Pakistan has remained an import-intensive country all these years seriously lacking, at the same time, in exportable surpluses, especially in the value-added variety.
Understandably, we started with a predominantly import substitution strategy but could not implement it with any degree of efficiency and vested interest of the private sector wallowing in ever-increasing profit margin under the ever higher tariff walls also came in the way. The high tariff walls under which Pakistan tried to implement this strategy on the other hand gave rise to smuggling which in turn damaged the nascent manufacturing units set up to substitute imports.
When the self -styled resident economic wizard, the then finance minister, the late Ghulam Ishaq Khan, under whose restrictive watch this strategy was being implemented was asked about this negative development, instead of admitting there was anything wrong with the way the strategy was being implemented said he was not worried because official foreign exchange reserves were not being adversely affected due to smuggling. He was also a great believer in keeping our currency over-valued which actually had subsidized imports and undercut the competitiveness of our exports in the global markets.
It is about time we needed to approach the trade sector from a more innovative angle rather than sticking to the same old strategies and tactics that we have been using all these 71 years.
In any case, the fundamentals of this sector are expected to undergo drastic changes as the China- Pakistan Economic Corridor (CPEC) project starts impacting the national economy in the real sense of the meaning.
The project is expected to bring in technology in a big way and we need to be prepared to take full advantage of this new window of opportunity.
Technological disruption isn't new for the global trade system. The steam power revolution had connected the world like never before. The invention of shipping containers laid the foundation for globalization. More recently, technologies such as Optical Character Recognition (OCR) to read container numbers, Radio Frequency Identification (RFID) and QR codes to identify and trace shipments, and basic digitization of trade documents have improved the reliability and efficiencies of the international trade.
At the same time, from trade agreements written before digital commerce, transactions that go accompanied with large amount of paper work, to trade financing that still depends on traditional banking methods, the global trade system has failed to take full advantage of cutting edge technologies that could make trade more efficient, more inclusive, and less costly.
According to Ziyang Fan, the project head, digital trade and data flows and Cristian Rodriguez Chiffelle, head of policy, international trade and investment - both from World Economic Forum - (5 technologies that will forever change global trade, published on June 6, 2018 in the Agenda weekly of WEF)-- the good news is that we may be on the brink of change, "different technologies in different parts of the technology adoption life cycle, when combined, could fundamentally change the way resources are allocated and international trade operates."
Government and businesses in Pakistan need to understand these current trends in order to take the full advantage of the following new technologies that are expected to disrupt global trade:
First, let us for instance take blockchain and blockchain-based distributed ledger technologies. These technologies can have, experts insist, tremendous impact on the global trade supply chain.
In addition to making movement of goods more efficient and reliable, blockchain-based solutions are disrupting the world of trade financing. For example, blockchain is being used to simplify the long and tedious process of obtaining a Letter of Credit (LoC), a payment mechanism used in international trade.
Blockchain has helped a private sector bank redesign its LoC issuance by developing a blockchain solution (based on the Ethereum platform) that reduced the issuance time from 20-30 days to hours. In some other instances, companies are by-passing the LoC altogether by providing real-time tracking of goods and inventory financing that de-risks transactions, and allows financiers to provide working capital relief to all supply chain partners at the lowest cost of capital in that chain.
Maqta Gateway, a wholly-owned subsidiary of maritime industry developer Abu Dhabi Ports, has developed and deployed its own blockchain solution for international logistics and trade.
Dubbed 'Silsal', Arabic for 'chain', the blockchain solution is now the first of its kind platform in Abu Dhabi and will enable real-time tracking of cargo and paperless documents while saving time and increasing overall efficiency of international trade on a decentralized ledger.
The blockchain solution was developed to bridge the gap between exporters and importers in an industry that is notoriously averse to digitization and change by reducing the need for manual paperwork, communication and physical visits with faster, real-time information exchanges over a decentralized ledger.
The international shipping industry is particularly ripe for disruption with the World Economic Forum (WEF) estimating that blockchain technology could potentially save 20 percent of the total physical transportation expenses, cutting costs by up to $1 trillion in global trade.
"[B]lockchain is a key step in the digitalization of trade," said Dr. Noura Al Dhaheri, CEO of Maqta Gateway, adding:
Through Silsal, we will be offering the trade community secure and integrated access to blockchain technology, with the added value of cost and time savings through real-time track and trace, reduction in paperwork and ease in extracting vital information to receive live updates.
The platform will also be able to encrypt and safely secure all essential transport documentation including the bill of lading, booking, delivery and transport orders.
Developed by the Digital Innovation Lab of Maqta Gateway, the blockchain was field tested with strategic customers of Abu Dhabi Ports prior to launch and will see a commercial rollout to freight forwarders and their customers initially. Subsequently, the technology will be offered to the rest of the trade community as a 'complementary tool' alongside the current Maqta's Port Community System, a move that will fast-track adoption.
The deployment joins a growing list of similar blockchain applications within the international trade industry including systems developed by Europe's largest shipping port in Rotterdam, Australia's Port of Brisbane, Korea's shipping industry and the world's largest shipping company, Maersk.
Next, artificial intelligence and machine learning (ALML) can be used to optimize trade shipping routes, manage vessel and truck traffic at ports, and translate e-commerce search queries from one language into other languages and respond with translated inventory.
More than efficiencies gains and better consumer services, Artificial Intelligence (AI) is also being used to make global trade sustainable. For example, Google launched Global Fishing Watch in 2016, which is a real-time tool using machine learning to combat illegal fishing by providing a global view of commercial fishing activities based on ship movements and satellite data. It can be used by governments and other organizations to identify suspicious behaviours and develop sustainable policies.
Third, It's increasingly easier to trade services online - digital platforms like Upwork allow users to find service providers from all over the globe for a wide range of services, and can find anything from a web developer in Serbia, to an accountant in Pakistan, to a virtual assistant in the Philippines. Meanwhile, startups such as the international learning platform VIPKID pairs up American educators with Chinese children to teach English online. These digital platforms seamlessly connect the customers with service providers, in a way that wasn't possible before when such professional services were mostly delivered in person.
Fourth, the jury is said to be still out on the impact of 3D-printing on global trade. There are studies that predict that once high-speed 3D-printing is mass-adopted and cheap enough, global trade may decrease by as much as 25%, since 3D -printing requires less labor and reduce the needs for imports. Others argue that such views are too optimistic and don't take into account the complexity and reality of mass manufacturing. Regardless of the positions, the impact of 3D-printing on global trade is real, especially as faster and cheaper methods of 3D-printing become available.
Fifth, from Apply Pay to Alipay to M-Pesa, mobile payments are transforming the way we live and connecting more people to market opportunities. According to the World Bank Global Inclusion Database, the number of people who gained access to bank accounts increased by 20% between 2011 and 2014, and mobile money accounts were a major drive for financial inclusion, especially in emerging economies.
As the newly banked population becomes connected to mobile payments, it'll be much easier for them to participate in global trade, either as consumers or businesses.
The authors suggest that public and private stakeholders must work closely together to establish the framework and foster the environment for these new technologies to unleash their positive potential while mitigating the potential harms. In particular, the stakeholders should adopt the multi-stakeholder and human-centered agile governance approach to allow room for experimentation, and to gather input from a diverse set of participants.
In addition, in the absence of a global standard, regional governing bodies should take charge and lead the effort to harmonize the regional rules on issues such as data flows, licensing, and taxation.
Technological innovations offer an exciting future for international trade among today's uncertainties, with the right governing approach, these innovations will usher in more inclusive and efficient trade growth in the years to come.
We need to set up a cell of tech experts in the commerce ministry to at least keep a close watch on this window of opportunity so as to be able to join the supply chain in the global trade at the right time and with the right technological tools.