HOW TO INCREASE EXPORTS?
THE COUNTRY HAS THE RESOURCES BUT BAD POLICIES OF THE GOVERNMENT ARE KEEPING CAPACITY UTILIZATION OF EXISTING CAPACITIES PATHETICALLY LOW AND RENDERING LOCAL MANUFACTURERS UNCOMPETITIVE IN THE GLOBAL MARKETS.
SHABBIR H. KAZMI
Aug 29 - Sep 11, 2011
Achieving US$25 billion export target for the financial year 2010-11 has encouraged the government to fix a target of US$28 billion for the current financial year.
While the policy planners may have their own reasons to fix the target, some of the experts are of the opinion that the planners seem to have completely ignored the changed ground realities.
Last year's quantum jump in exports was mostly due to hike in global cotton price that came down by more than 30 per cent this year.
On top of all, textiles and clothing units face prolonged outages of electricity and gas, which do not allow plants to be run on optimum capacity utilization, add to cost of production and erode competitiveness of the local manufacturers.
An interesting debate is going on regarding probability of achieving the target. The stakeholders are examining the factors that can help in achieving the target as well as those which could shatter the dream.
The real test of the policy planners and business community is when the circumstances turn hostile.
However, one can form his/her own opinion by looking at the argument put forward in the support and opposition of the premise. Let one point be very clear that only those nations progress, which are ready to face the challenge and try to achieve the best even under the most hostile conditions. Therefore, it entirely depends on the stakeholders to respond to the prevailing adversities.
To begin with, it is necessary to examine the key strengths enjoyed by Pakistan. The country has an elaborate agriculture, manufacturing, and services infrastructure. According to the International Monetary Fund (IMF), the country is required to achieve 4.5 per cent GDP growth rate during the current financial year as against a growth rate of 2.5 per cent achieved last year.
This alone suggests that extra efforts have to be made to accelerate the growth rate, which will automatically yield enhanced output as well as value addition in all the three segments.
On the face of it, it seems difficult but with focused effort to remove the irritants and key impediments and providing the right incentives can help in achieving the target, which otherwise look a little difficult to achieve.
Believing that this year's monsoon does not prove as devastating as last year, the country is likely to achieve bumper crops of wheat, rice and sugarcane but one has to wait till monsoon season is over to estimate the size of cotton crop.
According to some reports, standing cotton crop in Badin district of Sindh has been damaged severely but no details have been made available about Sanghar the highest cotton producing district of Pakistan. Disbursement of agriculture loans to the tune of Rs300 billion among the farmers should be enough to making timely purchase of fertilizers, seeds, pesticides/insecticides and implements.
Therefore, the country can achieve not only food sufficiency but also enhance export of wheat and rice and also avoid import of cotton and sugar.
However, the country will be forced to import urea, despite having achieved capacity to produce exportable surplus of half a million tons, at least.
Good cotton and sugarcane crops will in turn improve production and productivity of two agro-based industries, textiles and clothing and sugar.
Pakistan managed to achieve sugar output of over 3.5 million tons during last crushing season. It would have been higher had the government been successful in containing production of gur.
If export of textiles and clothing for last year was driven by higher cotton price, this year focus should be on achieving higher unit price realization through greater value addition.
This requires complete ban on export of raw cotton, yarn and unprocessed cloth to facilitate garments manufacturers to focus on improving quality, abide by delivery schedules and spend more time on overseas marketing rather than sourcing raw materials.
It is also necessary to identify the key impediments. While one can prepare along list of what needs to be done, the immediate focus should be on ensuring uninterrupted supply of electricity and gas at affordable costs.
At present, electricity tariff is on the rise despite crude oil prices on the decline and electricity outages range from 10 to 16 hours.
Gas supply to manufacturing units remains suspended up to three and half days in a weak.
One just can't keep on crying over spilt milk but has to take immediate remedial steps. The government must immediately ask Pakistan electric power company (Pepco) to immediately stop 'energy saving campaign' being run in print and on electronic media, costing billions of rupees. Similarly, distribution of free of cost energy savers must also be stopped immediately. In all prudence, this money should be used to resolve circular debt issue plaguing the entire energy sector and economy of the country.
Since adding new power generation capacity is not possible in the short term, sugar mills should be given the status of independent power producers (IPPs).
According to the experts, mills are capable of delivering 3,000MW to the national grind. The only stumbling block is that the government is not ready to offer them the bulk power purchase rate being paid to the IPPs.
One fails to understand the logic because lately the government agreed to double the tariff paid to rental power plants (RPPs) and released them billions of rupees advance payment.
At present, the RPPs are contributing around 130MW, which can hardly make any contribution in overcoming the existing shortfall.
In many countries, the government offers incentives. Local manufacturers are not asking for any favor but demanding the basic facilities needed to run the business. On top of energy crisis, the latest trouble is precarious law and order situation in Karachi.
Only the government has the capacity and resources to round up the culprits, especially those demanding booty and failure to pay could cost the person his life or burning of the factories and shops.