EXPORT GROWTH SANS ECONOMIC PLANNING

SHAMSUL GHANI
(feedback@pgeconomist.com)
Aug 29 - Sep 11, 2011

FY11 has brought some good news on external economic front; our total exports have almost touched the record $25 billion mark with textile exports going up from $10.2 billion in FY10 to $13.8 billion this year.

Is this upturn in exports sustainable? No. The reason is that a major part of growth represents unusual escalation in the international prices of cotton, and hence cotton made-ups, during the concluded financial year.

WORLD EXPORTS & IMPORTS 2010

COUNTRY EXPORTS
(BILLION US $)
RANK IMPORTS
(BILLION US $)
RANK
World 14,920 - - -
European Union 1,787 - 1,977 -
China 1,581 1 1,327 2
Germany 1,303 2 1,099 3
United States 1,289 3 1,936 1
Japan 765 4 639 4
France 517 5 591 5
South Korea 464 7 422 10
United Kingdom 410 9 561 6
Russia 400 10 249 18
Canada 393 11 401 13
Hong Kong 389 12 437 8
Singapore 358 13 310 14
Mexico 299 14 306 15
Saudi Arabia 238 18 88 31
India 225 20 359 12
Australia 211 21 195 20
Brazil 202 23 182 21
Malaysia 210 22 156 27
UAE 198 24 159 26
Thailand 194 25 161 25
Indonesia 158 29 127 29
Turkey 121 32 177 22
South Africa 86 36 82 34
Iran 84 37 59 44
Vietnam 72 39 80 35
Israel 56 49 58 45
Philippines 51 53 61 41
Iraq 48 56 41 52
Pakistan 21 66 32 58
(Source: CIA World Factbook)

Almost 70 percent of the textile export growth has come from the said cotton price hike. The cotton prices having come down as fast as they hade gone up, the price-based export growth will have to be made good by volume-based growth. This is no doubt a tall order.

The ominous signs have started to show up as during July 2011, the textile exports recorded a fall of 15 percent in comparison to June 2011 figures.

Not that all is gloomy on the export front. Some positive developments on broadening of non-textile product base and deepening of market access in the Asian region have taken place.

Among the top ten export-money-earners, cotton and textile alone contribute around 55 percent. The other nine top-earners (rice, petroleum products and coal, leather and footwear, chemicals and pharmaceuticals, fruits and vegetables, cement, jewellery, sports goods, and wheat) have contributed to the extent of 30 percent to the export earnings.

The remaining 15 percent has come from such items as surgical instruments and engineering goods, food-related products, fish, meat etc.

While looking for a broader export product base, we will have to have a clear demarcation between economic and social goals.

Our poverty figures are relentlessly rising. To keep these figures in check, we will have to keep our eyes on food security goals. We produce sufficient food and clothes to look after our bellow/close to the poverty line population.

Wheat has recently been added to the export list as a doubtful starter. Our wheat production is very close to our annual requirement. Even in bumper crop years, we will have to give a lot of thought to decide between the two alternatives: export or inventory upgrading.

Similarly, fish and meat are the basic food items that act as a firewall against malnutrition - the unmistakable cause of rising hunger and poverty.

By over exporting wheat, fish, meat, fruits and vegetables, we are very likely to raise serious issues of social dimensions. We need to be very clear in our economic policy measures regarding the extent of export of such items that can destroy our social balance.

Export-led growth model does not tell us to export every thing that is exportable. We must set ground through prudent economic policies for a balanced, maximum economic output to create such surpluses that are in demand across the world.

Another positive development that has recently surfaced is the deepening of market access. Traditionally, our export markets were concentrated in US and European regions.

The export policy, beside other imperatives, is usually guided by such factors as closeness to the market place to minimize on transportation costs, product shelf life and time required to deliver it at the nominated destination, any bilateral consideration that binds two economies to act in concert for mutual economic benefits.

The gravity model also warrants elimination of cost and time overruns. Our economic planners seem to have reconciled to the realities of gravity model.

The destination-mix used in export business last year consisted of US, UK, Germany, Italy, Belgium, Turkey, China, UAE, Bangladesh, and Afghanistan.

The destination-based diversification is a welcome sign and needs to be focused on. While our relations with India are not so sour these days, positive efforts to rope in the biggest democracy with a huge market and excellent growth potential should be made.

With the opening of Chinese bank in Pakistan, our financial linkages with this time-tested friend will be formally developed. These linkages will go a long way in furthering our external sector relationship with China.

The issue of ant-dumping duty with Turkey should be resolved in earnest to broaden the scope of Pakistani exports to this friendly country.

On product side too, we need to further diversify to reduce our dependence, to some reasonable limit, on a single sector - textile. Services sector contributes around 60 percent to our GDP but its representation on export front is minimal.

The diversification policies should aim at a larger contribution from this sector by including in export mix as many products from services sector as possible. Transport, communication, finance and IT are the most probable contenders.