Commerce Minister Khurram Dastgir reportedly rejected the conclusions drawn by his own ministry with respect to the reasons behind a decline in exports. The Commerce Minister directed his team to seek exporters’ views – the major stakeholders – while preparing the presentation on the reasons behind a decline in exports. This is sound advice and unfortunately reflects the lack of coordination between the policymakers and the stakeholders that has visibly been the major impediment to enhanced productivity in all our sectors during the third time of Nawaz Sharif administration.
The trade deficit has risen since the PML-N government took over power on 6th June 2013 and is borne out by data released by the State Bank of Pakistan. In fiscal year 2013 trade balance was negative 16.9 billion dollars while in 2014 it rose to 19.2 billion dollars. The total deficit during the first eight months of the current year has been estimated at negative 12.8 billion dollars – marginally lower than the negative 13 billion dollars estimated in the comparable period last year. This improvement, to the tune of 125 million dollars, is attributable to a highly significant decline in the international price of oil (registering lower total imports of goods) while services imports rose from 5.26 billion dollars to 5.35 billion dollars with the major contributor being transport.
Exports of goods were estimated at 24.8 billion dollars in fiscal year 2013 rising to 24 billion dollars in 2014 while in the first six months of the current year total exports of goods registered 16 billion dollars comparing unfavourably with 16.65 billion dollars in the comparable period last year. Exports of services, however, declined sharply – from 6.7 billion dollars in 2013 to 5.3 billion dollars in 2014 and registered 4.2 billion dollars during the first eight months of the current year contrasting favourably with 3.4 billion dollars in the first eight months of the current year.
The question as to what the PML-N government has done to actually promote exports can be easily answered by referring to the grant of GSP Plus status by the European Union effective from 1st January, 2014. There is no doubt that Pakistani textile exports have risen as a direct outcome of the GSP Plus status though one can envisage some impediments to this status in the future given that Pakistan has yet to ratify a few of the required conventions; more recently with the reinstitution of the death sentence to those convicted of terrorism the government has reversed on an important convention of the EU though to date the criticism remains a bit muted.
Unfortunately, though our other exports to the rest of the world have declined, which account for only a marginal increase in total exports. One of the reasons, as cited by numerous anecdotal surveys of exporters undertaken by Business Recorder, is that a strong rupee makes our products uncompetitive in the international marketplace. Independent economists as well as the International Monetary Fund (IMF) staff maintain that the rupee is overvalued to the extent of 15 percent and have urged the government to allow the rupee to reflect its real value. It is unfortunate that the Prime Minister and the Finance Minister regard a strong rupee as a reflection of a stable economy, besides understating the external indebtedness in government documents, which indicates an economically-flawed thinking, which is partly responsible for a decline in exports.
The presentation rejected by the Commerce Minister cited, apart from an overvalued rupee, law and order problems, energy crisis as well as port handling by ANF as other reasons for a decline in exports. In addition, Pakistan’s ranking in ease of doing business, compiled by the World Bank, remains low and the government’s focus on reducing the budget deficit, as per its agreement with the IMF, as opposed to fuelling growth through higher outlay in development is compromising the growth rate making it by far one of the lowest in the region. Additionally, the slow payment of refunds is yet another grouse of the exporters. Thus in all fairness to the Ministry of Commerce officials, the presentation contained valid arguments that have been presented by exporters numerous times during their interactions with the ministry officials as well as the media. However, the minister is right in arguing that reaffirmation of the stakeholders concerns is required before a presentation can be made to the Prime Minister.
The global slowdown coupled with a lack of preparedness and all decisions in the government being subservient to the assent of Ministry of Finance could be the principal reason. However, the private sector’s failure to plug into the global supply chain may be an additional reason for a fall in exports. Our policymakers’ failure to analyze properly the growing trends in the international market has resulted in the country’s failure to expand its share in global exports.