Importance of sunrise industries highlighted: Shift your focus away from sunset industries, Ishrat tells businesspeople

KARACHI: Dr Ishrat Hussain, the Advisor to the Prime Minister on Institutional Reforms and Austerity and former governor of State Bank of Pakistan (SBP) has suggested that Pakistani businesses should invest in and diversify exports from sunset to sunrise industries for which global demand is rising fast.

Speaking at a Karachi Chamber of Commerce and Industry (KCCI) webinar, Dr Ishrat Hussain also said the country should take advantage of expanding market for commercial services, particularly IT and IT-enabled services and Business Process Reengineering and focus attention on China and other dynamic Asian markets and integrate itself into their supply chains.

He said Pakistan's export structure in 2020 is no different from what it was in the 1990s while the world and the neighboring countries have moved way ahead. World exports today are around $20 trillion up eight times from $2.5 trillion in 1992. Pakistan's market share in the world export market has declined to 0.12 percent from 0.18 percent in the same period. "Had Pakistan maintained even that share our exports level would have been $36 billion at least - 50 percent more than what we have actually realized," he said. "Our trade imbalance would have consequently been much lower and the pressure on current account balance would have been eased," he added.

He said India in the same period has raised its share almost four times from 0.4 percent to 1.7 percent. "Why has this happened? We have continued to stick with the same industries which were not on an upward moving curve and have not invested in sunrise industries whose demand was growing rapidly," he said.

According to the World Trade Organisation (WTO), engineering goods account for 67 percent of total world exports today and textiles 6 percent. "In our case the proportions are reverse," he said. Textiles form 60 percent while engineering goods only 6-7 percent of Pakistan's exports. Incentives in the forms of tax rebates, financing, utility subsidies, etc., have been perpetually granted to five export sectors, he said, adding that these incentives should have been given to new non-traditional export sectors which were attempting to penetrate world markets. "The sooner we encourage new sectors in which the country has dynamic comparative advantage and for which the world demand is growing i.e. the sunrise industries the better off we would be," he added. Dr Ishrat said the growth of exports of commercial services is outstripping that of goods. "Our exports of services have also stagnated and remained around $5-6 billion whereas the world exports have reached $5.6 trillion," he said. "We have a share of less than 0.1 percent in this burgeoning market", he added. Services' exports do not require huge capital investment but human capital. "It's a pity that after two decades our exports of IT and IT-enabled services have reached only $1.5 billion. This amount can multiply several folds with skill up-gradation, enabling environment and infrastructure," he said, adding that "tourism offers another splendid opportunity if we can organize the hospitality, transport and transit services better than what we have".

Despite very close and friendly relations with China, Pakistan has not taken full advantage of the potential offered by the world's largest exporting nation, he said. Pakistan exports to China have averaged about $1.8 billion. "China accounts for around 8 percent of our total exports. If we aim to increase our share of the Chinese markets in the next five years to reach 1.0 percent of their imports we would be able to add $23-25 billion or equivalent to our current level of total exports," he said.

"This is not a hard task, given the favorable treatment we are likely to get, but requires appraisal of their current future demands and align our production structure accordingly", he said. "FTA with China should be used as the starting point for this journey. Our businesses continue to focus on EU and the US markets where the growth rate is relatively low. This is Asian century and countries such as Vietnam and Cambodia have integrated themselves into the global supply chain of China," he said, adding that "we have remained sidelined spectators and have not made any serious effort to participate in this integration," he said. "It is about time we took advantage of our close political relations and became an active player," he added.

Copyright Business Recorder, 2020