MISLEADING EXPORT-LED GROWTH MODEL
Nov 1 - 7, 2010
Trade policy (2009-12) lays much stress on export-led growth model without attempting to identify the imperatives of such a model. Export values vary according to the level and quality of value-addition which, in turn, are dependent on the level of technological advancement attained by a particular economy.
Given the potential of agriculture sector, Pakistan should have been in a position to produce surplus food, but per hectare yield ñ one of the lowest in the world - prevents the country from attaining that level. Lack of capital formation, low literacy rate, and absence of vocational training facilities relegate the country to the category of below-average producers in the world agro community. The same holds true for the manufacturing and other related sectors. Instead of making conscious and worthwhile efforts to make Pakistan's economy knowledge-based, we have chosen to maintain the status quo with the result that our cumulative economic efforts fall short of the sustenance level.
IMF, World Bank and ADB programs coupled with the occasional flow of aids and grants from the world community keep the country just afloat.
Export sector, apart from being dependent on backward and uneconomical production methods, suffers from the lack of diversification and poor marketing efforts. Pakistan Economic Survey 2009-10 summarises export performance in the following words: "During the fiscal year 2009-10, country's major exports followed previous years' trend of being concentrated in five items (cotton manufacturers, leather, rice, synthetic textile and sports goods). These five categories account for 70.9 per cent share in the total exports during July-March 2009-10. Intensity of concentration further deepens when analysed within these five export items, as 51.3 per cent contribution in the total exports came from cotton manufacturers during July-March 2009-10.î
The lack of diversification and overdependence on textile sector has harmed the economy in various ways. Given the sustained export performance, the dominant textile sector should have been in an economically sound condition. However, the sector, despite enjoying various subsidies, has failed to establish itself as an economic force to be reckoned with.
TABLE-1: MAJOR EXPORTS (PERCENT)
. JUL-MAR Commodity 02-03 03-04 04-05 05-06 06-07 07-08 08-09 08-09 09-10 Cotton Manufacturers 63.3 62.3 57.4 59.4 59.7 51.9 52.2 52.3 51.3 Leather 6.2 5.4 5.8 6.9 5.2 5.8 5.4 5.6 4.3 Rice 5.0 5.2 6.5 7.0 6.6 9.8 11.2 11.4 11.4 Synthetic Textiles 5.1 3.8 2.1 1.2 2.5 2.1 1.6 1.4 2.4 Sports Goods 3.0 2.6 2.1 2.1 1.7 1.6 1.5 1.5 1.5 Sub-Total 82.6 79.3 73.9 76.6 75.7 71.2 71.9 72.2 70.9 Other Items 17.4 20.7 26.1 23.4 24.3 28.8 28.1 27.8 29.1 Grand Total 100 100 100 100 100 100 100 100 100
Cotton and rice, the main products of strong natural resource base, account for 64 per cent of total export meaning that Pakistan has still to go a long way to transform its natural resource economy to knowledge-based economy.
In order to produce high quality, exportable goods, under sectors like leather, synthetic textile and sports, we need to have a high level of technology and suitably educated human capital. A consistent drop in the volume of export from these sectors further substantiates the view that export-led growth is only possible under a knowledge-based economy. One redeeming aspect is that the export of other items is picking up on a consistent basis vis-a-vis an almost equal drop in textile exports. From diversification point of view, this is a good sign.
The trade policy envisages promotion of agricultural development through exports. We have read and heard much criticism of the previous government's policy thrust on consumption-led growth. The critics of the policy offered production-led growth as an alternate model. The trade policy offers yet another model namely export-led growth model. All three models essentially encompass production. Export necessitates value-addition either to the domestic or imported goods and material.
We know that every country produces what it can and should in line with its resource base and technological competence. A predominantly young nation, immense agriculture potential and ample coal and water resources are Pakistan's strengths. We can produce surplus food and energy. Focusing these two sectors will give us a kick start after which we can create huge export surpluses.
Until we are able to produce these surpluses, our focus on exports will take us nowhere. Cotton and yarn producers will keep on exporting their produce leaving the domestic value-added textile high and dry. Meat products, fruits, and vegetables will continue to move to foreign markets leaving the masses in the grip of inflation and hunger.
TABLE-2: ECONOMIC CLASSIFICATION OF EXPORTS
(RS IN MILLION)
VALUE SHARE% VALUE SHARE% VALUE SHARE% 2000-01 67783 13 81288 18 389999 72 539070 2001-02 60346 11 80438 14 420163 75 560947 2002-03 71104 11 71321 11 509777 78 652294 2003-04 70716 10 83361 12 554959 78 709036 2004-05 02018 11 86483 10 675586 79 854088 2005-06 112268 11 106029 11 766543 78 984841 2006-07 113954 11 121930 12 793428 77 1029312 2007-08 171670 14 127090 11 897877 75 1196638 2008-09 226324 16 130612 9 1026781 74 1383718 Jul-Mar 2008-09 172476 17 97281 9 766710 74 1036466 2009-10 214702 18 124340 11 837347 71 1176388
Table-2 might give a false impression that around 75 percent of the country's exports comprise manufactured goods and therefore Pakistan may be categorised as an industrial economy. The fact, however, remains that the low quality of value addition does not give the country a competitive edge required to fetch right prices in the export market.