Make in Pakistan: Realizing the dream of export-led 'Make in Pakistan'

ABDUL RAZAK DAWOOD (Advisor to the Prime Minister on Commerce and Investment)

TEXT: The failure of "Make in Pakistan" over past several years has been the consequence of focusing on trading and growth through importation. This focus on trading was the result of many factors, particularly ease of collecting revenue by the FBR at the import stage and the Government's natural tendency to pursue short term importation policy rather than long term industrialization policy.

In the last ten years, matters for 'Make in Pakistan' got worse due to the need for more and more revenue and hence the push for higher custom duties etc. These factors contributed to de-industrialization and, hence, decline in Make in Pakistan.

Pakistan has the highest dependency on revenue collection at the import stage, compared to our regional competitors like Vietnam, Bangladesh and India Such high dependency on revenues at the import stage creates impediment to local manufacturing and brings about an anti-export bias by increasing cost and waiting for refunds.

In order to achieve an export led 'Make in Pakistan' the cornerstone has to be to build around domestic scale and global competitiveness. For the last two years, the Government has moved in the direction of reducing custom duties, particularly on raw materials and intermediaries, as was seen in the last two budgets. However, whatever has been done, so far, is not adequate in itself and more such reductions, in key areas like engineering, iron & steel etc, have to be done. Therefore, business community will have to wait a little till we get more fiscal space.

Going forward, our strategy is to bring duties on all raw materials down to zero and rationalize tariffs cascading and reduce the spread between raw materials and finished goods. This reduction in spread has to be done as it will induce greater efficiency and make our industry more competitive. The Government will also give a three year plan for the period 2020-2023 so that businessmen can plan better. Also, the Government will re-examine the plethora of incentives in light of the large devaluation of the rupee and will set sunset clauses on all such incentives.

The main step to improve our global competitiveness is to lower the energy costs for our industry. Ways and means will have to be found so that cross subsidies of other sectors are not placed on the industry. Another key area to improve our competitiveness is enhancing our productivity, which has to be done right across the industrial landscape.

With greater 'Make in Pakistan' and domestic scale, more and more products will be available for export-led growth, as annunciated in Strategic Trade Policy Framework (STPF), which will be promulgated soon.

The fundamental pillar of the STPF is to bring about a mindset change to an export culture, which would permeate from the Prime Minister's Office down to the Local Governments. We must understand that exports is a requirement of the Government for the well-being of the citizens of Pakistan, hence, there has to be a national effort to achieve the desired objectives.

The guiding principles of our export policy are that, first; there must be no element of duties, taxes, surcharge or cesses etc. on all our exports, which is the standard international practice. In Pakistan, this has not been the case and whatever is due to our exporters is inadequate and payments delayed for years. Second, export incentives must be disbursed timely and they must be time-bound as well.

Focus of export strategy is to achieve product and geographical diversification. Not only in the traditional export sectors, our product range has to widen but also there will be greater push in the developmental sector, such as pharmaceuticals, engineering, meat & poultry, fruits & vegetables and services. The recent move into export of Personal Protection Equipment, because of Covid pandemic, is an example of responding to the changing circumstances. Similarly, exports of tractors, microwave ovens, refrigerators and water dispensers etc, are good illustrations of product diversification achieved by some of our exporters.

The recent surge in meat exports, where there has been growth of 36%, and in IT services, where growth is 21%, are indicative of success of diversification strategy.

On the case of geographical diversification, the Look Africa Policy has shown some success as observed by the increase in exports to the African countries. In addition to Africa, we feel that diversification into Central Asian Republics would also open new doors of opportunities for our exporters.

To conclude, the fact that our exports declined by only 6% indicates that our exports are bouncing back. There is much to be done and, so far, small steps have been taken; however after Covid, more strategic policies are in the pipeline. Export led 'Make in Pakistan' is the main focus of the Government but it can only be successful in partnership with our business community.

Copyright Business Recorder, 2020