Prime Minister, Nawaz Sharif has reportedly approved Strategic Trade Policy Framework (STPF) 2015-18 after keeping the Commerce Ministry in waiting for several months, well informed sources told Business Recorder. The STPF envisages several incentives for exporters besides tariff rationalization aimed at achieving the $35 billion exports mark by 2018. Prime Minister has also approved Rs 20 billion for development and research for a period of three years. The government has already earmarked Rs 6 billion for export promotion in the federal budget 2015-16.
Commerce Ministry had set an export target of $95 billion for 2012-15 but it remained far behind the target because of energy crisis, law and order, isolated fiscal and monetary policies, international economic turmoil and traditional approach of Commerce Ministry.
The Cabinet sub-Committee on production and export headed by Finance Minister Senator Ishaq Dar has also cleared the final version of STPF 2015-18. Power tariff for the industrial sector has already been slashed on the instructions of Prime Minister Nawaz Sharif. Prime Minister has also announced zero rating from July 1, 2016 on the request of Commerce Minister Engineer Khurram Dastgir who was perturbed over prolong delay in approval of STPF.
The sources said, Pakistan's exports have been under pressure for the last 18 months, showing a decline of nearly 4.9% during the 2014-15 as compared to previous year and a further decline of 14% during the first half of the current financial year. The decline in exports is a regional trend - the exports of China and India during the last year also declined by 7.8% and 1.5% respectively. Indian export of cotton products and rice has declined by 22% and 10% respectively compared with Pakistan's decline of 10% and 5%, respectively.
Commerce Minister Engineer Khurram Dastgir also held a consultative session with the top Pakistani economists a couple of ago who sent a non-paper to the Prime Minister. According to economists, main reasons for decline in exports are: (i) economic slowdown in major markets; (ii) appreciated currency; (iii) high tariffs; (iv) low value-addition; and (v) low ranking in global competitiveness index.
According to sources, exporters attribute a decline in export to (i) poor R&D in two major raw materials for export industry viz. cotton and rice; (ii) stuck-up refunds of sales tax; (iii) poor infrastructure; (iv) security situation leading, inter alia, to flight of buying houses from Pakistan and travel advisories against buyers' visits to Pakistan; (v) energy deficit and high energy tariffs, (vi) market barriers in regional markets; and (vii) impediments at the border due to poor infrastructure and multiplicity of agencies.
The sources further stated that Commerce Ministry has recommended a structural change in composition of Pakistan's exports from excessive dependence on textiles to high value sectors, ie, pharmaceuticals, engineering and ICT, market diversification from dependence on the USA and Europe to regional integration, Research and development in private sector to transform factor-driven to innovation-driven export sector and in the public sector to develop high yield varieties in cotton and rice (basmati) for providing a competitive raw material base to the leading export sectors, support for value addition and support for branding.
In medium-term, Commerce Ministry has suggested that efficiency and service delivery of business support institutions/ organisations in the public sector needs to be enhanced through capacity building of existing organisations and creation of sector specific organisations especially for the futuristic pharmaceutical sector and the largest non-textile export sector of rice.
Commerce Ministry will also announce support for standardisation, reducing cost of doing business and country branding of Pakistan in the international market.
In the short-term, focus will be on horticulture products, basmati rice and meat products, which due to low gestation period have the potential for quick results; similarly, jewellery and cement sectors can add quickly to the export proceeds.
On the market side, Iran, Afghanistan, China and Saudi Arabia will be focused. Restructuring of Commerce Ministry and TDAP will also be part of the new trade policy. Commerce Ministry has also recommended implementation on Textile Policy 2014-19 in letter and spirit.
Prioritisation of industrial sector in gas and electricity distribution policy and removal of ban on new connections for the industry is also part of the trade policy. The sources further stated that focus of new trade policy will be marketing of basmati rice in the Middle East (Iran, Saudi Arabia) and for horticulture products South East Asia and the Middle East with exportable products of fruits, kinnow, mango, vegetables, potato, onion, fresh vegetables. The Middle East, including Iran, would also be one of the market targets for meat products and the government strategy to capture the market would be certification of products establishing market linkages and approval of facilities by importing countries.
Sri Lanka, India, Africa and Afghanistan would be target markets for cement products and the government would provide a freight subsidy to export to Africa and a strategy would also include revision of duty on raw material on coal and shredded tyre and proactive fighting of anti-dumping litigation in South Africa.
It is a considered opinion in Commerce Ministry that market-linked focus products for Iran are basmati rice and meat; for China rice, yarn, fabrics and garments; for Afghanistan wheat, rice, meat and cement. The policy strategy for market-linked products for Iran would be to provide warehousing branding support, certification support, border market support as well infrastructure development support to the sectors and for Afghanistan, the strategy includes infrastructure development, banking, rail link and zero rating on export of plastics.
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