EDITORIAL: Razak Dawood, Advisor to the Prime Minister on Commerce and Investment, tweeted over the weekend that exports in December 2021 have risen by 16.7 percent, year on year, in December 2021 when compared to the same month a year before.
In absolute terms exports rose from 2.366 billion dollars in December 2020 to 2.8 billion dollars in December 2021 — Dawood revealed citing Ministry data. This rise, the Pakistan Bureau of Statistics (PBS) data reveals, can be mainly sourced to the rise in the international prices of our major export items, a favourable outcome of the ongoing pandemic, and not to higher volume of exports which would have led one to conclude that the Ministry of Commerce had been successful in boosting exports due to its critical input in extending monetary and fiscal incentives to exporters.
Inexplicably, however, while the Advisor shared the data for December 2021 imports — 6.2 billion dollars projection with the actual amount at 6.9 billion dollars — he compared it to November 2021 figure of 7.9 billion dollars (month on month) and not to December 2020 (year on year) as in the case of exports.
The data cited on the PBS website for December 2020 imports is 5.005 billion dollars. Dawood has reportedly noted time and again during meetings chaired by the Prime Minister that Commerce Ministry cannot be held accountable for around 50 percent of imports notably petroleum and products, cooking oil and the recent heavy reliance on importing food items, particularly sugar, wheat and pulses, to ensure that the ongoing collusion in the market to get windfall profits can be checked.
However, this reflects a tendency exhibited by all ministries — to take credit for any positive feature, even though credit requires decisions/support by associated ministries, including finance as well as cheaper utility prices by the ministry of energy, and to disclaim responsibility for negative trends and/or to provide figures that would understate the extent of the problem. Sadly, the ministry of commerce seems to adhere to this tendency in recent tweets.
A Business Recorder exclusive noted that during the last three years an estimated 115.5 billion rupees under DLTL and 100 billion rupees as power and gas subsidy was provided to zero-rated export sectors.
In today’s rupee-dollar parity terms the amount is in excess of a billion dollars, which should be a source of serious concern to the country’s economic managers. Further concessions to the export sectors include duty-free import of plant and machinery, raw materials as well as subsidised financing by the State Bank of Pakistan.
What must be supported is the Ministry of Finance’s harsh conditions on new fiscal incentives compelling the Commerce Ministry to withdraw its textile and apparel policy 2020-25 already approved by the highest economic decision-making body in the country notably the Economic Coordination Committee of the Cabinet and ratified by the cabinet.
The Finance Ministry reportedly urged the Commerce Ministry to take a holistic approach and take account of the unprecedented support extended to exporters and its outcome to ensure informed decision-making by the ECC in future.
In this context, it is relevant to note that Derek Chen, Senior Economist, World Bank, while launching the Pakistan Development Update “Reviving Exports” in October 2021 stated that “since long-standing issues with the persistent trade gap have resurfaced…in-depth assessment and policy recommendations that can help spur exports” include: (i) gradual reduction of protection through a long-term tariff rationalization strategy; (ii) reallocate export financing away from working capital to capacity expansion through long-term financing facility; (iii) consolidate market intelligence services by supporting new exporters and evaluate the impact of current interventions to increase their effectiveness; and (iv) design and implement a long-term strategy to upgrade productivity of forms that fosters competition, innovations and maximized export potential.
It is hoped that the Commerce Ministry undertakes a study to determine the cost of the incentives to the country and the outcome on exports as well as to formulate a time-bound action plan to ensure import substitution policies are vigorously identified and pursued.
Copyright Business Recorder, 2022
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