New trade policy to help boost Pakistan exports

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New trade policy to help boost Pakistan exports

Government to provide investment support to manufacturers.

By M. Aftab

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Published: Mon 4 Apr 2016, 12:00 AM

Last updated: Mon 4 Apr 2016, 8:31 AM

Pakistan has unveiled its new foreign trade policy to push annual exports to $35 billion, despite reduced demand across the globe.
The focus markets that the Pakistan Commerce Ministry has outlined in the policy include Afghanistan, China and the EU, in addition to the UAE, Saudi Arabia, Middle East, North Africa, and South East Asia regions. The policy shifted its focus to expending regional trade, principally with landlocked Afghanistan, and the big boom market of Iran, which has a pent up demand for a large number of modern imported goods, including the latest, fine textiles and fashion garments from Pakistan.
Its focus on China also has wide connotations. Islamabad is connecting Bejing through the $46 billion China Pakistan Economic Corridor (CPEC), that is currently under construction. Pakistan will also focus on trade with the landlocked Central Asian Republics (CARs), where the demand for a variety of Pakistani products is multiplying, as the personal incomes of their citizens rise and their lifestyles improve.
A number of the CAR states have surplus electricity and natural gas supplies, which they wish to export to energy-deficit Pakistan. Several of these projects are under completion, which will raise the income of CAR nations, and help pay for consumer goods imports from Pakistan.
The basic objectives, the four main keys to achieve these targets are: boosting exports, improving export competitiveness, transitioning from a factor-driven to efficiency-driven economy, and increasing the share in the regional markets.
"Exports of $35 billion is the target to be achieved by 2018," said Pakistani Commerce Minister Khurram Dastgir. "The target is realistic and achievable."
Actual exports in the three years from 2012-2015 totaled $75 billion, against the target of $95 billion - averaging $25 billion a year. In view of such a low performance, can Pakistan raise the level to $35 billion a year in the present low-global business environment?
In order to achieve the export target, the government and the industry will have to do a great deal in several spheres. These include higher sophistication, better design and cost-effective products, all around. Some of these items and commodities include: all types of home appliances, fans, sports goods, cutlery, and rice. An up-gradation incentive will be provided to the manufacturers, in the form of investment support. The support will be up to a maximum of Rs1 million a year to each company to import new machinery for the improvement of its products.
Azmat Ranjha from the Ministry of Commerce noted: "The government is taking steps to improve energy supplies to the industry. This will help overcome the energy shortages, and raise the output level of exportable goods."
"Pakistan will also continue providing more and more incentives to the auto makers so that they can raise the volume of their car exports," Dastgir said.
The recently announced Pakistan Auto Policy provides incentives in the form of lower duty for import duty on car spare parts for assembling in Pakistan for the ultimate export of these cars. The Pakistan-based auto assemblers have recently been exporting assembled cars to Sri Lanka and other regional markets - a trend which Islamabad plans to encourage.
Dastgir said that Pakistan is especially "encouraging the assembly of small cars, including 600cc and 1,000cc cars. Some new foreign investors have shown interest in setting up their assembling factories in Pakistan to assemble these cars. We will provide them with tax incentives to assemble the cars for sale in Pakistan, and to increase car exports to the region."
Islamabad has also identified leather, pharmaceuticals, surgical instruments, cutlery and fishries as the sectors with higher export potential. Steps will be taken to help them lead a quantum jump in total exports. To boost exports in these sectors a government  grant will be provided to a maximum of Rs5 million to help factory owners import modern machinery for specified products, to improve product design, and encourage innovation, Dastgir said.
In order to diversify the export market, an outreach policy for Africa, Commonwealth of Independent States (CIS), and Latin America is being adopted. As part of the market penetration strategy, these new markets will be explored through market research, the opening of new Pakistani Trade Missions, holding of exhibitions of Pakistani products, and sending trade delegations.
Will the policy succeed? There are cynics even among the government and government-created agencies, who are skeptic about its success.
S.M. Munir, chief executive of the Trade Development Authority of Pakistan (TDAP) says: "The export target can only be achieved if exporters are refunded Rs300 billion. These deposits were made by Pakistani exporters to ensure that they repatriate to Pakistan all their export earnings."
Zubair Motiwala, a well known businessman of Karachi, says: "The Commerce Ministry has not taken the business community on board while mapping out the export strategy. It makes the success of the policy doubtful."
The new policy has been launched in an environment which is not very auspicious. Non-textile exports, for instance, were down 19.39 per cent in eight months to February 2016, compared to the like period in 2015. This is reported by the Pakistan Bureau of Statistics (PBS). Some of the present taxes, imposed by Islamabad, on industrial output will have to be cut down to improve the competitiveness of Pakistani exports.
R. Manzoor Ahmad, former Pakistani representative to the WTO wonders: "How can Islamabad foresee input costs coming down for exportable goods and services when tariffs and all kinds of  levies have been increasing consistently over the past three years?"
The writer is based in Islamabad. Views expressed by the author are his own and do not reflect the newspaper's policy.


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