Opinion: Issues with exports of Pakistan

Pakistani exports have been seriously lagging behind imports since many years creating a serious imbalance in financial equation of the country.

The pressure exerted by the increasing imports made the financial managers to try to stem the tide through administrative measures and there was witnessed a decrease in imports slightly improving the balance of payment situation.

On the other hand, it is reported that Pakistani exports have showed an upward trend in the current fiscal year. The current average growth in exports has shown a steady improvement as they grew by a healthy 11%and the increase in exports reversed the trend witnessed for three consecutive years during which the exports graph went down.

But it is still widely believed that the vast potential of $12.8 billion untapped export potential remains to be put to use and that not enough measures are utilised to harness the exports portfolio.

The overall growth portfolio remained upbeat and all sectors showed growth.

Exports drop by 23.95%, trade deficit by 46% in July 

The significant increase was recorded in the food sector that rose by an appreciable 31% revealing the extreme potential this sector contains. Similarly manufactured goods sector grew by a satisfactory 17% and also depicted the increasing potential in it.

A very good note was the increase in the exports of unmilled wheat and sugar. On the other hand, the growth of textile sector remained sluggish at only 8% but then this sector is experiencing difficulties since quite some time.

Continuing their good run the exports of knitwear and readymade garments went up 9% and 12% respectively providing very encouraging impetus.

Related to this sector was the growth shown by raw cotton that increased by 39% showing that Pakistani cotton was holding its own in very competitive international market.

Moreover, exports of chemical and pharmaceutical products showed a healthy increase of 36%.

The factors considered responsible for an upsurge in export growth may be the substantial export subsidies and currency depreciation. The devaluation in currency was expected to improve the margin of growth in exports but it is not calculated yet that how much percentage of growth is offset by the drop in currency value.

Another factor that appears to have augmented export rise is the marked improvement in supply of electricity to manufacturing sectors in particular.

The classification of exports is done by categorizing them as agricultural and industrial merchandise. The findings are that around 80.39% of total exports from Pakistan were industrial and 19.08% were agricultural products.

The remaining part constituting just 0.52% of the total was related to petroleum industry. Five years before the distribution between agricultural and industrial products has not been significantly altered as the industrial products comprised of 77.95 per cent.

Pakistan’s exquisite rice constitutes more than one-third of total exports in agriculture sector whereas 9 of the top 10 industrial products come from textile sector.

It is estimated that agricultural consumer goods form approximately 57% of total exports of goods belonging to the agricultural sector while agricultural intermediate goods and raw material account for 43% of total exports.

On the other hand, industrial consumer goods constitute approximately 62% of total exports
of this sector whereas industrial intermediate goods and raw material constitute 33%.

The rest is categorised as industrial capital goods and it makes a very small contribution to the overall exports.

It is also noted that industrial consumer goods are exported to the developed world particularly to America and EU countries and industrial intermediate goods and raw material, mostly in the form of textile products, are usually taken by Bangladesh and China.

Bangladesh particularly is gradually growing as the market for Pakistani goods as they are
well produced and are bought at competitive prices.

It is however observed that goods produced in Pakistan are mostly of low value-added consumer nature and Pakistan’s industry was unable to finetune its act due to the paucity of energy and other factors that reduced their competitiveness in the overall global markets.

Pakistan’s industrial products are mostly exported to the US, China, EU and Bangladesh. The most attractive countries where export goods pertaining to agricultural products are sent are
Afghanistan, the UAE, Kenya, Saudi Arabia and South Korea.

It is estimated that more than 36% of total exports to these countries are agricultural in nature.

It is obvious since Pakistan is an agrarian economy and most of its exports pertain to agro-based products particularly in the textile and leather sectors.

It is considered easier to export agricultural merchandise to countries that are situated closer to Pakistan in distance. Pakistani exports saw their bulk going to America, UK, China, Afghanistan and Germany.

Policy advisers are optimistic that once Pakistani trade and industry starts employing an efficient mix of inputs that are sourced from domestic and international markets then the prospects of increased exports are very bright. Just the improvement in energy situation
yielded good results and the need is of long-term policy measures to boost exports.

The signs shown by manufacturing sectors are very encouraging and the sector may be further strengthened.