EDITORIAL: Sometimes all it takes is for someone to point to an obviously apparent fact to get everybody to think in the right direction. Overcoming the government's reserves dilemma presents just such an example. No doubt the only credible way to increase foreign exchange earnings and bolster official reserves is to improve exports substantially. Remittances are healthy, even cause for some celebration at the moment, but international financial institutions (IFIs), including the World Bank, are giving us till 2023 at best to take advantage of this unexpected bulge, after which year it is expected to fade away. And tax collection has never been one of the government's strengths, nor is it expected to be anytime soon, so exports must lead the way if we are to have any chance of snapping out of the cycle of borrowing and then borrowing more to repay earlier loans, which keeps us forever dependent on bailout programmes like the one with the International Monetary Fund (IMF) that we are so desperately trying to get back on track. The problem is that even after surprising to the upside last fiscal, our exports fetched only about $22-23 billion.
Successive administrations have known for a long time that the present export basket will just not do for long without an overhaul that adds value to products that we produce and put on the market, yet nobody has so far got the ball rolling because of the high cost and long gestation periods required before such initiatives can start delivering results. That, in turn, increases the political opportunity cost of such things, and it is understandable why government after government goes for high-visibility mega projects like motorways and power plants that fetch easy votes instead. Yet the time has finally come that this particular can cannot be kicked any further down the road. Our exports will have to become more competitive, which means that manufacturing and production will need something of an overhaul. But while all that will take a lot of time, there are other, more sensible things that the government can do. Some analysts were recently lamenting the rather obvious fact that Pakistan, being a predominantly agricultural economy, still spends top dollar on import of agri products like cotton, wheat, sugar, tomato, potato, and the list goes on. Even in normal years, when the government doesn't have to scramble to purchase sugar or wheat stock at the last minute, such expenses eat up about $6-8 billion.
It's a pity that the country has been reduced to importing these items. For there was a time, not so long ago, when we not only produced rice, cotton, wheat, etc, for our own consumption but always had enough left-over for exports. All that began to change when some of the country's senior and most powerful political dynasties developed a penchant for sugar mills. Before anybody knew it they were using their influence to get land meant for planting other crops diverted towards sugar plantation and then, in the absence of proper storage facilities, getting their product exported at subsidised rates to improve their competitiveness. Now, if only we can go back to basics and nurture our comparative advantage for commercial gains, we can save the $6-8 billion that we spend on these imports as well as earn through exports every year. That way there is no reason for export earnings not to cross the $30 billion mark in the near term.
Just as the Pakistan Tehreek-e-Insaf (PTI) government prepares to dig in its heels for the long haul and begin the process of incorporating more value to the traditional export mix, it must also do whatever is necessary to sort out some of the needless problems that have held down the production and earning potential of the agriculture sector for all these decades. For that, though, it will have to improve its performance when it comes to handling special interest groups that are in the habit of cartelisation for illegal profit. Its legacy would be tainted forever if it is unable to do much about value addition in the little time it has left and also fails in taming so-called mafias that it has held responsible for the "artificial price hike" so often.
Copyright Business Recorder, 2020
Comments
Comments are closed.