Pakistan is likely to face a serious balance of payment crisis due to dismal exports performance despite the government’s incentives to the industries and special status for exports to the European markets. Pakistan’s exports figures for the first four months of the current fiscal year (July-October 2016) have depicted a gloomy picture of the country’s declining exports. That is despite concerted efforts by the government as well as the export industry to improve the dwindling balance of trade for many years now.

Pakistan has been struggling to increase its exports against swelling imports, but so far there is no improvement in its balance of trade. This year, the government has fixed the export target at US$24.8 billion against the three-year Strategic Trade Policy Framework’s ambitious target of US$35 billion by the fiscal year 2017-18, but it seems difficult to achieve.

"Interestingly, this year’s target is even less than the exports of the year 2011, which stood at US$25.3 billion that indicates Pakistan’s serious crisis of balance of payment," says Dr. Shahid Hasan Siddiqui, a senior economist. "If we compare with our traditional competitor India, its exports were at US$46 billion in 2001, which went up to US$306 billion in 2016, showing an increase of US$260 billion during that period; whereas Pakistan’s exports were around US$16 billion in 2001, which increased to US$22 billion during 2016, indicating a rise of only US$2 billion."

"Corruption, tax evasion and increased cost of utilities are adding to the cost of production, which is one of the main reasons hampering the growth in exports," Siddiqui adds.

Even though Pakistan is enjoying zero-rated exports to the European markets under the Generalised Scheme of Preference (GSP)-Plus incentive package since January 2014, this coveted package has also not provided any impetus to Pakistan’s exports.

Exporters are frequently complaining of the government’s apathetic attitude towards the overall economy, including poor policy response and indifference towards the country’s top export-oriented textile sector. High cost of production, artificial cap on currency exchange for many years against the US dollar, and recession in the international market are stated as main reasons of dwindling exports from Pakistan.

After Britain’s exit from the European Union (EU) as a result of famous Brexit referendum, the EU markets have witnessed sluggishness, which would further hold back the benefits of GSP-Plus in the coming months. In the first year of GSP-Plus status, Pakistan’s exports to the EU soared by 21 per cent, but started declining in the following months, whereas imports continued increasing, despite sharp reduction in petrol prices in the international market.

Oil constitutes the major chunk in the country’s import bill every year, followed by other heads like food products, machinery including electronics and cell phones, etc.

The Federal Bureau of Statistics’ recent figures have painted a dismal picture for the first four months of the current fiscal year (2016-17) as export proceeds during July-October 2016 remained at US$6,432 million (provisional) against US$6,865 million during the same period of the last financial year, thus indicating a decline of 6.31 per cent.

Although the figures of November are yet to arrive, the local exporters do not see any improvement in the situation unless the government moves swiftly in policy implementation process. Textiles, including value-added products like garments, hosiery, towels, bedwear, etc., constitute over 60 per cent of total exports from Pakistan.

Textile exporters decry that the government has withheld billions of rupees refunds and it is violating its own rules, as according to the FBR rules the payment of sales tax refund claims would be paid within seven days of the date of Refund Payment Order (RPO), but this rule has never been implemented and billions of rupees claims are still pending with the government.

"We are at a disadvantageous position on many fronts because world retail sales are currently down due to recession and we fail to offer any discount to attract buyers due to our higher cost of production," says Masood Naqi, a leading garments exporter and President of Korangi Association of Trade and Industries. "Even Bangladeshi exporters have more advantage. They can sell their products due to a lot of incentives and advantage they enjoy, including lower utility costs, lower wages, and other incentives."

The emerging producers of textile products from Vietnam are getting more export orders as their national exports have soared to US$60-62 billion this year because of competitive prices. Vietnam has even snatched markets of traditional players like China and India.

The government’s non-serious attitude towards export industries has always bothered the exporters, even though the present government is enjoying the benefits of lower oil prices in the international market.

"Policymakers are traditionally not attuned towards exports. Pakistan has never been able to make its mark in the global marketplace," says Majyd Aziz, former President of Karachi Chamber of Commerce and Industry as well as ex-Chairman of SITE Association of Industries.

"Trade Development Authority of Pakistan (TDAP) has the excuse that exports of regional competitors are also under pressure and that the world prices are also declining." Aziz also points out the culpability of exporters. "The critical mass of a good businessman is to survive and prosper during difficult times, but we have just become complacent. We are not ready to forge ahead in new territories and new products but are happy with fewer products and commodities and relatively few markets."

Pakistan has not taken proper advantage of free trade agreements, preferential trading areas, regional trade blocks, and non-traditional markets in Africa and Middle East.

Aziz points out that TDAP has become a redundant organisation and is only involved in participating in exhibitions instead of development of trade, both in the domestic environment as well as foreign lands. "The trade bodies should come forward and take part in international exhibitions."

The government has introduced a number of measures to improve exports from Pakistan in recent years. These steps include introduction of zero-rating of sales tax regime for five export-oriented sectors, including textiles, duty free import of machinery, payment of pending sales tax refunds to those Refund Payment Orders (RPOs), which have been approved up to April 2016, reduction in mark-up rate under Export Finance Scheme from 8.4 to 3 per cent and reduction in mark-up rate under Long Term Finance Facility by 4 per cent.

But textile exporters complain that these policy measures for export-led growth are still not being implemented by the federal government despite various past assurances.

There is need for a real time public-private dialogue to make exports a national priority, says Majyd Aziz, adding, "Forget about $35 billion by 2018."