IS FY12 EXPORTS TARGET ACHIEVABLE?

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)
Aug 29 - Sep 11, 2011

After achieving the exports target worth $25 billion in the last fiscal year 2010-11, Pakistan hopes to achieve the $40 billion export target set for the current fiscal year 2011-12.

The country for the first time has crossed $22 billion export target set for 2010-11. The exports during last fiscal year hit an all-time high of $24.827 billion, showing 28.7 percent increase from $19.29 billion in the previous fiscal year.

The trade deficit widened to $15.587 billion in the fiscal year that ended on June 30 from $15.420 billion over the previous year, showing a marginal increase of 1.08 per cent.

The imbalance in trade is attributed to higher flood-related imports in the months of November-December.

The country's import bill for oil and eatables ballooned by 23.61 per cent in 2010-11 over the previous year, contributing mainly to rising trade deficit, according to the federal bureau of statistics.

The import of petroleum products reached $7.274 billion in fiscal 2010-11, surged by 6.09 per cent from $6.856 billion previously. The import bill of eatables reached $5.086 billion in fiscal 2010-11 against $3.575 billion over the previous year, reflecting an increase of 42.27 per cent.

"We have achieved our target of exports worth $25 billion with the help of the business community and would hopefully achieve our target next year as well with improved performance," APP reported federal minister for commerce Makhdoom Amin Fahim as saying.

The country witnessed a considerable increase in exports during fiscal year 2010-11 despite chronic energy shortages, high production costs and worst law and order situation.

The increase in exports is attributed to the hike in prices of commodities, especially of cotton based textile group products in the international market.

The textile sector, which makes 65 per cent of the country's total export earnings, however appears the biggest defaulter in the fiscal year 2011, according to the central bank. The textile sector has the highest advances of Rs737 billion while 24 per cent of it is in default rate.

Though textile sector enhanced its exports earning by 23 per cent in fiscal year 2010-11, yet it appeared as biggest defaulter with Rs176.5 billion till March 2011, according to the central bank. During the third quarter of 2010-11 (January-March), the default rose by Rs26 billion to Rs573.5 billion reflecting the poor economic performance and worst risk management by the banks.

The central bank has been asking the government to stop borrowing from banking system and leave space for private sector to use the liquidity that could benefit the ailing economy. Private sector's total borrowing was just Rs85.9 billion for almost entire fiscal year 2010-11.

The United States remained top trade partner of Pakistan as it absorbed around $4.1 billion exports in the last fiscal year 2010-11. The official US Trade Representative in the report 2011 regarded Pakistan's high exports to tariff concessions on imported inputs and income and sales tax concessions. It is for the first time that the country got good response on non-traditional exports particularly mangoes not only in the U.S but also in U.K., Australia and other countries.

Exports to the United States climbed up by 15.2 percent to $4.101 billion in FY11 against $3.56 billion in the preceding year, according to the State Bank of Pakistan's (SBP).

The balance of trade between the two countries is in favor of Pakistan as it imported consignments worth $1.119 billion during the last fiscal year.

The other leading destinations for Pakistani products included the United Arab Emirates ($1.855 billion), Afghanistan ($1.864 billion), China ($1.645 billion), United Kingdom ($1.277 billion) and Germany ($1.216 billion).

Pakistan has also begun mango export to other countries expecting export of more than 150,000 metric tons of mangoes, most of it through sea and about 22,000 tonnes by air.

This month Pakistani mangoes recorded their debut on US land after all barriers in mango export have been cleared. This year, around 60 tons of Pakistani mangoes would reach the U.S., the world's largest mango importer. American authorities have designated only one port of entry, Chicago, for Pakistani mangos; from there, the imported fruit must be shipped to a facility in Iowa for irradiation treatment to destroy bacteria and insects.

Pakistani mangoes made their way to Chicago with their unique fragrance and sweet flavour, as the first Pakistani shipment landed Chicago earlier this month.

"We have successfully completed the process which involved a lot of stages....we went about methodically, identifying the various steps to make this push for mango export to the US see light of the day," APP reported Husain Haqqani, the country's ambassador to the United States as saying.

The stringent standards for export has so far blocked entry of Pakistani mango into the U.S. market.

Local fruit exporters estimate that shipping and handling costs come to $22 for a case of about five pounds of mangos.

Unless the exporters are given more options for shipping and irradiation destinations to bring down costs, U.S. importers will be reluctant to commit. Till June, US buyers were reluctant to import Pakistani mangoes due to high cost and other barriers.

Animal Plant Health Inspection Service (APHIS), a subsidiary of US Department of Agriculture (USDA), approved only Sadex Corporation for the handling of Pakistani mangoes once they arrive in the US. APHIS has very extensive requirements, which create a lot of risk factors, affecting the prospects of mango import from Pakistan.

The analysts argue that though the U.S has withdrawn a ban on imports of Pakistani mangos, yet few mangos are likely to make the transatlantic trip this year due to high transportation costs and strict regulations. The U.S. Agency for International Development (USAID) has spent $3.1 million to help Pakistani mango growers get their fruits ready for export.

Under USAID supervision, 80 Pakistani mango farm owners received training and funding to streamline sorting, washing, packaging and storing processes so that the fruits meet global certification standards.

Though first shipment from Pakistan has been sent to Japan, yet mango exports on a commercial basis to Japan would start next year for which a new vapor heat treatment plant would be installed.

Trade development authority of Pakistan started a drive in early 2010 to make a vapor heat treatment plant, provided by Japan in 1981, operational.

Before the start of exports to Japan, around 400 kg of mango was processed in the plant. Local exporters hope that the Japanese mango market could be worth three to four million dollar for Pakistan in the next five years, as there were only a few countries, which met Tokyo's quality standards.