Mm. Aftab
Filed on September 14, 2015 | Last updated on September 14, 2015 at 07.43 am

FDI inflows were $75 million, compared to $18 million in the two comparable months.

 

Pakistan has formed a new strategic policy to make a big push in exports particularly to the booming regions like Middle East, Africa, South East Asia and China.

The new target to boost exports to an all time high of $35 billion a year means that within three years the amount has to go up by nearly $10 billion, which will require considerable effort by the industry, businesses and services.

The three-year plan called “Strategic Trade Policy Framework (STPF) – 2015-18 has been okayed by the Cabinet Committee on Production and Exports. Low-cost finance, reduction in procedures, cheaper cargo and freight services, regular supply of electricity and gas and greater cooperation between the government and trade organisations are some of the incentives, which are required to achieve the results.

The STPF was planned by Commerce Minister Khurram Dastgir Khan on the back of worrisome performance of the export sector.

Exports during the June 30-ended fiscal year 2015 totalled $24.2 billion, against the official target of $27 billion.Fiscal year 2015 was the third consecutive year of declining exports. Compared to fiscal year 2014, exports in fiscal year 2015 were down 3.5 per cent. The exports were $25.1 billion in fiscal year 2014. The actual exports in fiscal year 2015 were only $25.1 billion against the government’s target of $29.9 billion.

“All steps will be taken to enhance export to the $35 billion level by 2018 by expanding production of all currently exported items and those with a future potential in the changing global market,” said Finance Minister Ishaq Dar who chaired the Cabinet Committee on Production and Exports.

“The government is cognisant of Pakistan’s declining trend in exports. In view of this, we will take all possible steps to reverse the trend,” Dar said.

“While formulating the new strategy for higher exports, we have taken into account the potential of the industry and the economy, as well as the hurdles in growth, which restrained the output. These hurdles include the continued shortage of electricity and gas, rising cost of doing business, appreciation of the rupee against the dollar and other currencies, as well as the growing foreign competition, particularly to our textiles,” Khurrum Dastgir said.

The STFP has outlined the potential markets, which will be targeted to enhance exports. The focus for export of high-quality, “Basmati” rice will be the Middle East, Saudi Arabia, the UAE and Iran. Pakistan will make a push for export of its fruits, including oranges, mangoes, vegetables, potatoes, onions and halal meat products to the Middle East, the UAE and Iran.

South East Asia will be the target for export of horticulture products. India, Sri Lanka, Afghanistan and Africa are identified for export of cement. Pakistan will offer a freight subsidy for export of cement to Africa. Items marked for export to China are rice, cotton yarn, fabrics and ready-to-wear garments. Wheat, rice, meat and cement are identified for export to Afghanistan. In order to expand trade, border marketing support, development, expansion of banking facilities, improvement of the rail-link and infra-structure development will be undertaken. Products destined for the Iran market will include provision of warehousing support, product branding, “halal” certification.

The STFP provides Rs20 billion for research and development to expand and upgrade Pakistani exports and to achieve the targets set by this plan.

The government has also decided to undertake immediate steps for expanding farm products, further improving the quality and range of products, especially fruits and vegetables, commodity pricing and to examine the input cost, which will have to be restrained in order to ensure expansion of exports and enable the country to counter foreign competition. The government will have a deeper look at other hurdles being faced by exporters. These issues relate to R&D, technology problems, moving out of the current concentration of traditional products, improvement of resources and financing of the potentially exportable products, upgradation of all products including those needed to match with the new and developing demands of the consumers in foreign markets where incomes, living standards and lifestyles are changing and rising, Commerce Minister Dasgir said.

The government’s Committee on Ease of Doing Business, the State Bank of Pakistan (SBP), the central bank, Ministry of Commerce and Ministry of Textiles will work jointly to achieve these objectives. Pakistani fashion industry is constantly increasing its exports and arranging fashion show in the UAE, Qatar and other foreign markets. One has to look at the latest foreign trade statistics in order to understand the importance of export volumes and values in the context of the entire external balances. Some improvement is visible in this sector according to the latest SBP statistics.

SBP says the current account deficit has narrowed down by 80 per cent to $150 million in July – the first month of fiscal year 2016.Both exports and imports drop down in July. Exports were down to $1.76 billion from $1.91 billion in the same month last year. Imports declined to $3.5 billion from $4 billion in the two comparable months.

FDI inflows were $75 million, compared to $18 million in the two comparable months.

For the whole of fiscal year 2015, the overall current account deficit was $2.3 billion – 27 per cent lower than the deficit in FY-14.

Fiscal year 2015 also saw the overall imports totalling $41.13 billion as compared to $41.66 billion in fiscal year 2014.

The foreign exchange reserves on September 3 were $18.497 billion, of which SBP held $13.458 billion, enough to cover imports for three months. The forex reserves held by commercial banks were $5.050 billion. Analysts and businesses are also questioning the current rupee-dollar parity. They claim that devaluing the rupee to a “realistic level” can reduce the current export slowdown.

The open market rate of dollar was Rs104.45/104.65 and Rs103.80/104 in the inter-bank market over the weekend. Institute for Policy Reforms, a research group said: “The rupee remains significantly overvalued which has impaired the competitiveness of our exports.” Several businessmen said the rupee is overvalued up to five percent against the dollar, and lowering it will help exports to rise. But the government has taken no decision on such claims.

IMF’s continued disbursement out of the $6.2 billion EFF facility, Pakistan’s planned issuance of eurobonds, and ongoing lower prices of imported oil and commodities are expected to continue support the external balances,” says SBP.

This picture of the external balances indicates that an all out efforts should go on to raise exports. And, now the STFP provides that road map.

Views expressed by the author are his own and do not reflect the newspaper’s policy.

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