UNEXPLORED EXPORTS POTENTIAL

THERE ARE LACKS OF PRODUCT DIVERSIFICATION, VALUE ADDITION, AND HI-TECH INDUSTRIES TO FACE THE FIERCE GLOBAL COMPETITION.

KANWAL SALEEM
(feedback@pgeconomist.com)

June 25 - July 1, 20
12

In the face of growing internal and external challenges, Pakistan is yet to explore its export potential. The country's export sector has shown relatively better performance by increasing share of local products in the international market. The export might have been more than what is being achieved if the conditions especially those due to the energy crises were normal. Export oriented industries have to face hours of load shedding. The prolonged power failure negatively affected the industrial growth in general and export oriented industries in particular.

The energy crises are deepening in Pakistan and no prudent long-term measures have been taken so far to steer the country out of these crisis. However, exporters, despite disappointed by the performance of government machinery, managed to almost reach close to export targets for the year 2011-12.

As per data, Pakistan exports during eleven months of the fiscal year 2011-12, decreased by 3.8 percent. The cumulative trade figure shows that Pakistan's exports during July-May were $21.53 billion, while in the corresponding period of the last fiscal year, exports were $22.39 billion. Imports during July-May 2011-12 were $40.93 billion as compared to $36.55 billion during the same period of the year 2010-11, registering a 12 percent growth. On the other hand, exports during May 2012 were valued at $2.16 billion, which was 5.96 per cent lower than the level of $2.3 billion during May 2011.

A study reveals that Pakistan possesses sufficient potential (on average) to expand its trade with Australia, Austria, Bangladesh, Canada, China, Germany, Denmark, Spain, France, the UK, Japan, Hong Kong, Italy, Iran, Korea, Kuwait, Sri Lanka, Malaysia, New Zealand, the Philippines, Sweden, and Switzerland. However, the maximum trade potential exists with Norway and Brazil. In contrast, Pakistan's actual trade has exceeded the predicted level for many countries, for instance, with Chile and Mexico.

As per estimates, Pakistan has the highest trade potential with partners in the Asia-Pacific region (ASEAN) followed by Western Europe, the Middle East, Latin America, and North America. Pakistan needs to explore ways and means to enhance its trade relationships with these regions/countries. In any case, Pakistan will have to improve the quality of its exports and minimize the cost of production to enable it to compete well in the international market.

Analysts told PAGE that the country's exports base is extremely narrow. The cotton group alone contributes about 63 per cent of its exports earning. The other three items namely leather, synthetic made ups and rice contribute about 15 per cent of total exports. Unfortunately, they said these four items are relatively low value added product.

According to them, Pakistan has not made much progress in increasing the number of products. Pakistan is also yet to enter in hi-tech exports.

They said, Pakistan is lagging in product diversification, value addition diversification, hi-tech industries to face the fierce global competition, faced with lower per cent share of industry in GDP. The government needs to take the following measures for export promotion.

Diversification of product and market: At present, our exports are highly concentrated in five products namely cotton, leather, rice, synthetic, textiles and exports which account for 78 per cent of our exports. These items are generally of low quality and low priced in the international market compared to other competitive countries. Pakistan is gradually moving towards not only higher value added products in export of textile manufactures but have added 10 more sectors like engineering goods, marble and granite, fisheries, IT and finance and accounting services etc., for increasing earning in exports. In addition to diversification of products, new markets for the Pakistan's goods must be explored in African countries, South America, Russia Eastern Europe etc.

Value addition in exports: Pakistan's share in international trade is merely 0.12 per cent. For increasing exports, it is necessary that it should move towards higher value addition in exports. Pakistan is importing new machinery for quality improvements in textile manufactures, leather jackets, and other products so that its exports should grow.

Cluster development: If there is a concentration of small and medium enterprises producing related goods, it helps the industries in complementing each other resources and exports. The government of Pakistan is providing loan and building infrastructure to develop light engineering industry to Gujranwala and Gujrat, cutlery industry of Wazirabad, sports industry of Sialkot, marble industry of Karachi. If the businesses succeed in improving the quality and quantity of their produce, it will help in increasing the volume of exports.

Brand development: The Trade Development Authority of Pakistan (TDAP) must persuade the exporters of textiles, leather garments, rice, and sports goods to develop their own brands and labels for their products. The highest level of value addition occurs when products are sold under a brand name.

Improvement in physical and financial infrastructure: The government should invest heavily in the improvement of physical and financial structure including shipment, clearance, cargo space, handling at the parts and airports for smooth flow of export and import of goods.

Incentives for gems & jewellery sector: In order to increase exports of gems and jewellery, it has been declared as an industry. The sector has now easy access to credit and avails the advantages in utility rates and taxes. The reduction in cost of production will make these goods competitive in the international market and help in promoting trade.

Improving skill development: For increasing exports, stress should be laid on increasing labour productivity through education, on the job training, skill up gradation and importing new knowledge and latest techniques. This will help the businesses to produce higher value added goods at low labour unit cost.

New era of exports: Pakistan should prepare itself rapidly for the new era of exports where hi-tech and information technology has major role to play.

Export of horticulture products: For increasing export of perishable horticulture products, the setting up cool chains and cold storages must be encouraged in the country.

Warehouse city: Modern warehouse house city must be set up with public private partnership and run by professional management.

Neglected regions: Focus on trade should be on neglected regions of the world.

The government needs to play the role of facilitators for the trade and industry for exploring true trade potential. The basic needs of export-oriented industries must be fulfilled to help them grow.