Industrial growth, which invariably contributes substantially to the GDP and consequently economic development of a country, depends on continuous expansion in the domestic and international markets for the goods and services produced in a particular country. In the modern world of economic interdependence and free market economies, the developed as well developing countries lay more emphasis on enhancement of their exports to propel the process of sustained economic growth.
An incisive look at the last three budgets announced by the government, reveals that they invariably focused on the strategy to boost exports, removal of the bottlenecks in the expansion of export markets and encouraging export of value added good instead of raw and semi-processed materials which fetched lower prices in the international market. The factors hampering the enhancement in Pakistani exports on the supply side include: severe shortage of energy supply, poor quality of infrastructure, outdated technologies, lack of export culture and weak contract enforcement mechanism. Other impediments relate to non-diversification of export markets. It is estimated that 51% of our exports are confined to six regions and countries like EU, US, UK and Middle East. Pakistan has been unable to tap its export potential in the regional markets and is also faced with tariff and non-tariff barriers in markets like Iran and India. Trade facilitation at the borders, corruption in border agencies, lack of coordination among them and inadequate port infrastructure were also having a debilitating impact on exports. The international variable affecting our exports comprise appreciation in US dollar and Euro against Pak rupee and decrease in prices of major commodities.
Owing to the foregoing factors, Pakistani exports during 2014-15 stood at $ 23.8 billion as compared to $25.1 billion during 2013-14 representing a decline of 4.88 per cent. To address this issue the government has announced a Strategic Trade Policy Framework 2015-18, which envisages enhancement of Pakistani exports to $35 billion by 2018. The mid-term initiative has been firmed up after thorough and detailed consultative process with all the stakeholders including, Federation of Pakistan Chambers of Commerce and Industry, district chambers, trade associations, private businesses, academia, trade missions, ministries and other government agencies.
The overall strategic focus is on removal of procedural and budgetary bottlenecks, improving export competitiveness, transformation of factor-driven economy into efficiency and innovation driven entity and enhancement in the regional trade through competitiveness, compliance with standards, policy environment and market access. Accordingly the new trade framework has identified four major areas i.e product sophistication and diversification, market access and exploration of new export markets, trade diplomacy and institutional development and trade facilitation. A trade committee headed by the federal minister for commerce has also been constituted to remove bottlenecks in the implementation of the policy, issues relating to trade promotion, strengthening international competitiveness. The committee will be presenting annual STPF implementation report to the Cabinet Committee on Production and Exports as well as Federal Export Development & Promotion Board.
The Policy Framework with a view to ensure improved market access and creating a facilitative environment for exporters, rightly envisages giving loans and tax rebates to the exporters. Among our export mix, leather, pharmaceuticals, fisheries and surgical instruments have higher export potential. To exploit this potential the government would give a matching grant of up to Rs.5 million for a specified plant and machinery or specified items to improve product design and encourage innovation in small and medium enterprises and export sectors of leather, pharmaceuticals and fisheries. The Policy also envisages setting up of a common Facility centre for surgical sector.
In regards to multilateral trade agreement, government is entering into multilateral arrangements for better market access such as Trade Facilitation Centre, Information Technology Agreement and Government Procurement Agreement. Access to regional markets such as GCC, ASEAN, SAARC, Afghanistan and Central Asian Republics is also being improved. Similarly the government reportedly, is negotiating bilateral preferential access with Thailand, South Korea, Turkey, Iran, China, Malaysia, Indonesia, Nigeria and Jordan.
Since the new initiative has been drawn up in consultation with all the stakeholders and embraces all aspects related to pushing up the exports, it seems quite realistic in its approach and content. The target of $35 billion fixed to be achieved by the end of 2018 might seem over-ambitious to some but considering the fact that the economy has witnessed an encouraging revival during the last three years, the prospects of achieving this target look quite bright. The government through its macro-economic reforms has brought down the budget deficit from 8.2 per cent of GDP to 5.3% of GDP. Expansion in the tax-net, bringing down inflation to single digit, increase in credit to private sector and agricultural sector, gradual enhancement in development funding, increased foreign remittances and foreign exchange reserves touching the phenomenal figure of $20 billion, speak volumes about the health of the economy.
The government has also given top priority to tide over the energy crisis that gripped the country and was undermining industrial growth. Reportedly 3000 MW has already been added to the system and by the end of 2018 the power projects initiated under CPEC and those already in hand like Neelum-Jhelum are likely to add more than 10,000 MW to it, promoting industrial development. The import of LNG has already led to the revival of some of the industries which were shut down due to the shortage of gas in the country, a fact corroborated by the business concerns. The revived prospects of implementation of trans-regional projects like TAPI, CASA-1000 and Pak-Iran Gas pipeline also are encouraging portents in regards to making Pakistan an energy secure country.
In view of the foregoing realities and the successes achieved by the government in reviving the economy it is probably safe to infer that from the economic perspective, Pakistan was poised to embark on a process of sustained economic growth. The Strategic Trade Policy Framework is also a very promising initiative and the government has done everything that it possibly could do to facilitate and encourage the exporters. Now it is up to the business community and the industrialists to play their role and make the desired contribution to the national effort.
The writer is a freelance columnist.