Decline in exports

Pakistan's textile exports have declined in the last four years because of the high cost of doing business. This is the considered opinion of a large and growing segment of Pakistani businessmen. There was a comment this week on the statement of Muhammad Younus Dagha, Secretary of the Ministry of Commerce, that the textile industry is itself responsible for the continuous decline in exports. Zahid Mazhar, senior vice chairman of the All Pakistan Textile Mills Association is reported to have stated that it is the higher cost of doing business in Pakistan, compared to other cotton producing countries in the region, is only this: the higher cost of doing business.
He suggested that the government remove the levy of the gas infrastructure development cess on gas, and provide gas at the regionally competitive rate of Rs 400/MMBTU as was earlier announced by the federal cabinet's Economic Co-ordination Committee last November. He said that the spinning and weaving sectors, the backbone of the textile value chain, faced the brunt of the high cost of doing business.
"Today, the spinning industry is incurring heavy losses by selling yarn below cost," he said. "The production of yarn and fabric is substantially more than the local consumption; therefore, their exports must be encouraged."
He is also reported to have requested the payment of long outstanding sales tax refunds and other refunds to address the liquidity issue, to check the influx of imported yarn and fabrics in the country and to save the domestic industry. Free-trade agreements and preferential trade agreements should be revisited and reviewed in such a way that the exports of Pakistani goods to those countries are increased, he added.
While the observations of APTMA have merit, issues related to exports are far more complex and serious than the gas infrastructure development cess or outstanding sales tax refunds or free-trade agreements.
These and other such are issues which are on a merry-go-round for years with ad hoc reliefs provided to the industry. The industrialists do get pacified for some time, but the issue soon bounces back.
Pakistan's core issue is the cost of doing business which has slid down to a level where our industry is no longer competitive against competing countries in the region. These competitors have managed to move up. While Pakistan moved down they moved up, pushing Pakistan out of the global market, which is reflected in their growing exports at the expense of our sliding exports. It is easy for all of us to decode what is really happening in global trade and why Pakistan is left out.
It is not only the textile industry which has suffered, other export industries met the same fate.
Pakistan's global ranking of doing business is at 144 out of around 200 countries for 2017, according to the World Bank rankings.
Ease of doing business has 10 parameters which are considered in ranking a country, and this includes procedures, legal framework, taxation and related matters. The main components of the cost of doing business are the energy cost, HR costs vs productivity, raw material and inputs for production, incentives and the taxation regime of the government.
Pakistan is failing on all accounts. Ease of doing business is a victim of poor governance across-the-board, from incompetence to the lethargic mindset of business-as-usual. A close comparison on this account with competing nations in the region shows the edge they have achieved over us.
In availability and affordability of energy, Pakistan is far behind the competing nations and the gap is likely to widen further enhance with the replacement of natural gas with LNG, and power plants operated on coal and LNG thereby jacking up the energy bills of our export industries.
Instead of endlessly debating and negotiating deals with exporters and always coming back to square one, the government should quietly and diligently work on bringing around significant improvements in ease and cost of doing business for the export industry.
But the task is not an easy one, and the government cannot do it on its own. They have to move from cosmetics to hard work on ground and the mind set positioned from business as usual to innovation and out of the box thinking and application.
The work requires exhaustive research in identifying the gaps in doing business in Pakistan. Once we are able to come up with a viable plan to bring Pakistan's competitiveness to the level of our competitors in the region, we need to put up a marketing and Pakistan branding strategy which also requires restructuring, including the responsibility of the otherwise idle and passive role of our commercial counsellors at our embassies abroad.
The principal responsibility of bringing around improvements in doing business in Pakistan can best be delegated to Trade Development Authority of Pakistan and the Federal Board of Investment, supported by the provincial Boards of Investment. The Planning Commission can take the lead as an overall manager of the task force.
Declining exports and depleting foreign reserves and closure of export-oriented industries is of serious concern.
(The writer is former President of Overseas Investors Chamber of Commerce and Industry)