Once again, the budget has been presented in glooming terms. And, once again exports have declined, despite the fact that the government launched the ambitious Strategic Trade Policy Framework (STPF) 2015-18 in March 2016 to boost exports. The major objective of STPF was to enhance and diversify the country's annual exports. It targeted a doubling of exports from $17.9 billion in 2014-15 to $35 billion till 2017-18.
However, instead of moving towards the target, exports have consistently declined since then: from $17.9 billion in 2014-15to $15.6 billion in 2015-16 and further to $15.1 billion in 2016-17. With one year remaining for achieving STPF goals, the government needs to explain as to how it plans to achieve 133% growth to reach the export target of $35 billion?
Here, two questions arise. One, what was the basis of setting the target at $35 billion for 2017-18. The government needs to release the workings behind target setting. And what measures the government adopted to achieve the target. Two, what are the factors behind the export slide? Given the stagnation and roller coaster growth pattern in the commodity producing sectors -agriculture and industry - achieving the $35 billion export target would have required substantial structural real sector reforms, which were never on the agenda.
STPF also aimed at enabling Pakistani firms to produce and export more diversified and sophisticated range of products. But, a reverse has occurred, ie, greater concentration. There are four major commodities that constituted over 73 percent of Pakistan's total exports in 2014-15. These include textile & clothing (57 percent), rice (9 percent), fruits & vegetables (3 percent) and leather & manufactures (4 percent). Concentration of these commodity groups has increased to over 76 percent in 2015-16 and 2016-17 (Jul-Mar).
Source: Economic Survey 2016-17 and website Pakistan Bureau of Statistics.
An analysis of different items within these commodity groups reveals that, except two, all items showed a decline in terms of their export value in both 2015-16 and 2016-17. These include; rice, fruits & vegetables, leather tanned, leather manufactures, cotton yarn, cotton cloth, knitwear and towels. Items that depicted a positive growth in both the years was readymade garments, while bedwear exhibited negative growth in 2015-16 and positive in 2016-17.

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Export growth of major commodities (percent)
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                      Change in terms of value   Change in terms of quantity
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Commodities              July-June     July-Mar       July-June     July-Mar
                          2015-16       2016-17         2015-16      2016-17
                              over         over            over         over
                           2014-15      2015-16         2014-15      2015-16
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Rice                          -8.6        -14.9            10.4        -14.5
Fruits & Vegetables           -4.5        -13.4            -3.0        -24.9
Cotton Yarn                  -31.8         -5.1           -30.2          5.3
Cotton Cloth                  -9.7         -6.2             1.5        -15.0
Knitwear                      -1.5         -0.1            15.3          4.8
Bed wear                      -4.1          5.1             0.6          8.0
Towels                        -0.4         -3.2             3.4         -2.2
Readymade Garments             4.8          5.9             3.8          4.7
Leather Tanned               -25.9         -5.8           -27.6         -5.7
Leather Manufactures         -12.0         -6.2           -25.8         -7.9
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Source: Economic Survey 2016-17 and website Pakistan Bureau of Statistics
According to the Economic Survey 2016-17, this decline has occurred as a result of Brexit, due to which the Pound Sterling witnessed a sharp fall in its value with reference to other currencies. Hence, Pakistani exports to the UK became expensive. It needs to be mentioned here that the UK accounts for only 8 percent of Pakistan's total exports and, as such, the Brexit factor explains only a small part of the phenomena of export decline.
The value factor aside, exports have also declined in terms of quantity. Out of ten major export items, quantity export of six items declined in July-March 2016-17 compared to the same period last year. These include rice (-15 percent), fruit & vegetables (-24 percent), cotton yarn (-15 percent), towels (-2 percent), leather tanned (-6 percent) and leather manufactures (-8 percent). The items whose quantity exported declined in both the years, 2015-16 and 2016-17, include fruits &vegetables, leather tanned and leather manufactures. On the positive side, some items -knitwear, bed wear and readymade garments - recorded an increase in quantity exported in both the years.
The decline in export of these items in terms of quantity calls for investigating the production side of the economy, which points towards declining output of concerned commodities as per Economic Survey 2015-16 and 2016-17.In agriculture, major crops output grew at negative rates, -1.6% and -5.5%, in 2014-15 ad 2015-16 and by 4% in 2016-17. The 4% growth is, however, not worth celebrating; given that it come in the wake of two years of negative growth. Rice production was 7.0 million tons in 2014-15, which declined to 6.8 million tons in the next two years. Cotton crop production was 14 million bales in 2014-15 and which declined to around 10 million bales in 2015-16 and 10.7 million bales in 2016-17; remaining about 40% below the 2014-15 benchmark. Other crops too have registered near zero growth over the last two years.
In manufacturing, low growth is observed in the production of cotton yarn (0.8%) and cotton cloth (0.5%), with overall textile sector production growing by less than one percent in the last two years. Growth in production of leather products dropped from 10 percent in 2015-16 to negative 18% in 2016-17.This indicates that the real issues in export decline lies in the production sector of the economy. Thus, the earlier question: what was the basis of setting the $35 billion target for 2017-18 and what measures were taken in this respect?
(The writer works at Social Policy and Development Centre - SPDC)

Copyright Business Recorder, 2017