The dismal export performance and extraordinarily soaring imports resulting in a mammoth trade deficit during the last fiscal year, 2006-07, underscore the need to focus on non-traditional export in the years ahead.
The trade imbalance went up sharply to $13.53 billion in fiscal year 2006-07, showing an increase of 11.53 percent over the fiscal 2005-06 when it stood at $12.13bn. The country managed to earn just $17.01bn through exports against $16.45bn in the previous year, while imports ballooned to $30.54bn against $28.58bn.
Against all expectations, both export and import targets were missed by considerable margins. In the trade policy for the fiscal 2006-07, the government had targeted imports at $28bn and exports at $18.6bn with a deficit of $9.4bn during the year. The export target fell short by $1.59bn and imports exceeded by $2.54bn.
In 2005-06, trade deficit was attributed to the oil prices. However, this pressing factor was seen subsiding in the later half of fiscal year 2006-07. The present imbalance in international trade can be seen in the light of narrow export base as well as declining export competitiveness. Experts are of the view that disappointing foreign trade figures are because of extraordinary reliance on textile exports, traditionally occupying 60-70 percent share in the overall exports of the country.
Although textile exports registered better than overall growth during last year, the expansion was low as compared to regional competitors. It is high time to devise a comprehensive strategy for expanding the export base of the country with emphasis on previously less explored areas. Being an agrarian economy, agricultural and horticultural products' potential needs to be realised. In today's world, the focus is on value-addition. Increasing agricultural productivity and developing competitive value-added products can open new vistas of exports.
It needs no mention that the country is blessed with ample horticultural wealth that we have not been able to benefit from. World horticulture market is valued at $80 billion to which Pakistan contributes only $150 million annually. Although Pakistan Horticulture Development and Export Board has made certain efforts, even our main products such as mangoes and oranges are yet to make their presence felt in the international markets - thanks to a number of infrastructural problems.
During a recent meeting of the Sub-Committee on Infrastructure of the Task Force on Horticulture Finance and Competitiveness, it was observed that integrated approach and infrastructure building were direly needed to make the horticulture sector competitive in the international market.
Among the non-traditional exports, Information Technology and related services hold great promise. Global IT industry has witnessed an unprecedented spread and continues to expand, with a lot of opportunities for emerging economies. Pakistan Software Export Board (PSEB) is facilitating and assisting IT companies increase their share in global markets.
It is encouraging to note that Pakistan's IT and IT-enabled services exports witnessed vigorous growth during the fiscal year 2006-07 and have surpassed the target of $108 million. It was an increase of around 50 percent when compared to exports worth $72.21 million for the fiscal year 2005-06. If the same rate of growth can continue, as PSEB hopes, exports can go beyond $160 million mark in financial year 2007-08.
Still as compared to India, our software exports look meager. India exported more than $27 billion worth of software last fiscal year. However, Pakistan Software Export Board believes that Pakistan IT revenue is under-reported. It is estimated that for every dollar of export earning coming to Pakistan, IT companies keep some three dollars overseas.
At this approximation, software exports alone should be in the vicinity of $430 million. A 'Bearing Point' study some time ago estimated Pakistan's IT revenue in 2004-05 at $400 million.
According to economic survey 2006-07, 77.2% of our exports are concentrated in five categories ie cotton, leather, rice, synthetic cotton and sports goods. Three of these categories, textile, leather and sport goods are facing serious challenges.
Besides un-impressive textile exports, the leather garments' exports reportedly fell by 24 percent during fiscal year 2006-07. Leather exporters are complaining of step-motherly treatment as compared to the textile sector. They maintain that at the time of announcement of trade policy in July, the proposal about the six per cent research and development rebate on the export of leather garments was put off by the Economic Coordination Committee.
Regarding non-traditional exports, carpet industry can play an important part. The announcement of carpet cities in the trade policy is welcome. However, carpet manufacturers and exporters are not happy that semi finished carpets can be imported, dealing a blow to the industry said to be employing over a million people. Valid grievances should be addressed with consultations.
The focus on Halal meat in the trade policy is appreciable. It will, however, require quality packaging and processing to establish and maintain competitiveness in intended markets. Same is the case with fish and fish products' exports that have risen slightly but are way short of the potential.
Experts believe that a 15-20 percent annual increase in exports is necessary to sustain growth at around 7 percent. Thus, non-traditional exports need to be put high up the economic agenda by strengthening of Horticulture Development and Export Board, Pakistan Software Export Board and other relevant institutions to put the country on the path of sustained growth.
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