High levels of export in goods and services are among one of the key signs of growth in business, enterprises and economy. Unfortunately, the numbers for exports in Pakistan are on continuous decline from $ 20979.1 million in 2013-14 to $ 15118.6 million in 2016-17.
Conventionally, export for a country is necessary because individuals and firms have been able to produce more goods and services than can be consumed at home. This capacity to manufacture more prompted a search for foreign opportunities to sell the “excess” production; Individuals and firms have been able to sell their goods or services at higher prices than the prices obtained domestically; and building foreign reserves which helps in building economy and enhance growth.
Pakistan seems to be on the path of making progress on improving export promotion. The package “Export led growth”; policies for technological development; establishment of banks for financial services; proper regulatory framework for the promotion of e-commerce and IT exports; formulation of domestic trade policy; establishment of services trade development council; restructuring of the export development institutions and establishment of new trade development councils for leather and reduction of mark-up rates by State Bank of Pakistan are some of the major initiatives taken by the government for export promotion.
Pakistan seems to have made some progress on few of the initiatives. Perceptions regarding an improvement in export-owing primarily to China Pakistan Economic Corridor (CPEC) – low mark-up rates and trade facilitation allowing exporters to increase in some of the sectors have been other positive signs. However, progress on major indicators seems to be slow.
A survey conducted by Sustainable Development Policy Institute (SDPI) has highlighted various challenges which are being faced by exporters, manufacturers and service providers have highlighted number of challenges. These challenges alongside preventing new entrants in export market also causing decline in exports. First, there is lack of planning and coordination between different ministries and departments involved in facilitating exports. Second, it takes over 300 hours per year to prepare and pay taxes. Third, export development fund is under the control of ministry of finance which also adds additional regulatory pressure. Fourth, as far as trade facilitation is concerned Trade and Development Authority (TDAP) being one of the concerned authorities is not following their mandate of facilitation.
Fifth there is weak government support in understanding certification processes for exporters who want to export to advanced countries. There is also weak government support for exporters in becoming part of supply chain (e.g. Marks and Spencer’s and Zara). Sixth, there is lack of foreign direct investment (FDI) in export oriented industries. Seventh, there are issues in accessing quality human resources. Eighth, there are institutions like Small and Medium Development Authority (SMEDA) but there is no implementation of that research by SMEDA itself. Ninth, there are over 40 chambers of commerce but with no people power in terms of administration and trade facilitation. Tenth, there is no industry/sector specific trade policy except for textile sector which creates a notion of discrimination amongst other sectors.
So what may done in the forthcoming strategic trade policy framework (STPF 2018-23) to make exports more competitive in the regional and international market which provides a positive signal towards integration and improving the economy?
First, there is need to rationalize tax regime with simplified procedures. Within rationalization there is need for tax integration, which may involve tax harmonization, among the provinces to avoid double taxation and cascading. Government should review all such tax proposals which will help in improving cost of doing business and promoting businesses within and outside South Asia. Additionally tax Reform Commission (TRC) should take into consideration proposals seeking reduction in indirect taxes, phasing out of federal excise duty and a more transparent structure for taxes on trade.
Second, there is need for arrangements which may help in giving all relevant authorities under Export Development Fund (EDF) to ministry of commerce which currently reside with ministry of finance. There is also need to ensure that ministry of commerce is sufficiently influential to develop and implement policies to enhance exports.
Third, there is need for businesses, associations/chambers aided by ministry of commerce to develop effective centers for global market research. They may be supported through trade offices within Pakistan and embassies of Pakistan in different countries. These offices should also focus on promotion and identification of all such Pakistani products to the markets with low or no outreach. Further there is also need for business to business (b2b) integration for diverse and collective market research efforts.
Fourth, there is need to identify SMEs’ with more capacity of scaling up. Such SMEs’ can help in job creation and helps in generating more tax revenues. Fifth, institutes like TDAP need to assist and facilitate traders. It should act as education center for traders across Pakistan. TDAP should also come up with the arrangements where they can help exporters in identifying markets for export. Sixth, there is need for changing the regulatory structure involved in monitoring the exports with more need inclined towards quality. Institutes like TDAP, SMEDA, associations and chambers should educate businessmen in this regard with major quality testing centers within their domain. Further these organizations should focus more towards product specific policies depending on collective market research done by government and private sector.
Eighth, there is also need to look into value addition with reference to each of the commodity i.e. need is to look for more ingredients which can give more worth to the commodity both in terms of quality and money. Several case studies from global market can be beneficial in this regard.
Ninth, there needs to be a policy to encourage the use of patented items. For this the institutions like Intellectual Property Organization (IPO) needs to be strengthened in capacity and quality in order to ensure that they deliver results at par with the international counterparts. There is also need to increase their scope in terms of area of practice such that IPO may be made responsible for encouraging product development through academic and action research; as well as trade mark registration.
As the strategic trade policy framework will be coming next year, right now is a most appropriate time to consider reforms mentioned above. These reforms can lower the cost of doing business, increase competitiveness of Pakistani exports and make them equal to international standards.
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.