The export slide

The Economic Co-ordination Committee (ECC) of the Cabinet, the highest economic decision-making body in the country, under the chairmanship of Finance Minister Ishaq Dar approved export of 300,000 tons of sugar, half of the 600,000 tons recommended by the Ministry of Commerce which had based its recommendation on a letter from the Pakistan Sugar Mills Association claiming a record surplus of 1.475 million metric tons. The ECC's overarching legitimate concern with respect to determining the quantity of sugar exports is on its possible impact, if any, on the domestic price, especially during Ramazan. To ensure that domestic sugar price remains stable, the ECC also decided that it would review domestic price on a monthly basis. However, the ECC should also take cognizance of the fact that surplus sugar at present is a reflection of a decline in land under cotton cultivation, which is a major input for our textile value-added sector which accounts for the bulk of the country's exports, with a resulting negative impact on our ability to meet the domestic industry's requirements necessitating imports of raw cotton and yarn. The Economic Survey 2016-17 notes that the area under cotton cultivation declined by 14.2 percent last year compared to the year before due to "exceptional losses from previous year's pest infestation and low domestic prices at the sowing time that pushed growers away from cotton to other competitive crops (sugarcane and maize)". Economists have been urging the government to set a support price for cotton that would attract growers instead of pushing them away.
The textile sector continues to lament the lack of appropriate policies to encourage exports and recently pointed out that the 180 billion rupee export package announced by the Prime Minister in January this year is a non-starter as the government limited the fiscal/monetary incentives envisaged in the package to only those exporters who show a 10 percent increase in their export revenue. Without the timely release of sales tax refunds which compels the exporters to borrow to meet their liquidity requirements, which in turn adds to input costs, and with an overvalued rupee that makes exports uncompetitive in the global market there is little likelihood of a 10 percent rise in exports, the textile sector maintains. And also accuses the Ministry of Commerce for failing to prioritize the textile sector in allocations of the 6 billion rupees budgeted for export promotion.
In the Standing Committee on Commerce, the members took the Commerce Ministry to task accusing it of not only failing to finalize any free trade agreements or preferential trade agreements during the past four years but also for a steady decline in exports and a widening current account deficit during the year just past. The argument put forth by the Minister and the Secretary that the Ministry of Finance maybe held responsible for failing to release refunds on time, on an overvalued rupee and on the condition to limit the export package implementation to those companies that show a 10 percent rise in export revenue is only partially valid as it is the overriding responsibility of the Minister and the Secretary of the Ministry of Commerce to provide a compelling argument to the ECC, failing which to the cabinet, to ensure that its recommendations are supported by the majority which, in turn, may convince the Prime Minister to overrule the objections, if any, of the Ministry of Finance.
The members of the Standing Committee criticized the Commerce Minister yet again for failing to attend their meetings. This is unfortunate as government ministers, by and large, have shown a consistent lack of respect for parliament evident from their poor attendance record. With less than one year remaining for the end of the Sharif administration's tenure one can only hope that better sense would prevail and ministers begin to hold themselves accountable to parliament.