IS EXPORTS TARGET ACHIEVABLE?

TARIQ AHMED SAEEDI
(feedback@pgeconomist.com)

Jan 2 - 8, 20
12

Total exports from Pakistan rose 7.6 per cent to $9.4 billion in the first five months of current fiscal 2011-12 compared with $8.7 billion in the corresponding period last fiscal year, according to the latest statistics released by the trade development authority of Pakistan (TDAP).

Although there was an uptrend in exports, textile group that is the leading foreign exchange earner for the country registered 1.3 per cent drop in exports in July-Nov 2011.

Textile exports earned the government $5.02 billion as against $5.08 billion earlier. The decline though slight was a cause of concern for the bed wear and knitwear sectors that saw 4.33 per cent and 2.79 per cent decline respectively in exports. The government received $900 million foreign exchange in the period under review from knitwear exports as against $926 million in the comparable period. Similarly, bed wear exports earned the government $797 million in comparison to $833 million, as per the statistics.

Industrialists are anticipating further decrease in textile exports if the problems facing the textile are not addressed.

While energy crisis is the main agent of eroding the competitiveness of Pakistani textile goods in the international market, correction in currency policies by the regional competing economies is also one of the reasons. Sri Lanka and India are encouraging depreciation of currency value against the US dollar to give benefits to the export sector.

Uninterrupted gas and electricity load shedding is seriously disturbing the industrial production. A number of textile companies are carrying considerable attrition creating employment issues domestically and problems in meeting global demands. Complete shutdowns of textile units have also widely been reported in Faisalabad and other major economically active cities of the country.

Industrial production dropped 0.1 per cent in the last financial year due to the energy crisis, according to an annual review by the state bank of Pakistan (SBP). The situation is getting worst day by day. A minister has already warned of continuation of energy problems this year too.

Time is running out and the government has to do something to save the industrial load sustainability that is waning each passing day, evident from the rampant accumulation of nonperforming loans in the leading exporting sector of textile.

Exports of cotton yarn also tumbled significant 13 per cent in the five months of this fiscal year to $639 million from $740 million in the corresponding period last fiscal.

The remarkably heavy rainfalls during July-September 2011 wreaked havocs to the agriculture production in Pakistan. The heaviest downpours were recorded in Sindh province varying from 400mm to 1000mm. First cotton picking has been finished before the rainfalls, which staved off full destruction of cotton crop. However, 80 per cent of cotton crop was damaged in the affected districts of Sindh, according to the United Nations food and agriculture wing (FAO). The loss was estimated at 2.239 million bales.

The demand of ban on import of cotton yarn got louder because of the shortage of yarn in the market and subsequent price rise. Towel manufacturers have been calling for ban on yarn exports. Towel exports declined almost two per cent in July-November.

There is a hope of recovery. More than 14.8 million bales are expected in the ongoing season and that may augur well for the textile sector, experts said. In contrast, the cotton crop assessment committee (CCAC) has set cotton production estimate for 2011-12 at 12.6 million bales. Last year, the country missed the target and produced 11.7 million bales.

Rice that is one of the top exportable commodities witnessed bearish spell in exports in the five months of ongoing fiscal year. During July-Nov, rice exports slid nearly 25 per cent, as per the TDAP's data. Rice excluding basmati fetched the government only $368 million as against $407 million earlier, showing 9.4 per cent decline. Basmati rice exports decreased $283 million from $289 million, down 15.6 per cent.

The flood has also damaged 0.284 million tons rice crop in the affected areas of Sindh, which recorded 1.2 million tons rice production in 2010. Inundation of Indian rice in the international market is known as one of reasons of low exports. The Indian basmati paddy has competitive price tag as compared to its Pakistani competitor super basmati variety.

As the government of India has lifted ban on private companies to ship non-basmati rice, it is expected to export four million tons in its fiscal year started from April 1. The government imposed ban in view of the global food crisis back in 2008.

According to US Department of Agriculture, India that is the world's second largest rice producer has become the world's third largest shipper meeting 11 per cent of global demand last calendar year, outpacing its rivals US and Pakistan.

Pakistani exporters do not fear overpowering of their shares in the foreign markets by Indian counterparts, anticipating healthy production this financial year.

Too, "shipments from Pakistan may exceed four million tons in 2011-12, Bloomberg reported Shamsul Islam Khan, a board member of the rice exporters association of Pakistan (Reap) as saying at a conference in Singapore. "Production may surge 38 per cent to 6.5 million tons in 2011-12, he said.

In its report, FAO has also endorsed the viewpoint of REAP's official, forecasting similar volume of production. However, it projects exports at three million tons.

Trade Policy 2011-12 has set export target of $26 billion. In view of the five-month records, the achievement will not be a cakewalk until the issues facing the export sector are resolved immediately. Pakistan's export revenue is entirely dependent on textile and agriculture sectors. If the two sectors perform well, exports go more than expected. In addition, early resolution of tariff and nontariff barriers in exporting destinations will be a boost. The government has to speed up the materialization of new regime of bilateral trade with India. There should be a move forward from free and preferential trade agreements.