The commerce ministry has acknowledged that Pakistani products are of poor quality and contributes less towards value-addition thus fetching low prices as compared to competitors.
"Pakistani products are of poor quality and low in value-addition which are the main reasons of not fetching good prices," the ministry, in its presentation, said to Prime Minister Shaukat Aziz a couple of days ago on Pakistan's export performance.
The ministry, which is already under pressure for failing to achieve export target of $18.6 billion set for the current fiscal year, is also of the view that investment made by Pakistani entrepreneurs do not present optimistic scenario as evident from the import of machinery since 2001-02.
Official sources told Business Recorder that the machinery installed being old and the electricity incentives being provided to some of the sectors have proved less productive and carrying higher maintenance costs.
"Low return on capital, low productivity of labour and increased wastage of inputs adding to the cost are also some of the major reasons which make Pakistani products more expensive than neighbouring countries," the sources added.
Sources said that Pakistani entrepreneurs have been investing in non-productive, speculative sectors and non-industrial sectors like real estate and stock markets, which pay better returns as compared to industrial and productive sectors.
The Planning Commission has already recommended to government to discourage investment in non-productive and speculative activities with levy of capital gain tax on real estate business and stock transaction, the sources said, adding this proposal might be made part of the budget proposals.
Sources also said that the industry is making insignificant expenditure on R&D and is unable to meet consumers' requirements in terms of fashion and design.
High protective tariffs carry anti-export bias making domestic market lucrative, and discouraging investment in export-oriented industry not forcing domestic producers to look forward, the sources maintained.
"Pakistan's export houses lack capacity to meet bulk orders on one hand and on the other un-competitiveness in terms of adherence to contracted quality and delivery schedule are major reasons which ail Pakistan exports," the sources added.
Exports during July-March 2006-07 have increased by 3.5 percent as compared to 18 percent in the same period last year and 14.3 percent for the whole fiscal 2005-06.
The main reason for slow growth of exports is decline in export of food and, petroleum group and other manufacturing groups consisting of carpets, rugs and mats, sports goods, tanned leather, leather manufacture, footwear, surgical/medical goods, chemical and pharmaceutical products.
Exports of fruits, rice, football, carpets, footwear, plastic material, and pharmaceutical products have declined due to reduction in volume despite the increase in unit values.
Sources said, export of naphtha, footballs, leather tanned, and leather manufactures have declined both in volume as well as value.
While mentioning post-quota environment, the sources said that Pakistan's share in world export of Textile and Clothing (T&C) amounted to 3.1 percent and 1.2 percent respectively in 2004 and the position is almost the same after dismantling of quota regime, the sources also observed.
The commerce ministry is also of the view that the incentives given to Pakistani exporters are very lucrative as compared to India, Bangladesh and Sri Lanka. But Pakistani exporters and manufacturers are not paying attention towards quality and value-addition.
Sources said the prime minister had appreciated the commerce ministry for analytical work on the reasons of decline in export's growth in few sectors and slow growth of overall exports.
The prime minister also agreed to take necessary measures to streamline growth in exports as per the recommendations of the ministry concerned, the sources added.