAL CONFERENCE IN MALAYSIA
Prof. Dr. Anwar Ali Shah G. Syed, Professor and Dean Faculty of Commerce & Business Administration, University of Sindh, Jamshoro proceeded to Malaysia to represent Pakistan with his presentation "Participation of Small-Medium enterprises (SMEs) in Economic and Social Development: a comparative study of Pakistan and Malaysia" in international conference on Management of Resources in Muslim countries and communities: Challenges and prospects organized by International Islamic University, Kuala Lumpur Malaysia held on August 4-6, 2009.