The Commerce Ministry has expressed legitimate fears that a fall in country’s exports by nearly 5.5 percent could have adverse consequences on economy. The reasons for the decline are attributed to the monetary policy, tariff and tax regime and poor synergy between industrial and investment policy or on poor infrastructure and lack of labour productivity. These reasons, however, are not sufficient or adequate to convey the complete picture. Traditional exporters, on the other hand, point towards an unrealistic exchange parity, high utility costs or lack thereof and non-refund of taxes collected by the FBR on time as real causes behind their lack of competitiveness and poor performance. They argue if their refunds are disbursed and PKR is depreciated by at least 10 percent, the forex earnings would be several times higher than the handout we receive from the International Monetary Fund (IMF) which is tied with conditions detrimental to improving the business climate.
The truth, however, lies somewhere in the middle. The government faces fiscal woes and has therefore drawn a three-year strategy – Strategic Trade Policy Framework (2015-2018) – with a view to achieving a 40 billion dollars export target in three years. We, however, would like to know the results of the last three-year plan drawn in 2012, which envisaged exports of 95 billion dollars in three years. Blaming the poor law and order and energy situation for under 70 billion worth of exports in three years are nothing but implausible reasons for missing the target. In the budget estimates for 2014-15, the federal government had earmarked Rs 2 billion towards STPF. Not a penny was spent under this head, according to the budgetary documents. For 2015-16, a sum of Rs 6 billion has been set aside for STPF. Will this allocation too lapse without a dime spent again? Won’t the axe wielded by the Ministry of Finance to meet its fiscal deficit target agreed with IMF take precedence again?
The ministry of Commerce says that STPF will be used for “improvement in export competitiveness” to transition from ‘factor driven economy’ to ‘efficiency driven’ and ‘innovation driven economy’ with increased share in regional trade. These are high sounding words. The babus in the Commerce Ministry are good at cut-and-paste job. Little do they, however, know what this actually entails.
The government’s task is to create the right environment and let the entrepreneurs work and use their skills. Do we allow it? No we don’t. The government interferes through archaic labour laws. Moreover, returns that every company has to file are so cumbersome and time consuming that it drains the drive needed for exports. Let the government create the infrastructure to provide uninterrupted energy and keep its eyes and ears open to suggestions from businesses. And, free the businesspeople from hassle and obstacles placed in their export drive. After all, it is exporters, not bureaucrats, who earn dollars for the country. Islamabad can indeed introduce and implement an investment and taxation policy that is clearly aimed at boosting exports.
Ministry of Commerce says: “Pillars of STPF 2015-18 will be product sophistication/diversification, R&D branding and value addition”. These are pretentiously impressive or pompous words. Do we have the resources and capital needed for R&D? No we don’t. Islamabad can help by making laws and allowing ease of payment for multinational and national companies to manufacture on a toll basis and later think of branding. After all, all well-known international brands were first national brands as no brand could ever become a successful global brand unless it first established itself as a national brand. We do not have the research capabilities or the money to produce medicines needed by the world. Our leather industry needs chemicals to turn raw hides into fine leather and then supply raw material to well-established design houses. Let us learn from our Chinese friends who first became the suppliers of parts. And, once the requisite volumes were achieved only then did they contemplate making the product and marketing it, but at a lower price than those of well-established brands. It is after all a buyer’s market; and you need to create a market pull. The world has left us standing and marched on. Let us learn to walk before you can run. Or like always you will fall flat on your face. Regional trade is dependent on foreign policy imperatives. Pakistan-India relationship holds the trade hostage. Less said, the better.