EXPORTS: CHALLENGES AND OPPORTUNITIES
Feb 14 - 20, 2011
Agriculture sector remains the major export revenue spinner and Pakistan's economy is yet to be diversified despite passage of 62-year of its existence. The main agriculture based exports are cotton, cotton products, and rice. Despite the two natural calamities: 2005 earthquake and 2010 devastating floods, the economy has shown resilience and exports grew 22 per cent.
But, everything is not going well with economy. Weak exports, domestic political uncertainty, ongoing energy crisis along with unstable law and order situation in neighboring Afghanistan have multiplied problems of textile-reliant export base of Pakistan.
Pakistan's trade deficit stood at $ 8.14 billion in July-December 2010 in comparison to $6.89 billion during the same period last year, according to data released by the Federal Bureau of Statistics. Exports jumped by 20.63 per cent from $9.09 billion to $10.97 billion in the first half of the current fiscal year. Imports during July-December were up by 19.58 per cent to $19.12 billion from $15.99 billion.
Economists believe that incompetent bureaucracy is a cause of the current state of affairs. Instead of dealing this promising and revenue generating sector on modern standards, it is just using conventional methods. Neighboring India is earning over $6 billion of software exports. Another dominating reason of uncompetitive exports of Pakistan is energy crisis, which resulted in higher cost of manufacturing.
It could be a very good opportunity for Pakistan to increase its share in global food market. India tries - instead of exporting food items to international market - to meet domestic demand.
Good news for Pakistani exporters is an opportunity provided by EU for 3 years in terms of concession in duties on 75 items. Mohibullah Shah, the former CEO of the Trade Development Authority of Pakistan (TDAP) is satisfied with the move of EU. "The EU has made a good move to support Pakistan's economy. However, this is just the beginning and we need to go a long way," he said.
Government circles were expecting more - but something is better than nothing. Now the responsibility lies on the shoulders of exporters to meet EU's quality standards.
Government is also negotiating with Japan, Canada, and Australia to gain export incentives in line with the EU. These efforts should be encouraged. So that mistrust between industry and government could be minimized. There is no doubt that our export products follow international standards but the focus should be given to abolish illegal practices which were adopted by some exporters in past.
If our government manages with the help of exporters to generate $4 billion additional revenue, it will ease some problems of unemployment in country and bring a sign of relief for the hard-pressed economy. After a ban on fisheries slapped by EU, Pakistani exporters are successful in capturing Middle East markets; the ban proved a blessing in disguise.
Being 4th largest producer of mango after China India and Brazil, with top class quality, Pakistan can increase exports up to 500,000 tons. To achieve this goal, the government has to take initiatives to establish one window export facility in major mangoes producing areas in Pakistan as other countries are already facilitating their exporters.
No nation can think to increase exports without developing human resource. We have examples of those nations who have educated their population with long term objectives. Germany, which was completely destroyed during Second World War, was export champion for many years. I had the chance to monitor closely the achievements Germany made even in period of global financial crisis and ongoing EU debt crisis.
Innovation is the key to success in export business and it could only be realized by close collaboration between industry and academic institutions. In my university, we have every year innovation competition among students and it was financed by local chamber of commerce. Students were required to make a product commercially producible. Another example of German based company is Henkel that regularly conducts innovation challenge events to gather unique practical ideas from young students across the world.
It is common practice to utilize research papers and PhD thesis for commercial purposes in developed countries. Unfortunately, we did not emphasize could not explore this area so far. Insignificant number of universities has started to cooperate with industry but shelves of most of the universities are filled with these research papers. We have to equip our workers with latest industry related skills, so that they can compete with India and Bangladesh. Focus should be given on research and development and it could only be achieved by public private partnership.
It is the right time for Pakistani industry to pay attention to value addition instead of exporting semi-finished products. Our government has to search untapped markets like Africa instead of being dependent on few countries. Our embassies and missions abroad can play an important role if we make them result-oriented.
Moreover, we can reduce balance of payments deficits by encouraging small and medium enterprises. Already small and medium enterprise development authority (SMEDA) is working in Pakistan, but its operational area is limited and the scope of its work should be enhanced. Empirical results show that success lies in the promotion of small and medium businesses.
Under the given circumstances, Pakistan can still add value to existing products. For example, instead of exporting leather, we can export it in form of jackets and shoes etc. We have to go one step further in textile sector, from semi valuation to fully valued goods. Enhancement of per acre yields of agriculture land is desperately required not only to fulfill the local demand but to export food items. To achieve this target, farmers should be educated about the use of modern cultivation techniques. We use excessive water on farmlands.
Mainly there are five factors, which play a vital role in the development of any country: education, science and technology, and entrepreneurships. Successful and leading nations always create opportunities from adverse circumstances instead of waiting for good time, which never comes to those who wait for it.
The writer is a student and working in Henkel Germany.