The million dollar question that has been begging a plausible answer since the 2013 general elections is: What actually ails our exports? It seems to have finally found an answer. There are a number of items that constitute Pakistan’s export basket. Our exports continue to be dominated by cotton textiles and apparels. The other export items include rice, fruit, cement, leather goods, rugs, carpets, sports and surgical goods and livestock meat.
The answer to this profound question about the export slide emerged from a discussion between the Secretary, Ministry of Commerce and, textile manufacturers/exporters. Pointing out the fact that the sharp fall in exports constituted a major challenge to the government, Commerce Secretary and former Water and Power Secretary Younus Dagha, who is widely known for bringing about positive changes in activities that fall under his bureaucratic domain, told the exporters that the textile sector must regain its position on the global market stage without any further loss of time. But this would not be possible without scaling up innovation, better branding of products and higher manufacturing output.
Agreeing to the exporters’ argument in relation to sales tax refunds that have caused liquidity constraints leading to reduced output and job opportunities, Dagha, however, made it clear that the private sector must not expect to receive “everything” from the government, as any government’s essential job is policymaking and implementation of rules to provide a level-playing field to all. In this regard, he pointed out that the textile sector has never made a serious effort to carry out research to boost its ability in relation to product innovation, branding and output. This failure, according to him, has led to curtailing its share in the global market. It is, however, not known whether or not businesspeople agreed with his assertion that the government in its package has set a seven percent duty drawback, which is a kind of incentive for value-added textile sector. Dagha appeared to be equally blunt about the legitimacy of businesspeople’s principal argument. According to him, 90 percent of textile sector’s concerns are genuine but citing high cost of production as “the only reason” for the fall in exports is highly unjustified. Emphasizing the need for taking into account fashion trends, he pointed out that higher exports are not possible in the absence of increased manufacturing output which is, unfortunately, stymied by lack of fresh investment in the sector as real estate and stock exchange have become more lucrative options for prospective investors from the textile sector or for that matter manufacturers in general for the past many years. In this regard, he also made a revelation, saying that investors in Bangladesh and India bring back their savings to their own countries but the Pakistani investors prefer to park their foreign exchange earnings abroad because of growing financial insecurity in their own country.
Although commerce secretary’s outlook showed greater understanding of the issues involved, his assertion that the higher cost of doing business cannot be cited as the lone reason behind the export slide, however, unjustly militates against a fairly plausible argument that cost of doing business always remains the fundamental or critical concern or issue for any person before he sets out to conceive, plan and execute his business plan or venture. Secondly, the facts in relation to energy, that constitutes at least 30 percent of any manufacturing unit’s cost, speak for themselves. Businesspeople do business to make profits; they don’t make investments in the absence of anticipation of returns. How could the government deny facts that the country’s industrial gas tariff is 126 percent higher than Bangladesh’s, 63 percent higher than India’s, and 26 percent higher than Vietnam’s? Wages, too, are much higher in Pakistan than in India, Sri Lanka, Bangladesh and Vietnam. There exists a major anomaly on the national landscape as well. Water rates in Karachi, the economic hub of Pakistan, are almost five times higher than rest of the country, including Punjab’s major industrial towns Lahore, Faisalabad, Gujranwala and Sialkot.
Not only is the government, therefore, required to address the concerns of businesspeople without any further loss of time, it is also expected to play a proactive role towards regaining and expanding the country’s share in the global market. This will require it to take a prudent approach as setting an ambitious target for country’s beleaguered export sector will achieve little or nothing. The profound failure of Strategic Trade Policy Framework 2015-18 that envisaged the target of $35 billion exports is a strong case in point. The key responsibility on the part of the business community, however, would be to make fresh investments in the textile sector with a view to improving products and achieving higher manufacturing output.