The Professor of Harvard University, Theodore Levitt, once said that the trouble with much of the advice that businesses get today, about the need to be more vigorously creative, is that its advocates often fail to distinguish between creativity and innovation: Creativity is thinking up of new things and innovation is doing new things.
A powerful new idea can kick around unused for years, not because its merits are not recognised, but because nobody has assumed the responsibility for converting it from words into action. Ideas are useless unless used. The proof of their value is only in their implementation. There is no shortage of creative people, the shortage is of innovators.
The Trade Policy 2009-12 is full of creative ideas, but silent on the modus operandi and its in-time implementation. The global share of Pakistan in the export market is 0.130%, which was 0.21% in 1999, showing a decline of 1/3 in one decade. Export dropped from US $19.1 billion, in 2007-08 to US $17.8 billion in 2008-09, imports dropped from US $40.4 billion in 2007-08, to US $34.9 bill in 2008-09.
Textile exports, which are 54% of our total exports dropped from US $10.6 billion to US $9.60 billion. But alarmingly, the export of non-textile manufactured items has gone down from an already low figure of US $5.83 billion in 2007-08 to US $3.12 billion in 2008-09. On the other hand, non-textile exports have gone up in all our competing countries, especially in Asia ie China, India, Malaysia, etc.
To overcome these weakness the government has come up with a new creative idea, under the name STPF ie Strategic Trade Policy Framework, with the fundamental principles laid down as growth with equity, creating opportunities for gainful employment, a sound macroeconomic framework for poverty eradication, environmental protection, HR development, targeting the private sector as the engine of growth, with a focus on small agriculture.
The Trade Policy is silent about the road map on how to achieve these objectives. The major causes for the failure of the Trade Policy are identified by the MOC as the energy crises, low productivity and poor innovation, low value addition, lack of foreign investment, tax laws, lack of product and market diversification.
These terms look very impressive, but what practical measures have been suggested to overcome these weaknesses are unidentified. The diagnoses may be correct, but where is the prescription and medicine. In his speech, the Federal Minister of Commerce, Makhdoom Amin Fahim stated " Very soon, we should be able to see Pakistan producing and exporting more sophisticated and diversified products ".
But how do believe, when the Trade Policy has not suggested any thing to reach these targets. The measures to be taken to improve export competitiveness are also vague, nothing but the identification of the problem. But how to overcome these problems is not mentioned. The government should have announced a special relief package for the industry, in the shape of special energy tariffs for the export industry, as introduced in Turkey and special incentives depending upon the nature of industry and its impact on employment in the country.
The government should list the benefits of the dollars, earned through exports and the dollars borrowed. Obviously, the dollars, earned through exports, generate economic activity and employment in the country and is without conditionalities. The foreign exchange earned through exports is the property of nation, not to be returned, whereas, borrowed money is full of conditionalties and has to be returned with interest.
The depreciation of the rupee is rapid, when exports decline, as it creates a trade deficit. The net depreciation of the rupee, multiplied by total foreign lending, has had an adverse effect on the foreign debt to the GDP ratio. A weak currency has a direct impact on imports, which accelerate inflation in the country and the mark-up rate goes up. This is a vicious circle and the only remedy is to boost exports, through export friendly policies and monitor imports by discouraging the import of luxury items, which have a substitute in the country.
At present, our retail shops are full of imported cosmetics, shoes, juices, electronics, toys, clothing, food and other non-essential items. We must discourage the import of non-essential items, the nation may hence be groomed and trained to live within means, with a simple lifestyle but with respect, like in Iran.
The integrated solutions to achieve the strategic objectives are long-term objective and cannot bring results within a period of two to three years to put trade on the right track. It would have been better to announce a Trade Policy for the year 2009-10, with short-term measure, with a five-year strategic policy framework. Short-term measures are required to face the challenges of the global recession and the abnormal security situation of Pakistan.
The government has been working on the strategies of various industries, such as the leather industry, where SWOG (strategy working group) has already finalized their strategy paper and recommendations that have been forwarded to the authorities. The Federal Minister of Commerce, in his speech on the Trade Policy 2009-12 stated as under:
"To launch a comprehensive leather and leather products export plan in consultation with the major players of the leather sector". The Ministry of Production, SMEDA and the consultants M/s J.E. Austin have been discussing a leather strategy, with major players of the leather sector for the last two years.
The trade policy should have moved forward from discussion to implementation. The measures to be taken and the claim that the competitiveness of Pakistan would be improved, from 101 to 75, is not clear in the Trade Policy. The details of creating a fund to hedge the mark-up rate hikes and its mechanism is not clear.
Similarly, what instructions have be passed to the electricity supply companies about the punitive and compensation clause, is also not mentioned. The suggestions, like the picking up of the full insurance coverage, payment of extra inland transportation costs of leather garments, would not help improve our export performance. We have to do more and follow the neighbouring countries.
To reduce the cost of doing business, it has been suggested that industrial importers may import new, refurbished, and upgraded machinery on the basis of a trade-in, with their old, obsolete machinery. It will not have any substantial impact on reducing the cost of doing business, by the above decision. It would have been better to follow some successful model that had a problem similar to what we have today, and how they plan to come out of such problems.
In my opinion, the South Korean Model would be the ideal to follow. South Korea was liberated in 1945 and during the War of 1948, 57% of their industry, comprising of spinning, cement and milling, was damaged. All electricity units were being operated in North Korea, who shut down 80% of the electricity of South Korea, and they were left with just 20% electricity generation.
During the 1948, the literacy rate of South Korea was very low and there were hardly any graduate to be found in the rural areas. We need to follow the first 4 five-year plans of South Korea, which they named the Ignition period of the economy. Instead of making policies, which are philosophical and fruitless, it would be better to tune the policies of a successful model to our environment. Pakistan must focus on education and Human resource development, without which, any plans, how attractive they may be, cannot be implemented successfully.
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