Lower exports feared

Commerce Ministry on Tuesday hinted at a possible estimate of the country's exports, which would be around $20.9 billion in 2015-16, 12.4 per cent or $4.6 billion less than the target of $25.5 billion set in Strategic Trade Policy Framework (STPF) 2015-18. These projected export figures were shared by the Commerce Ministry with the poorly attended meeting of Senate Standing Committee on Commerce headed by Senator Syed Shibli Faraz. Out of 13 members only Senator Karim Khawaja and Senator Rubina Khalid were present in the meeting.
A Joint Secretary of Commerce Ministry, Muhammad Ashraf, informed the committee that exports from Pakistan peaked in 2013 at $25.1 billion. However, during the last two years a decline was witnessed in exports. He said Brexit has suddenly created new challenges for Pakistan. In GSP-plus Pakistan will have following three impacts: (i) the UK was Pakistan's biggest supporter in the European Union (EU) and when the UK exits from the EU, Pakistan has to find new friends able to maintain the concessionary regime of the EU; (ii) when the UK exits the EU after two years, Pakistan has to negotiate a request for similar arrangements with UK itself but whether the UK will accept it or not would be in question; and (iii) if the UK doesn't get a sweeter deal with the EU and the UK products face some duties in the EU, then Pakistani products which are channeled to the EU through the UK will also face tariff issue. The UK is 20 per cent of Pakistan's total exports to the EU.
When the EU will become less important for the UK then Commonwealth bloc will get importance as intra Commonwealth trade will overtake intra EU trade by 2017 which implies that Commonwealth will be a major player. However, major challenge for Pakistan in intra Commonwealth trade will be that India will be the major player and Pakistan will be secondary player in the market.
He cited the examples of different global competitors whose exports have declined. For example Indian exports have declined by 16.7 per cent, Brazil's by 15.1 per cent, Malaysia by 14.5 per cent, and China by 2.6 per cent etc. Bangladesh is the only exception which was in the positive side. Commerce Ministry presented details of sectors which have shown a negative growth due to domestic issues and international downturn. These details are also available on the website of Pakistan Bureau of Statistics (PBS).
He said the United Nations gave five reasons for a decline in Pakistani exports ie global price development, persistent power shortages, weak investment growth, narrow export base and poor infrastructure. The IMF, in its tenth review, gave five reasons, global commodity crisis, power shortages, business climate, external demand and exchange rate appreciation.
The biggest issue Pakistan is facing is that the buying houses have migrated to Bangladesh due to security situation in Pakistan. Pakistan has problems with its four neighbours, ie, India, Afghanistan, Iran and China (due to Himalaya which increases cost).
Chief Executive Officer (CEO), Trade Development Authority of Pakistan (TDAP) S. M. Munir said that the government has to devalue the rupee to facilitate exporters. He argued that with the depreciation of Euro and Pound Sterling, exporters will face substantial financial losses and added that in India, if the government takes a decision during the night, it is implemented the next day but in Pakistan, FBR does not even issue a SRO.
He said Rs 315- 350 billion refunds of exporters are stuck in the Federal Board of Revenue (FBR) including his own of about Rs 240 million but nothing is being done on this issue. This has created a liquidity crunch for exporters. He also opposed GIDC on gas consumers.
"I have taken up this issue with Finance Minister Ishaq Dar in Karachi, requesting him to sort it out," he added. According to the law, refunds are to be cleared within 20 days after submission of claims but the exporters are suffering for the last three years. Incentives announced in the previous trade policy have not been cleared so far. And the Governor SBP stated that he could not clear the cheques without the permission of Finance Minister, Munir lamented. He added that since he assumed charge of CEO the organisation, exports have come down due to reasons not within his domain but he is tired of replying to media queries.
He said prices of leather and rice declined during the outgoing fiscal year but the good news is that prices of both commodities have now started rising for the last two months. He said, the issue of energy has been resolved for the last few months with the effort of Minister for Water and Power Khawaja Asif and there was no power load shedding before Remazan. He further stated the gas is also available to the Punjab-based industry after the import of LNG which is cheaper than the domestic gas.
He said Pakistan's pharmaceutical sector was facing a lot of problems including with Drug Regulatory Authority of Pakistan (DRAP). He has taken up the issues of pharma sector with the Minister for National Health Services Regulations and Co-ordination. He maintained that if the issues of pharma sector are resolved its exports can increase by $1 billion within six months.
He also criticised Ministry of Agriculture for not playing its role in development of agriculture sector as Pakistan's per acre production was the lowest in the world whereas India's per acre production was three-four times higher than Pakistan. The Ministry of National Food Security and Research misinformed the government about cotton production and added that 5 million bales of cotton were short of target. He said the government should open banking channels for exports to Russia and Iran as both the markets are very important for Pakistan.
According to a press release, while briefing the committee on the reasons behind the decline in exports, Ministry of Commerce said that many factors including global price development, weak investment, narrow export base, power shortages, security climate, poor infrastructure, appreciated currency, high tariffs have led to a decline according to academic research and data by UN and IMF. It was also stated before the committee that the exporters, however, term sales tax refunds, market barriers in region, trade facilitations and poor R&D in raw material base as equally responsible factors.
Chairman of the Committee while giving his remarks said that Pakistan export policy has always been security centric while instead it should be trade centric. He also observed that managing exports is only one way of looking at it and considering the import-export balance is more important.
Ministry of Commerce also told the members that the IMF has projected a 3.6% increase in global trade growth and rice and wheat commodity prices are also expected to rise in coming years. Brexit was termed a threat for Pakistan's exports. It was stated that the GSP plus status being enjoyed by Pakistan currently is mainly due to British presence in the EU.
Representatives from Pakistan Business Council while giving their opinion on STPF and the decline in exports contended that STPF does not adequately address the import-export alignment in the country and does not talk about domestic competitiveness. They also said a substantial change in trade is not possible without a national vision. Chairman and members of the committee stressed on measures for job creation and export generation and emphasised that the drastic decrease in exports and massive increase in imports have both affected domestic industry and have to be managed.