Talking trade numbers

Once again, exports offer no reprieve with most export items registering a decline in the first half of FY17. Total exports fell by 4 percent in 1HFY17 clocking at $9.9 billion, against 1HFY16 at $10.3 billion showing reduced earnings from most exporting sectorsincluding food items such as rice (exports fell by 18%), vegetables (25%) and meat (27%). Fish and fruits exports went up10 percent and 11 percent respectively; latter likely due to kinnow exports that started on Dec 1, 2016.

Pakistan continues to rally in the European markets with its value-added textile exports. Exports for knitwear, towels, bedwear, tents and readymade garments all increased; with knitwear, bedwear, and readymade garments together accounting for 34 percent of all exports in 1HFY17 (31% in 1HFY16). The share in exports for value added textile has gone up. However, because of lower cotton prices, knitwear exports grew by 17 percent quantitatively but captured merely 0.2 percent in earnings.

Apart from certain low earning items such as plastic products, pharmaceutical products, jewelry and fans; exports for most manufactured goods declined. Prominent items include carpets exports that fell by 17%, sports goods (8%), leather goods (7%), footwear (7%), surgical goods (7%), and auto parts (25%). It is important at this point to evaluate the 11 free and preferential trade deals Pakistan has signed with multiple countries to gain access to those markets; but clearly hasnt been able to translate them into substantial earnings.

Imports on the other hand grew by 10 percent in 1HFY17 clocking at $24.4 billion (1HFY16: $22.16 billion) mainly driven by machinery imports (which grew by 41%), petroleum products (11%) and food items (9%). Oil and petroleum products have maintained a 20 percent share in total imports during the first half in FY16 as well as FY17. LNG imports grew by 124 percent and were expected to increase substantially due to the increase in demand for gas and widening gap between demand and local gas production estimated at 4 billion cubic feet per day. These imports will continue to increase through the year.

Import of food items have also maintained a share of 12 percent in 1HFY17 with no changes since last year and nearly 30 percent of food imports constituting cooking oilmainly imported from Malaysia and Indonesia. Pakistan had become one of the largest market for crude and refined cooking oil with locally produced oils catering to only a quarter of the growing market. Quantitatively however, palm oil imports fell from 1.3 million metric tons to 1.2 million metric tons between 1HFY17 and 1HFY16.

The surprising burden on the import bill is coming from machinery imports, also showing the biggest growth in 1HFY17 year-on-year. Machinery imports registered a 41 percent growth and the share in total imports for machinery went up from 18 percent to 23 percent between 1HFY16 and 1HFY17. Textile machinery imports grew by 11 percent, while construction and mining machinery grew by 55 percentboth are signs of growth in industrialization. Mobile phone imports declined by 12 percent likely due to governments move to double the sales tax announced in budget 2016-17.

The most interesting figure under the machinery group is power generation machinerycosting $1.65 billion in 1HFY17, against $790 million in 1HFY16a 109 percent growth in 1HFY17 year-on-year, accounting for 29 percent of all machinery imports. This share was only 19 percent in 1HFY16.

Greater transport imports also need to be closely studiedimport of CBU trucks and buses grew by 95 percent, which is likely to increase in coming months due to a greater demand for logistical vehicles while car imports went up by 10 percent despite such high tariffs on CBUs. Import of CKD/SKD also increased by 15 percent and was greater for cars ($307 million) than heavy vehicles ($147 million) which points toward higher demand for cars in the future.

Lastly, steel imports fell by 17 percent quantitatively and by 7 percent in dollars terms which strongly suggests that the regulatory duty on steel items and the now-5 year extended anti-dumping duty on Chinese steel is paying off.