Struggling exports in a squeezed space

227

PAKISTAN’S export sector has been sliding for a few years now amid global economic slowdown and domestic problems like a high cost of doing business, unreliable energy supplies and underlying inefficiencies of the private sector.

In fiscal year 2015, exports were down about 4.8pc to $23.9bn from $25.11bn in 2014. The $27bn target set for FY15 was missed by a wide 10pc margin.

Similarly, in fiscal years 2013-14 and 2012-13, the export targets were also missed.


A cursory look at the trade numbers suggests a widespread downfall in terms of both export values and quantities. Among the list of 74 exportable items, 65 items declined or stagnated in export quantities and 62 in export value


The current year seemed to be toughest so far. Overall exports in first half of the current fiscal year struggled at $10.3bn, down 14.5pc from slightly over $12bn of the same period of 2014.

The share of export earnings in the country’s foreign exchange reserves is declining and contributing significantly to the external account deficit.

A cursory look at the trade numbers suggests a widespread downfall in terms of both export values and quantities. Among the list of 74 exportable items, 65 items declined or stagnated in export quantities and 62 in export values. Exports of only nine items increased in terms of quantities but could not make a mark because of fall in commodity prices while 12 items earned better prices.

Food exports dropped by 10.6pc in first six months, and was led by 11pc fall in rice and 28pc in Basmati. The rice exports fell by 11pc in dollar value to $1.8bn despite about 15pc volume increase. Wheat and vegetable exports improved but the export earnings were insignificant.

Textile sector exports fell by about 9pc in dollar value in first six months and almost all its productions declined both in quantity and value terms. Petroleum Group exports dropped over 77pc while other manufacturing sector exports fell by 20pc.

A major factor for the decline could be found in too much concentration in textile and clothing sector, accounting for 50pc of total exports.

The government policy of securing savings in the power sector by closing down power plants in first two years of its tenure also had a role.

A subsequent policy change that ensured minimum power load-shedding for the industrial sector in the third year has improved production in some sectors like automobiles, fertilisers, chemicals and rubber etc in recent months but these may have a minimal impact on exports.

The prime minister announced Rs3 per unit cut in power tariff for industrial consumers but the notification issued said it would be inclusive of monthly fuel price cut that was interestingly approved at Rs3.83 per unit for next month bills by the power regulator.

Robust wheat and sugar production have not helped exports despite huge subsidies. A recent uptake in the private sector credit may have some lag impact going forward.


Most of the initiatives announced in different trade policies have remained unimplemented


As it happens, the key stakeholders — ministry of finance and commerce — seem to be on different pages. Most of the initiatives announced in different trade policies have remained unimplemented as the finance ministry seemed fatigued by repeated subsidies out of budget and their misuse. A strategic trade policy regime prepared by the commerce ministry for three years (2015-18) also could not move out of files.

At a recent meeting, the commerce ministry explained that exports from Pakistan, China and India were on the decline while Bangladesh was improving.

The commerce ministry believed the global commodity crisis had shifted the demand pattern in major markets, while strong exchange rate against dollar and slower economic growth in China were contributing to sluggish export performance.

On top of that, Pakistan’s state of trade relations with most of its neighbouring nations has clearly hampered potential growth.

The government needs to sit down with the industry under one roof to identify critical issues, rationalise priorities and resolve them on priority instead of sectoral engagements which have so far only created an environment that is far from fair.