BOOSTING EXPORTS FROM PAKISTAN
TARGETS CANNOT BE ACHIEVED WITHOUT CHANGING THE MINDSET AND EXTENDING SUPPORT TO THE PRODUCTION OF EXPORTABLE SURPLUS AND ACHIEVING COMPETITIVENESS IN THE GLOBAL MARKETS.
SHABBIR H. KAZMI
Feb 14 - 20, 2011
Critics are clearly divided between two groups. While one says that achieving the export target fixed for the current fiscal year may not be an easy target, the other group says Pakistan can double its exports simply by following a clearly laid down policy. The second group goes to the extent of saying that Pakistan's exports can be doubled over the next five years provided the government stops favoring a few groups having vested interest and work out a comprehensive policy involving all the stakeholders and then follow the plan in letter and spirit. Factors like ongoing load shedding of electricity and gas, persistent hike in interest rates, rising cost of doing business and even poor law and order situation are said to be the key impediments. However, all these factors can be overcome by following a comprehensive strategy and involving all the stakeholders.
To begin with Pakistan should focus on its inherent comparative advantage, being among the top five largest cotton producing countries. The country is capable of producing 20 million cotton bales. At an average production hovers around 12 million bales and at times plunges to 10 million bales. The disappointingly low cotton production is because of improper crop management that includes cultivation of non-certified seed, not applying appropriate dosage and mix of fertilizers, inadequate spray of pesticides and above all bad crop management. Reportedly, this year Sanghar has attained the status of producing highest quantity of cotton equivalent to1.569 million bales, till lately Rahim Yar Khan district enjoyed this distinction. Cotton output in Rahim Yar Khan has gone down mainly because farmers have switched over to cultivation of sugarcane from cotton. This is a bad move which the government should have resisted mainly because climatic conditions of Rahim Yar Khan are not conducive for the cultivation of sugarcane. Because of high temperature and dry climate sugar recovery is significantly low in Punjab as compared to lower Sindh.
Pakistan's largest cash crop is sugarcane and sugar industry is also termed the driving engine of rural economy. However, the grimness of the situation can be gauged from the fact that local mills have an aggregate capacity to produce nine million tons refined sugar but actual production hovers around 3.5 million tons, mainly because of an acute shortage of sugarcane. The result is almost every year country faces 'sugar crisis' pushing the prices to record levels.
Bad planning and ill-timed import of sugar not only forces the government to spend precious foreign exchange on the import of sugar but customers are fleeced due to hording and black marketing of the commodity. Experts say that sugarcane production in the country can be doubled without increasing area under sugarcane cultivation.
If sugar industry operates on optimum capacity utilization, then not only cost of locally produced sugar can be brought down significantly but there will be three added benefits: 1) country can get very low cost electricity by burning baggase instead of furnace, 2) line losses will also be brought down substantially because mills are located closer to the point of consumption and 3) production of E-10 (motor gasoline blended with alcohol) will also help in reducing country's oil import bill. However, none of these benefits can be actualized without increasing sugarcane production in the country.
The key factors responsible for poor yield of different crops include 1) limited disbursement of agriculture loans among the farmers, 2) high interest rate charged on agri loans, 3) absence of comprehensive crop insurance schemes. Despite the best efforts of the State Bank of Pakistan and active participation of commercial banks, insurance company disbursement of agriculture loan hovers around Rs250 billion, a very small amount when compared to the total loans extended to industries. Share of agriculture and manufacturing sectors is almost equal Pakistan's GDP but loan disbursement to agriculture sector is low, partly because of its exposure to natural calamities and partly because of availability of comprehensive crop insurance scheme.
The objective of comprehensive crop insurance scheme just cannot be achieved without formation of a specific pool by the government. The concept is not new and being followed in India for decades.
Many of the experts say that Pakistan should focus more on export of non-traditional products. The policy is good but objective cannot be achieved without creating the required infrastructure in place. This statement could be best understood by referring to two products kinno and fresh flowers. Within tangerine family kinno has a unique taste. Pakistan still has not been able to fulfill certain international requirements. Creating the required infrastructure is not even capital intensive but 'who cares' attitude has been depriving the country from earning millions of dollars from export of kinno.
Pakistan also produces tons of fresh flowers enjoying tremendous demand around the globe but meeting buyers' requirements has always been a key issue. The freshness of flowers is lost in the absence of required packing and logistic facilities. A few exporters, at their own have been able to export fresh flowers but the potential is enormous.
On top of every thing, the freight charged on the perishable goods is prohibitively high and ground-handling facilities are disappointing. A substantial quantity of fresh flowers, fruits, and vegetables goes stale while in transit. This may also be kept in mind that nearly half of the fruits and vegetables gets waste due to the absence of farms to market roads and modern transportation and storage facilities.
Pakistan enjoys exportable surplus in many commodities but failure in developing appropriate packing, ignorance of global food and health laws, presence of groups having vested interest and failure of state owned corporations/authorities responsible for promoting exports from Pakistan has not allowed the country attain the status it deserves.