Facilitating businesses to boost trade
The cost of doing business in Pakistan is on a downward trend. In recent figures for the cost of doing business in different countries of the world, Pakistan is ranked at 147, according to the World Bank’s cost of doing business report.
The ranking is based on various indicators such as starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. These indicators usually sketch an image of a country’s economy, which is gloomy in case of Pakistan. The core objective of this article is to take into consideration one of the indicators revolving around trade.
Trends during the period of 2013-17 showed that Pakistan’s total trade is on the decline. During this period, exports declined from $24.46 billion in 2013 to $20.44 billion in 2017. During this period, countries such as Bangladesh, India and Vietnam made gains in the export market both in commodities and market. Even market access facilities such as the provision of GSP plus status from the European Union and other facilitations being provided by China, United States and countries with which Pakistan has free trade agreements, could not help to arrest the declining exports.
When one looks at the declining exports in the region, Pakistan’s ranking in doing trade has been found on a decline. This deteriorating position of Pakistan has been mainly due to challenges associated witht rade facilitation. It can be noted that both documentary and border compliance are the key factors due to which Pakistan is lagging behind in the region.
While looking at the trade facilitation picture of Pakistan, where from ministries like Commerce and Foreign to agencies at the border, Pakistan’s framework to facilitate is more disintegrated one. Beside disintegration, major facilitation channels such as infrastructure, IT support and capacity building have been found missing. The government in parallel is utilising all of its resources while following disintegrated approach and different departments. It is due to these missing ingredients and disconnect between departments that there are challenges to policy formulation which can lead to the development of National Single Window.
So when one looks at the ingredients of trade facilitation, risk management is one of the components in which Pakistan has no mechanism to follow. Within standard risk management process, as followed by agencies across the world, there are five major steps involved starting from ‘establishment of context’, which includes importing of goods, export controls and passenger traffic. This is followed by ‘identification of risk’ for revenue protection along with prohibitions and restrictions; ‘analysis of risk’; ‘assessing and prioritising risks’; and “addressing risks” to define countermeasures.
Pakistan currently has no system to measure and assess risk as the departments involved have no coordination in between them. Departments involved in trade process are following their own mechanisms, thus resulting in multiple checkpoints for each regulator which results in increased time to reach the border. On reaching the border, challenges arise of clearing and storing the commodities. These challenges result in high compliance cost at border both for documentary and border.
Secondly, there is no standard and unified mechanism of licensing for the business community involved in import or export of a commodity at regular or particular time period. Due to this exercise of licensing, regulators such as Anti-Narcotics Force (ANF) are different, resulting in challenges to face checking and verification of the commodity.
Third, there are challenges related to management information system which has also led to disintegrated policy management from past 70 years. There is no clarity about how to initiate procedures related to centralised management information system where the interface can be developed to access data. This lack of clarity also adds to the compliance cost for business community due to which business community also fails to achieve export targets.
Fourth, while looking at the trade facilitation, there are a number of departments involved starting from Ministry of Commerce and FBR to various security agencies. There is no inter-departmental coordination through which information flow can be made easy among them. This lack of information flow has also led to mistrust between departments and the business community.
These challenges resulted in the business community to go towards informal trade thus losing a chunk to undocumented trade.
The deteriorating position of Pakistani exports has been mainly due to challenges associated with trade facilitation. It can be noted that both documentary and border compliance are the key factors due to which Pakistan is lagging behind in the region
Since the Strategic Trade Policy Framework (2018-23) is around focusing only on expanding the export base and easing tax-related policies, it will not lead towards successful policies. Trade facilitation should be incorporated into the framework, and National Single Window (NSW) should be made part of it to facilitate businesses.
While adding NSW to the agenda of STPF (2018-23), first and foremost thing on which government agencies need to come up with is the coordination mechanism through which easiness to access borders should be made apriority. To achieve this objective, there is a need to have a single point of checking for all agencies involved in the trade. The point of checking should be either at airports, borders, dry ports or seaports.
To have a single point of checking, there is further need to improve infrastructure, storage house and warehousing facilities at ports and borders which should have the capacity to absorb intake of goods.
Secondly, this coordination will further help in taking standard measures to manage risk. Through this coordination, agencies need to develop standard lists and procedures which should be shared among departments. These measures in coordination will help to work on the ‘establishment of context’ to ‘defining countermeasures for risk’ all agencies involved.
The government should also work on procedures related to standard management information system for unified data across the board. This uniform system should be available from the origin of export where documentation can be tracked,and that information should be accessible to other agencies tracking exports.
This system should contain information such as goods or services to be exported, the volume of export, weight of export, number of documents required and number of documents attached and export by mode of transport. Besides these ingredients within the system, there should also be standards available such as standard quantity of export, tariffs and standard regulations (product specific).
Fourth, the business community should be made aware of the use of system developed, and there should be information dissemination mechanism with time to specify a change in the rules and regulations. The business community should also be made aware of the lists and sensitivities involved while trading.
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The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.