Pakistan’s exports keep declining in absence of long-term vision

During the last seven years, Pakistan’s exports have been continually declining on year-on-year basis----from $25.12 billion in 2012-13 fiscal year to $22.96 billion in 2018-19.

Thus total exports of goods (excluding services) registered dismal performance in the previous years too: $24.73 billion in 2013-14, $22.09 billion in 2014-15, $20.49 billion in 2015-16, $20.42 billion in 2016-17 and $23.21 billion in 2017-18. The trend continues and there are no signs of improvement in near future. Export of goods during the first quarter of current year 2019-20 (July-September 2019) amounted to $5.51 billion.

Our exports are much lesser in relation to its significant potential, and also much lesser than those of the countries with comparably lower natural resources, less gross domestic product (GDP) and small population, like Bangladesh and Vietnam. Ours is the 68th largest export economy in global ranking. Pakistan is 16th among top 20 Asian countries on the basis of 2018 export figures. Ironically, Bangladesh is ranked 15th at $43.5 billion, which is about double of Pakistan’s exports. Likewise, Indonesia enjoys the 11th position at $180.2 billion, and Malaysia is at the 10th position with $247.3 billion. Not surprisingly, Thailand ranks the 9th at $249.8 billion.

In fact, currently we stand nowhere in the region insofar as volume of exports is concerned. Pakistan’s exports are nominal, at 0.34 percent share in total exports from Asia valuing $6,928 billion. The most astonishing position is that of Vietnam—the 8th at $290.4 billion exports as its economy now enjoys the 45th largest position in the world.

In 2018, Pakistan had a population of over 208 million and GDP $284 billion. Comparatively, Vietnam, with 96 million population had $242 billion GDP, whereas Bangladesh’s GDP was $250 billion with a population of 165 million in the year under review.

It may come as a shocking surprise that our annual exports are near to those of Kampuchea or Cambodia ($19.34 billion), one of the least populated country in Asia, and Myanmar ($16.67 billion). There are a variety of factors for the dismal export performance of Pakistan, including poor governance, low productivity, high cost of production, obsolete technology etc. But most important factor is the government’s improper policies and lack of vision for long-term export promotion. The government's apathetic attitude is reflected in the fact that currently there is no export policy, no industrial policy, and no measures for revival of the manufacturing sector.

In 1963, the Export Promotion Bureau (EPB) was established and a dynamic export policy implemented through it. This resulted in enhancing the exports steadily, month by month, year by year, having reached the mark of $16.5 billion in 2005-06. However, in November 2006, EPB was replaced by creating the Trade Development Authority of Pakistan (TDAP), and focus was thus shifted from export promotion perspective to global trade development.

Consequently, the subsequent years saw steep jump in the imports, impeding the growth of our exports. The Strategic Trade Policy Framework 2015-18 had proposed various short-term and medium-term action plans for growth of exports that remained on paper only. The document had set an export target of $35 billion by June 2018 but was not achieved.

A number of bilateral, free-trade and preferential-trade agreements with various countries, such as Afghanistan, Sri Lanka, China, Malaysia, Iran, Indonesia and Mauritius were concluded, besides the membership of the SAARC (South Asian Association for Regional Cooperation) countries, but, sadly, trade balance remained generally in favour of other countries. Pakistan was unable to take effective advantage of these agreements, as it was not in a position to secure competitive tariffs for its exports. As an example, our exports to China declined by 12 percent, to Sri Lanka by 7.5 percent and to Afghanistan by 8.0 percent in 2017 compared to the previous year. In fact, Pakistan promoted exports of other countries at the cost of ours; call it vested interest or myopic policies or corruption. This led to trade balance in favour of other countries, and resultantly, huge negative overall trade balance.

Textiles and clothing remained the number-one export item of Pakistan for decades, almost 55 percent of total exports, though without much of diversification and value-addition in recent years. Second largest export item is agro and food products, including vegetables, fruits, rice, sugar, fish, mutton and beef and other foodstuff. Other export commodities are live animals and animal products (including raw hides, leather and its products), wood and wooden products (like furniture), animal and vegetable fats and oils, plastics and articles thereof, products of chemicals and allied industries, cement and other mineral products and machinery and transportation items. As evident, most of Pakistan’s exports are raw materials, without any or nominal value-addition.

The analysis of regional countries that outperformed in exports demand that Pakistan learn from their success stories. Globally, capital/engineering goods are termed as major component of national exports for the reason of high value-addition. Pakistan has less than two percent share of engineering goods in its overall exports. In contrast, Vietnam’s leading exports are engineering goods (mobile phones, computers and electrical products and other machinery and instruments), which constitute 39 percent of its total exports.

Likewise, engineering goods and vehicles are top export items of Thailand and Malaysia. Share of electrical machinery and equipment and other machinery and computers in Malaysia’s total exports is as high as 44 percent. Similarly, Thailand’s exports of machinery and computers, and electrical machinery and vehicles are over 43 percent of its total exports. Indonesia exports electrical machinery, other machinery and computers and vehicles that constitute 12.5 percent of its total exports.

One of the key economic indicators of a country is the unemployment rate, and volume of its exports is conversely proportional to the joblessness. According to 2019 reports, Vietnam has 2.16 percent unemployment rate, Malaysia 3.2 percent, Bangladesh 4.3 percent, and Indonesia 5.34 percent. On the other hand, the unemployment in Pakistan is 5.9 percent of its labour force.

The writer is retired chairman of the State Engineering Corporation