Three things need to be done to boost the exports of any country. One- Quality products, competitive prices- mass production and well organised industries. Two- modern technology and innovation is required to produce high quality products and fresh investment to modernise the manufacturing base. Third-easy access to capital and markets by export oriented industries and exporters.
Pakistan is no different. Pakistan lacks in all three basic ingredients to boost exports. The exports of almost all the countries in South Asia are on the rise. Unfortunately with Pakistan, the case is opposite. Pakistan saw nearly $5 billion drop in its exports during the five years of PML-N government.
Pakistan needs to invest in modern technology-innovations and skilled labour. Pakistan needs to produce high quality products to compete in the global market. Pakistan also needs to look beyond the traditional markets in Europe-North America and Middle East to find new markets for its products.
We failed to increase our exports to become export oriented economy instead of import and consumer economy on two accounts. Our policy makers failed to initiate industrialisation in the country to boost exports. We also failed to tap the large market of China.
To boost our exports- focus must be on the productivity. Exports will increase slightly without enhancing the productive capacity. Modern technology and innovation is key to produce high quality products and to increase the productivity.
The real solution lies in boosting exports and in-turn boosting manufacturing, job creation and a more equitable wealth distribution. Exports thrive on creating productivity through increased rewards to the low –tier work force, thereby creating upward mobility in a society.
There has certainly been a lot of rhetoric by the present economic managers on how they consider export to be a key growth driver of the economy and that they would like to focus on increasing it, the trouble is that in today’s competitive world, increasing exports is a science that requires expertise.
The present economic team of PTI government appears clueless since they neither have the requisite experience in the field nor do they understand the nuances of a modern day export industry. A simplistic route by way of devaluing the currency will just not do and this is becoming quite obvious by now: Despite devaluing the Rupee for nearly 46%, the exports have shown a modest 4% increase in last 17 months.
The world trade has increased enormously since World War II. It increased many manifold since the rise of globalisation in 1980s.One thing that we can learn from the increase in world trade and the countries benefited from exports is that sustainable increase in exports primarily comes through a stable currency and not the other way round.
Without going into the details of its reasoning for now, in our case also the absence of any meaningful growth in exports through Rupee’s devaluation was only writing on the wall. With no real accumulated export surplus in hand and an industry eroded by the damaging policies of former finance minister of PML-N government Ishaq Dar , at best the need was for a devaluation of only about 10%. That was enough to adjust the value of rupee. But the sudden devaluation of more than 30% in few months proved counter-productive.
What we need to focus on to in order to increase the exports is not the devaluation but quality of products and widening base of manufacturing. We need to invest in modern technology and innovations.
Not only will the government need to revisit the policies and measures to see where changes are needed to rekindle interest in exports, but to also restore the entrepreneur’s confidence – the current mistrust between the businesses and governmental institutions is not helping to increase productivity and exports.
Further, a more precise direct strategy will have to be evolved that clearly identifies the strong areas and then backs them with direct support in capacity building and attaining regional competitiveness. As an example, the Ready Made Garments (RMG) category seems a potential future winner, because whereas, quite a number of categories lost volumes despite the 32% devaluation, RMG instead posted a robust gain of around 15%.
Similarly, in today’s data rich world we can easily determine via IT which categories to support, where to focus on skill development, how and where to tweak existing FTAs, precisely what new products to launch, what specific subsidy is required and where, what kind of guidance to give our exporters to achieve optimum price points, and which markets to target.
Pakistan must harmonise its quality standards with its large trading partners in order to ensure products imported as well as produced domestically do not face trade restrictions. In essence, the government has performed relatively better in reducing the current account deficit. However, significant progress is required for improving the overall economic conditions.
Exports are the back bone of any economy. Where domestic consumption is low, the primary mode of enhancing the growth rate of a country is through its exports. Exports help earn valuable foreign exchange, which is quite important for a country like Pakistan, which has to pay its oil and defense purchase bills through foreign exchange. Decreasing exports would mean an unfavourable balance of payments which would put pressure on the exchange rate causing the rupee to depreciate which would increase again the bill of imports creating a vicious cycle from which a country has to protect itself.
In the fiscal year 2015-16, Pakistan’s exports witnessed a 12pc decrease from US$23.6 billion to US$20.8 billion. This is an awkward and embarrassing situation for Pakistan given the fact that we had been awarded the GSP Plus status by the European Union to help boost our exports.
According to the economic survey of Pakistan 2014–15,Pakistan’s exports remained stagnant at US$24–25 billion (and it actually decreased in the year 2016) while Bangladesh’s exports surpassed the US$30 billion mark last year and is set to hit the US$34 billion mark this year. The reasons for decreasing Pakistani exports are the sluggish growth in the Pakistan’s major trading partners namely UK, USA, and China and high cost of production due to expensive electricity and cost of production.
Among Pakistan’s major exports, rice, cotton, leather, jewelry and the chemical sector have been hit hard by the slump in exports. Given the current scenario of Pakistan’s dwindling exports, a strategy for bolstering them becomes imperative.
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28 March, 2020