‘Make in Pakistan’

EDITORIAL: It is heartening that the government consulted the exporters extensively before finalising the Export Facilitation Scheme 2021, which will be effective from August 14. The Federal Board of Revenue (FBR) has now allowed exporters to make domestic sales of up to 20 percent of goods manufactured from duty- and tax-free raw materials imported under the Scheme; just as Prime Minister Imran Khan approved a rather ambitious export target of $38.7-40 billion for the ongoing fiscal year. Increasing export revenue is absolutely crucial for Pakistan at the moment and it is appreciated that the government is putting in the necessary legwork, but efficiency also demands that it moves in the right direction.

Since ours is the Import Substitution Industry (ISI) model, basic and intermediate raw materials have to be imported to keep the wheels of the industry turning. That of course means that increasing exports will always jack up the import bill and a bloating current account deficit will keep giving the government headaches. Therefore, there is a need to move away from exporting excess production to producing for exports. And that means going out, identifying new markets and the products that they need, and then producing those products whether they are needed in Pakistan or not in order to tap those markets. That is precisely how other countries such as South Korea and Vietnam with export-led growth strategies succeeded in increasing their trade earnings. And that is what we are going to have to do if we are really serious about materialising a quantum jump in our exports in a hurry.

Adviser to PM on Commerce Razzaq Dawood seemed pretty confident about achieving the big export target as he announced it to the press. Yet even if aiming to go from $25-odd billion to something like $40 billion in one go might seem somewhat unrealistic, and the weakening rupee might not be counted on to stimulate exports as much as the adviser believes, there is still enough to show that the thinking is correct. That’s far truer now than even one fiscal ago considering how the government has gambled on an expansionary budget; that too in complete defiance of the International Monetary Fund’s (IMF’s) contractionary stranglehold that was part and parcel of the $6 billion Extended Fund Facility (EFF).

This is clearly the make-or-break year for the Pakistani economy as well as the Pakistan Tehreek-e-Insaf (PTI) administration. If the economy sags and consumers become more price sensitive then it will have nothing at all to sell at the next election. And the economy will sag if the current account deficit keeps growing. So far, even some of the government’s measures meant to protect people from exogenous price shocks - like not passing the complete burden of rising oil prices in the international market to domestic consumers – are impacting the C/A deficit in the wrong way. Last year record remittances stepped in and kept the C/A in green for most of the fiscal, but they’re not likely to stay strong enough to allow many more celebratory tweets on the part of the ruling party.

Razzaq Dawood is not new to this game. He was commerce minister in the Musharraf administration as well, when the then prime minister Shaukat Aziz initiated a global outreach scheme to hunt down new export markets and produce to cater to their demands. But then that administration, along with all such plans, suddenly unraveled and the new government’s new finance team, interestingly enough headed by the current finance minister, seemed to have more traditional ideas. Now Razzaq Dawood has the chance to put a similar plan into action with even more force since the entire government’s long-term survival, just like the country’s, hinges on how much we can earn from exports and how soon the gap between imports and exports can be overcome.

The government is doing the right thing by keeping stakeholders on board when formulating policy as important as this. Hopefully, it will not be long before the ‘Make in Pakistan’ strategy becomes a success and the right kind of results start coming in.

Copyright Business Recorder, 2021