Export growth won’t be easy from now on

Ever since the rupee-dollar parity was allowed to be determined by market forces the Rupee depreciated dramatically and in consequence we became competitive in our exports and they began to grow at a gratifying pace. The only impediment to growth in the first year of the PTI Government was Sales Tax refunds to exporters. Once that was resolved, exports bounded.

We have now achieved a plateau where we are back as the cheapest and the most efficient source in the world for our base line exports. The export markets that India and other countries had taken away from us during the long period of almost fixed exchange rates of the Ishaq Dar era were recovered due to our lower prices. The disruption caused in India by the ham-handed way of dealing with Covid also helped. Now the easy part is over and a more difficult terrain lies ahead.

Gohar Ijaz, a favourite leader of the APTMA (All Pakistan Textile Manufactures’ Association), has promised us that 50 billion dollar exports can be achieved if the Government follows “the right policies.” Dr Reza Baqir, a former Governor of the State Bank, has written in Dawn that all is not lost and the current high rates of commodities will abate and prices of oil will half. Perhaps not half, but come down they will. Prices of Brent Crude are off by 20% from last financial year and prices of edible oils are down by 33%, but the winter chill is looming and the Russian energy is prohibited. No doubt the very high prices we pay for petroleum, electricity and other imports will lead to import substitution and demand suppression. Yet will this be enough?

On the other side, the floods have caused massive damage to crops in Sindh and Baluchistan. The cotton crop will be affected and we may have to import an extra two million bales this year just to sustain last year’s activity and exports. On top of that we will need to import wheat and possibly some of the destroyed livestock as well. Home remittances may not grow as much, as there is a world recession coming on. So there is scant prospect of the huge deficit becoming a surplus. If the deficit persists, will the rupee go on eroding in its value? Especially if the State Bank persists in not using its reserves to quell speculation? As always the answer is in “export-led growth.”

Export-led growth will now need much more than simply being the cheapest in the world. The demand for the basic bed sheet, towel, or T-shirt has already been met and there is a finite limit to how many of these items are required in the world. Very likely this demand has already been fulfilled. In the last few decades as our textile industry was growing, that of the first world was contracting; so we took up the capacity vacated. Now that phase is over. There are very few textile factories left in the USA, Europe, or Japan that produce basic products like we do. Those few factories left in the developed world are producers of such high quality and design that we are not able to match them. The market has shifted and the 850 billion dollar world trade that Gohar Ijaz talks about is that of garments. Bangladesh realized that a long time ago, and without growing any cotton they have mastered that market. So now we have to find our way into a much more competitive market, dominated by India, Bangladesh, Vietnam and China. All these countries have low cost and highly skilled workforce. They have invested billions into their education and skill development.

So must we. Not only in skill development and education but also in technology. The first priority is to build on our strengths. Why can we not get the same yield for cotton and wheat as in India? The basic lack is that of good seeds adapted and developed to our soil conditions. Better farming practices, better inputs and better collection and preservation of the harvest are needed. If we get better yields from our cotton and wheat we will save about five to seven billion dollars directly per annum. In addition to the billions we save on imports we will provide cheaper raw material to our textile chain making them even more competitive.

Similarly, better quality seeds and practices will help our farmers grow more fruits and vegetables which can be exported. The biggest and most lucrative market for such items is the Middle East, particularly Saudi Arabia and the Gulf States. They import these items from as far away as New Zealand, so why not Pakistan? The Saudi market for import of fruits and vegetables was estimated at 12 billion dollars in 2020 and expected to grow to 17 billion by 2028. The overall market for our farming sector especially in the labor intensive fields is vast, yet we are unable to exploit it.

Coming to the base line textiles, here we need to adapt our industry to apparel. That is the field in which the world is spending most of their money on. An average consumer will balk at spending thirty dollars on a bed set but will think nothing of a hundred dollars on a dress that appeals to them. This is despite the fact that the bed set will consume four times the fibre that is required for the garment. The amount paid is for the colour, design, stitching quality and the brand. The exports of garments, particularly trousers, jeans and similar garments are already growing rapidly. We need to establish many institutes to provide the industry with skilled manpower and management. We now need to help them upgrade and make good quality garments. For this we need not only skilled seamstresses, but good designers, cutters, packers and marketing personnel. A quick look at the internet will inform you that while there are 132 universities and colleges offering an MBBS program (for doctors) there are only 9 universities and colleges providing textile graduate degrees. While we can argue that medical doctors are more important, yet to make a good salary to pay for the doctors is also equally important. While we get sick once in a while, clothes have to be worn and a living has to be made every day. I have looked for any colleges or institutes where trained personnel are produced for the sports goods industry, but find none listed. All I am trying to say is that there is such limited support for the industry that it is manned by experienced but untutored craftsmen. Therefore, they lack innovation and fresh developments. All we do is copy what others have done rather than create our own product ranges.

There are huge funds lying unused in the Export Development Fund of the government of Pakistan. This fund was created back in the 1990s to make such educational institutes. Just a few were set up and the rest of the money is used for foreign junkets for export promotion. We, the industry need to put up proposals to set up more institutes to develop the skills we need. There is a huge mass of young men and women who are hungry for such training and knowledge and will surely jump at such opportunities. As per Nestle Pakistan, there are about five million babies being born in Pakistan every year! Where are these babies going to find schools, universities, jobs and eventually houses? It’s not just the lack of resources that hampers our growth, it’s also a lack of vision, and totally misplaced priorities.

(The writer is also Chairman-elect Towel Manufacturers Association of Pakistan for the year 2022/23)

Copyright Business Recorder, 2022