Sustaining diversified exports in Pakistan
Tuesday, 16 March 2010
Mohiuddin Aazim
DURING the last five years Pakistan has increased its exports to some non- traditional markets. And it has also diversified its export base. (See Tables).
The Great Recession has changed the world markets. New economic giants are emerging. And room is being created for new export items. Developing countries like Pakistan need to grasp changed realities and act accordingly.
The desperation with which the world is looking for food security should motivate us to enhance food production and exports. Till FY04, rice, fish and fish preparations and fruits and vegetables were among top ten export earners for Pakistan. But by FY09 the picture changed: rice became the second largest export earning item but the other two categories of food items lost their respective slots.
Diversification of export markets and export items is possible only when the government and the private sector work dedicatedly and in harmony. "Top officials of TDAP (Trade Development Authority of Pakistan) must make themselves available to business leaders so that the irritants to export growth can be identified and fixed on time," suggests Mr. Fawwad Ijaz, ex-chairman of Pakistan Leather Garments Manufacturers and Exporters Association. TDAP officials say the private sector must also put its house in order. "Look at the FPCCI (Federation of Pakistan Chambers of Commerce & Industry). They do not have enough research and analysis facilities to give us informed inputs in policy making," said one of the officials who declined to be named.
Table I
Basic Data: FBS
Table II
Basic Data: FBS
"Export diversification strategy needs to be evolved at three tiers," opines chairman of a large group of companies with diversified export business in textiles and chemicals and dyes. "In the first tier you have individual exporters and in the second tier fall their groups or associations. Finally it is the third tier where the public private sectors join hands."
Businessmen like him admit that strategising sectoral exports or export destinations is not a priority at the first two tiers. And they complain that whatever public private partnership exists at the third tier is not cohesive and result-oriented.
China and Turkey have emerged as top ten export destinations for Pakistan whereas Hong Kong and France are no more on the list. Business leaders admit they have not fully exploited export potentials in the Chinese market. They hold disjointed efforts of the government and the private sector responsible for it. China is now the third largest economy of the world and is about to overtake Japan to become the second. Penetrating deeply into Chinese market is very important from a strategic point of view.
But the government has so far not developed a comprehensive action plan to tap export potentials in China. In the last few years hundreds of Pakistani students have graduated from Chinese universities. Businessmen with trade links in China say they occasionally use such students as interpreters and trade promotion officers in Chinese markets. But their talents need to be exploited fully through an institutionalised arrangement.
In the last fiscal year, Afghanistan became Pakistan's third largest export market as exports to Kabul reached $1.396 billion. But how can we sustain the surge in exports to Afghanistan after the withdrawal of the US and NATO forces from there? The Ministry of Commerce has not even bothered to hold discussions with the private sector on this subject let alone preparing a policy paper on it. "Exports to Afghanistan can touch two billion dollars mark within three to five years if we facilitate opening of Afghan banks in Pakistan," says Mr. Zubair Tufail, former Vice President of FPCCI. Three Pakistani banks have opened their branches in Kabul but no Afghan bank operates in Pakistan. Lack of proper bilateral banking facilities also mars the prospects of enhancing trade links with China and Iran and India.
Enhancing trade relations with India and increasing local exports there also requires resolution of some key political conflicts including Kashmir. Thus despite the fast economic growth of India, Pakistan might not benefit from it in the short term. But trade relations have improved significantly with China and Iran and so have our exports. Exports to Iran stood near $400 million in the last fiscal year-only a few million dollars lesser than our exports to the Netherlands.
"We need to set up warehouses in the areas bordering with Iran. That will be a great incentive to Iranian importers willing to buy Pakistani goods. If we do this I am sure our exports to Iran would reach a billion dollars within a few years," says Mr. Zubair Tufail.
As for diversifying export items, Pakistan needs to move towards value-addition in the areas where it exports raw materials or semi-finished goods. And where we already export finished and value-added products we should go for higher value-addition. This applies both on non-traditional and traditional exports.
Food exports can fetch far more foreign exchange than they do now only if we can focus on producing value-added food products instead of merely exporting food grains. In textiles, leather and footwear we need to catch up with the latest global trends in fashion designing and product development.
Cement and gems and jewellary have occupied a place in the list of the top ten export items during the last five years. Export earnings through surgical instruments and engineering goods have increased significantly. Cement exports can be enhanced further by improving trade relations with India. Gems and jewellary exports would swell if greater attention is paid catching up with the new trends in designing. New markets for gems and jewellary and surgical instruments can be explored in the US and the Europe as well as in Middle East. The European Union looks willing to give greater market access to our quality export products. Our trade envoys and businessmen should make joint efforts to ensure that the EU standards are met in manufacturing of export goods.
To increase exports of engineering goods, it is logical to look towards developing Asian and Middle Eastern countries to get advantage of rising demand in those countries and relatively low freight time. Setting up a materials bank to help exporters of engineering items can also be beneficial.
The writer is a freelance Pakistan journalist. He can be reached at mohiuddin.aazim@gmail.com
DURING the last five years Pakistan has increased its exports to some non- traditional markets. And it has also diversified its export base. (See Tables).
The Great Recession has changed the world markets. New economic giants are emerging. And room is being created for new export items. Developing countries like Pakistan need to grasp changed realities and act accordingly.
The desperation with which the world is looking for food security should motivate us to enhance food production and exports. Till FY04, rice, fish and fish preparations and fruits and vegetables were among top ten export earners for Pakistan. But by FY09 the picture changed: rice became the second largest export earning item but the other two categories of food items lost their respective slots.
Diversification of export markets and export items is possible only when the government and the private sector work dedicatedly and in harmony. "Top officials of TDAP (Trade Development Authority of Pakistan) must make themselves available to business leaders so that the irritants to export growth can be identified and fixed on time," suggests Mr. Fawwad Ijaz, ex-chairman of Pakistan Leather Garments Manufacturers and Exporters Association. TDAP officials say the private sector must also put its house in order. "Look at the FPCCI (Federation of Pakistan Chambers of Commerce & Industry). They do not have enough research and analysis facilities to give us informed inputs in policy making," said one of the officials who declined to be named.
Table I
| Top Export Destinations | FY04 Export Earnings | Top Export Destinations | FY09 Export Earnings |
| 1. USA | $2.944 bln | 1. USA | $3.336 bln |
| 2. UAE | $943.2 mln | 2. UAE | $1.469 bln |
| 3. UK | $941 mln | 3. Afghanistan | $1.396 bln |
| 4. Germany | $606.65 mln | 4. UK | $873.81 mln |
| 5. Hong Kong | $582 mln | 5. China | $700.58 mln |
| 6. Afghanistan | $493.15 mln | 6. Germany | $676.32 mln |
| 7. Italy | $454.14 mln | 7. Italy | $579.29 mln |
| 8. Saudi Arabia | $348.62 mln | 8. Netherlands | $464.31 mln |
| 9. France | $338.73 mln | 9. Saudi Arabia | $455.23 mln |
| 10. Netherlands | $335.15 mln | 10. Turkey | $402.86 mln |
Table II
| Top Exports | FY04 | Top Exports | FY09 |
| 1. Cotton & Textiles | $8.047 bln | 1. Cotton & Textiles | $9.564 bln |
| 2. Leather, Leather Products & Footwear | $798.6 mln | 2. Rice | $1.986 bln |
| 3. Rice | $634.46 mln | 3. Leather, Leather Products & Footwear | $968.35 mln |
| 4. Sports Goods | $324.7 mln | 4. Petroleum, POL Products & Coal | $812.42 mln |
| 5. Petroleum & Petroleum Products | $294.46 mln | 5. Chemicals & Pharmaceuticals | $606 mln |
| 6. Chemicals & Pharmaceuticals | $262.96 mln | 6. Cement | $576.6 mln |
| 7. Carpets & Carpeting | $231.5 mln | 7. Gems & Jewellary | $291.8 mln |
| 8. Fish & Fish Preparations | $152.9 mln | 8. Sports Goods | $273.7 mln |
| 9. Fruits & Vegetables | $128.36 mln | 9. Surgical Goods & Medical Instruments | $250.35 mln |
| 10. Engineering Goods | $100 mln | 10. Engineering Goods | $266.4 mln |
"Export diversification strategy needs to be evolved at three tiers," opines chairman of a large group of companies with diversified export business in textiles and chemicals and dyes. "In the first tier you have individual exporters and in the second tier fall their groups or associations. Finally it is the third tier where the public private sectors join hands."
Businessmen like him admit that strategising sectoral exports or export destinations is not a priority at the first two tiers. And they complain that whatever public private partnership exists at the third tier is not cohesive and result-oriented.
China and Turkey have emerged as top ten export destinations for Pakistan whereas Hong Kong and France are no more on the list. Business leaders admit they have not fully exploited export potentials in the Chinese market. They hold disjointed efforts of the government and the private sector responsible for it. China is now the third largest economy of the world and is about to overtake Japan to become the second. Penetrating deeply into Chinese market is very important from a strategic point of view.
But the government has so far not developed a comprehensive action plan to tap export potentials in China. In the last few years hundreds of Pakistani students have graduated from Chinese universities. Businessmen with trade links in China say they occasionally use such students as interpreters and trade promotion officers in Chinese markets. But their talents need to be exploited fully through an institutionalised arrangement.
In the last fiscal year, Afghanistan became Pakistan's third largest export market as exports to Kabul reached $1.396 billion. But how can we sustain the surge in exports to Afghanistan after the withdrawal of the US and NATO forces from there? The Ministry of Commerce has not even bothered to hold discussions with the private sector on this subject let alone preparing a policy paper on it. "Exports to Afghanistan can touch two billion dollars mark within three to five years if we facilitate opening of Afghan banks in Pakistan," says Mr. Zubair Tufail, former Vice President of FPCCI. Three Pakistani banks have opened their branches in Kabul but no Afghan bank operates in Pakistan. Lack of proper bilateral banking facilities also mars the prospects of enhancing trade links with China and Iran and India.
Enhancing trade relations with India and increasing local exports there also requires resolution of some key political conflicts including Kashmir. Thus despite the fast economic growth of India, Pakistan might not benefit from it in the short term. But trade relations have improved significantly with China and Iran and so have our exports. Exports to Iran stood near $400 million in the last fiscal year-only a few million dollars lesser than our exports to the Netherlands.
"We need to set up warehouses in the areas bordering with Iran. That will be a great incentive to Iranian importers willing to buy Pakistani goods. If we do this I am sure our exports to Iran would reach a billion dollars within a few years," says Mr. Zubair Tufail.
As for diversifying export items, Pakistan needs to move towards value-addition in the areas where it exports raw materials or semi-finished goods. And where we already export finished and value-added products we should go for higher value-addition. This applies both on non-traditional and traditional exports.
Food exports can fetch far more foreign exchange than they do now only if we can focus on producing value-added food products instead of merely exporting food grains. In textiles, leather and footwear we need to catch up with the latest global trends in fashion designing and product development.
Cement and gems and jewellary have occupied a place in the list of the top ten export items during the last five years. Export earnings through surgical instruments and engineering goods have increased significantly. Cement exports can be enhanced further by improving trade relations with India. Gems and jewellary exports would swell if greater attention is paid catching up with the new trends in designing. New markets for gems and jewellary and surgical instruments can be explored in the US and the Europe as well as in Middle East. The European Union looks willing to give greater market access to our quality export products. Our trade envoys and businessmen should make joint efforts to ensure that the EU standards are met in manufacturing of export goods.
To increase exports of engineering goods, it is logical to look towards developing Asian and Middle Eastern countries to get advantage of rising demand in those countries and relatively low freight time. Setting up a materials bank to help exporters of engineering items can also be beneficial.
The writer is a freelance Pakistan journalist. He can be reached at mohiuddin.aazim@gmail.com