Pakistan’s merchandise exports have declined from 0.18 percent in 1990 to 0.14 percent of the world export market in the last twenty five years. Not only has the export growth rate levelled down but the composition has also remained unchanged. Two thirds of exports are concentrated in a few agriculture raw material and labor resource-intensive products such as textiles, leather, rice etc. We are focusing on traditional, stagnant sunset sectors rather than the dynamic fast growing strategic products in the hi-tech and medium-tech sectors.
Pakistan has never followed an export growth-led strategy. High rates of sales tax and custom duties act as a barrier for imports of raw materials, components, parts and accessories that go into the final fabrication or assembly of goods. The tax refund scheme for exporters is ridden with corruption and the genuine exporters stay out of the scheme and therefore do not expand into new activities for which there is growing demand in the world market. The inadequacy of engineers, accountants, managers, and marketing executives naturally leads to under performance and inefficiency. In the last five years, the shortages of power and gas have played havoc. Export orders could not be delivered or had to be diverted because of shortages.
There is a huge scope of moving to the efficiency frontier. The size, scale of operations, market structure, formality and location are some of the considerations that affect productivity and profitability which, in turn, lead to expansion, value addition or diversification. The government should initiate reforms that will enable Pakistan to enhance its export competitiveness, reduce its dependence on external aid and augment its foreign exchange resources. These should encompass openness to the world, lowering and simplifying tariffs, less intrusive bureaucracy, improvement in trade facilitation and logistic.
SYEDA DURESHEHWAR
Karachi
