Najma Minhas: You are holding one of the most important portfolios in the government. The prime minister himself highlighted the importance of exports to grow the economy, but we know that exports in Pakistan have generally been stuck in a rut for the past decade. If we compare ourselves to our regional neighbors, Bangladesh’s exports are around $47 Bn, India’s are $500 Bn, and Vietnam has about $290 Bn. You recently said that you have a target of $39 Bn. How are you going to achieve this?
Mr. Abdul Razak Dawood: First of all, you are right, we’ve been in a rut for the last ten years hovering around $25 Bn, and then it went down, and we have never paid attention to the export of services. So what is our strategy? Our strategy, first and foremost, is to put a focus on exports. When I first came into the government, and somebody asked me what my top three priorities were, I said, “Exports, Exports, and Export.” It’s a mindset.
Najma Minhas: Do you mean the focus of the government or the focus of your ministry when you say ‘to focus on exports.’
Mr. Abdul Razak Dawood: Focus of the government. If you think back to the last two governments, the PPP and PML-N, did you ever hear them say exports in the last few years? No, it never came up. The problem is that once you move your focus away from exports, all policies start moving away from helping you export, so it is essential to focus on exports.
Then you begin removing anti-export biases. Anti-export bias, in my view, is whenever you increase duties on raw material or intermediaries. When we came into the government, the first thing we did was we started removing the anti-export bias. We removed all the duties on raw material and intermediaries, which was of enormous help to our exports. Then there was an anti-export bias in the sense that we were not giving our export industry internationally competitive energy prices. Once that came in by this government, everybody woke up that the government is serious now. The government wants exports to take place because they are now giving us internationally competitive energy prices. How were internationally competitive energy prices determined? They were determined by us looking at Bangladesh, India, Vietnam, and Cambodia.
Najma Minhas: Have we come to relative levels?
Mr. Abdul Razak Dawood: Yes, we are now comparative. They are all hovering around 7 8 cents. It was in that area; in some parts of China, it was lower, but when we did, the average was 7 cents for electricity and $6.5 per MMBTU for gas for industry.
Najma Minhas: Is this a policy you will continue because we generally see that energy prices are rising.
Mr. Abdul Razak Dawood: We have kept it reasonably constant, but now for the next three months, because of the difficult situation, the government will raise that $6.5 to $9 and bring it down once the summer months come. With the international prices of oil and gas going up, we feel the strain around it. So yes, they will go up for three months, and then they will come down. As a principal, we must give our industry internationally competitive energy prices, and we know that Pakistan is a high energy cost country.
Najma Minhas: Pakistan’s export basket is almost 40 percent textile, and for the last 20 years we haven’t changed much. By comparison, if you look at Vietnam, 20 years ago, 20 percent of its export basket was crude petroleum; today, 20 percent of its exports focus is on broadcasting equipment, integrated circuits, and electronic equipment of different types. Similarly, Pakistan has only added around 21 new products to its export basket, whereas Vietnam has added 48, so this is concerning. What is your ministry going to do about it?
Mr. Abdul Razak Dawood: This is a very important question, and what we are trying to do about it, we have put all this down on our Strategic Trade Policy Framework (STPF), and if there’s one word that is important in that framework, it is diversification. What do I mean by that? I am talking about product diversification, within a sector diversification into other sectors, and diversification in our geography. Yes, we’re over-reliant on textile; in the country’s best interest, we have to move away and start bringing down our reliance on the textile industry.
Najma Minhas: So how are you going to do that? I mean, It sounds nice “product diversification,” but how do you intend to ensure it.
Mr. Abdul Razak Dawood: One big move that we have already done, and it’s going to show results in the next 6-9 months, is that we brought out a mobile phone policy. For the last 20 years we have been importing completely built-up phones, which is ridiculous. We were spending a billion dollars importing phones that could have been locally manufactured. So we came out with a policy, and as a result of that policy, many parties have come in, and in September, that was the first time that we produced more locally manufactured phones than we imported, and they are ramping up. We are still importing, but more phones are being locally manufactured.
Najma Minhas: Have you identified specific sectors that are interested in developing?
Mr. Abdul Razak Dawood: Yes, to move away from textile, we have to go into engineering, pharma, food processing products, fisheries, so we have a portfolio of items that we have to get after, and we are doing that. I asked the ministry of commerce to analyze where we are on diversification. We made a straightforward chart – which said traditional products into traditional markets, non-traditional products into nontraditional markets, where we stand, and the results were very interesting. Traditional products in traditional markets have grown by 7 percent. Traditional products in non-traditional markets it has increased by about 60 percent. It means those exports which were just going to the European Union, America, have started moving. It means that the exports that were previously going to the traditional markets have begun to move towards the non-traditional ones.
Najma Minhas: Now that you have identified the sectors, what is the policy you think will enable them. In the past, we have relied a lot on subsidies, and we have tried to help specific industries by subsidy loans and in many other ways, but all it achieved was them continuing on the same road. It hasn’t encouraged them to do R&D or to move away from the same products that are being subsidized.
Mr. Abdul Razak Dawood: We have moved our focus away from the textile industry and are focusing our subsidies on farming and engineering products.
Najma Minhas: So they are cheaper for the government because you are not subsidizing them right now.
Mr. Abdul Razak Dawood: I feel that we need to give them incentives to provide them with that quantum jump lets give them that incentive. So there is another incentive we are giving them – say suppose we are giving them a 3 percent of invoice value as an incentive. We can say if you go into a nontraditional market, such as Botswana, Argentina, Chile, etc., we will give you an additional 2 percent of the invoice value as an incentive to help you cover the freight prices/ extra cost of going to another market.
There’s another thing that I want to say because it would not be fair if I did not say this. Within textile, which is our traditional market, the whole range of products is very little. When we had an international conference in Lahore before Covid, many foreigners had come over, so I gathered them all together and asked them to please be very frank with me. I’m the Advisor on Commerce, and please say what you want so that I can learn from you. They said, ‘we have been here one day and we have looked at everything, we have seen your full range. You don’t produce enough range for us to spend 2-3 days!’
Najma Minhas: So it goes back to my point that if you are making money on a product, why do R&D and invest anywhere else. So how do you intend to move them along that range?
Mr. Abdul Razak Dawood: What we have done is we have reduced the duties on all raw materials, which means now you can bring into Pakistan nylon, viscose, acrylic, and other raw materials duty-free. There is a term called technical textiles, which are high-end fabrics; these are a mixture of a couple of products; I have encouraged them to import these and then use them to make high-end value products, garments, bedsheets, etc. The idea behind this is to incentivize the textile industry to increase the range of products they manufacture, thus achieving the overarching goal of product diversification. We did it in June this year, so all that raw material is now duty-free.
Najma Minhas: Can the commerce ministry work on that without the compliance or the acquiescence of the FBR?
Mr. Abdul Razak Dawood: It has happened, and I will tell you how it has happened. Before all the tariffs were the responsibility of the FBR, it is no longer the responsibility of the FBR; it has come into the ministry of commerce – now we do it.
Najma Minhas: So what do you do? You set the rates.
Mr. Abdul Razak Dawood: We set the rates. We decide the customs duty on any product; it is us now because it is a matter of trade, not a matter of revenue. Before, it was a matter of revenue.
Najma Minhas: Very interesting, so when did this happen?
Mr. Abdul Razak Dawood: End of 2019, since then it has been our responsibility, which is why I can just mention what we did in the first interim budget of this government. We made a small amount of reduction in duties on raw material. And when Hafeez Sheikh was the Finance Minster we pushed it, and same this year with Shaukat Tarin.
Today about 50 percent of the raw material that comes into the industry is duty-free, which is a good number. We are putting duties on because of the conditions set on us under the IMF program. We didn’t put it on the leading products but some products.
Najma Minhas: So I want to come back to some discussion on traditional markets for Pakistan exports. You have referred to the traditional markets, the U.K., the U.S., E.U. where we export 60 percent of our products. Yet, we also know a lot of geopolitical concerns often influence whether we can trade into these countries. Has that meant we have started looking at other countries?
Mr. Abdul Razak Dawood: I have never really felt that compulsion. What is happening is, with the world coming out of Covid now, the biggest two markets that are absorbing a lot of the goods from around the world just happen to be U.S. and E.U., so our exports to E.U. and USA are going up. And what are these exports? Textiles! So we are back to that same problem of textile being the front runner, where we want others to overtake them, but today, the amount of our textiles exports are skyrocketing. So our other exports will take time to pick up, such as engineering products and food processing products, so we are in a bit of a dilemma, and we also need dollars. So if many textile products are being exported, we should not try to stop them in any way.
Najma Minhas: What is the geographical diversification that you referred to?
Mr. Abdul Razak Dawood: To me, geographical diversification is twofold, and I worked on it a lot. Number one is regional connectivity. I have been to Iran, Uzbekistan, Afghanistan, and now going to Kazakstan. And the other thing about it is we have got to have an environment whereby there is a free flow of trucks in different countries owned by different countries, and why is this a good time to do that – because sea fares are rocketing!
Najma Minhas: It is interesting because you tweeted recently that logistics facilitation and the TIR have become a vital part of our strategy. NLC took a couple of trucks to Azerbaijan. A couple of trucks have arrived from Uzbekistan; how will you facilitate road travel because there seems to be a huge opportunity?
Mr. Abdul Razak Dawood: There is a huge opportunity. When I went to Iran last week, they have also now agreed that they would allow our trucks to go through Iran under the TIR convention, Turkey, Uzbekistan, and once you are in Turkey, you’re basically in Europe. That’s one. The other thing we did was we sent a sample truck from Pakistan through Afghanistan, Uzbekistan, and then to Moscow. We actually got there, we sent a truckload of mangoes, and they arrived there.
Read more: TIR Opens Up Huge Trade Opportunities
Najma Minhas: How do you intend to facilitate the growth of road trade? I mean, is there a one-window operation? There must be customs issues probably at all points.
Mr. Abdul Razak Dawood: Absolutely, that’s why all the customs are meeting. I told the Uzbek people, and they are very, very supportive. Why invent the wheel? We have got the TIR convention. Let’s all agree to abide by those rules and the customs, etc. And we have also sent our people to integrate the two customs. When the Afghans came here last week, they also agreed to it. When I went to Iran, they have also agreed. I have set myself a target that by the 31 March next year, I would like to call a conference for all the regional countries and say now that we have all individually agreed let us all put it on paper together that all our trucks can move freely in each other’s country.
Najma Minhas: Okay! So tell us why Africa? Which countries are you focusing on in Africa?
Mr. Abdul Razak Dawood: We analyzed Africa. When we talk of China, it’s a billion-plus people; when we speak of India, it’s a billion-plus people. Africa as a continent has a billion-plus population, It shook me, and then the whole issue came up that where do we go. We had a conference in East Africa in Nairobi. Now we’re going to Lagos, and we’re trying to invite people from surrounding countries, asking for the Ambassadors to come there, so it is a very large activity. In the three days, we also have a one country exhibition to see our products.
Najma Minhas: What kind of value are you putting on this trade. I mean, are there any numbers that you expect to get out of Africa.
Mr. Abdul Razak Dawood: When we look at Africa as a market, I think that it would be a fantastic achievement if we could get it up to anywhere between half a billion to a billion. Unfortunately, we lost the last two years to Covid we couldn’t go they couldn’t come. Now we’re picking up again, and I’m hopeful, so there are many opportunities; for example, our tractors and motorcycles are going into Africa.
Najma Minhas: Are these what we consider the exports to non-traditional markets.
Mr. Abdul Razak Dawood: Yes. Absolutely, You hit the nail on the head. Then we’re taking 28 pharma, 22 engineering, and a few textile companies with us on tour to Africa next week.
Najma Minhas: so lots of opportunities in Africa. Now recently, the Pakistan Pavillion has been set up in Dubai Expo 2020; all businessmen are full of praise for you and the personal handwork that you have done to put this together. It’s been a huge success. What is the advantage that is going to come out of this Expo in Dubai?
Mr. Abdul Razak Dawood: First of all, Alhamdulillah, the expo has come out stunningly. We have three objectives, the first one is the feel-good factor, and it has two parts; when a Pakistani goes there, he comes out feeling proud about his country, and I have heard that from many people. Many people living in the U.K. or elsewhere are all going to Dubai, and the expo is what they want to see. Secondly is the feel-good factor by the ex-pats, the non-Pakistanis. When I spoke to them at the actual expo, they said we couldn’t believe this was actually Pakistan. We never knew that Pakistan was like this, we never knew that Pakistan had such beauty, we didn’t even know that you were so rich in culture and tradition. That’s one objective.
The second objective is tourism, and the videos we have put up in the pavilion are stunning. Most Pakistanis haven’t seen those parts of Pakistan. There were some parts that even I had not seen. What we’ve done is we’ve set up a box there where we people all sorts of information. The third objective is an investment; nobody invests in Pakistan just because he’s seen a good pavilion. He will consider Pakistan because he’s seen a good Pavillion, but then he has to come here to check out the market’s potential.
Najma Minhas: Has that follow-through been pursued by the ministry?
Mr. Abdul Razak Dawood: What we’re doing is, we’re now noting everybody who’s coming and also having seminars inside the pavilion. We have a meeting room and a 70 man auditorium. Our own companies, various companies from Pakistan, are going there, and people are already coming.
Najma Minhas: are you tracking any orders coming through as a direct result of the Pavillion.
Mr. Abdul Razak Dawood: It’s easier to track somebody where he says that I want to go to Pakistan as a tourist, can we get a VISA? So that is easier. On the investment side, it obviously takes a little longer.
Najma Minhas: So apart from having a conference room available, how is the government helping the private sector organize private events that will bring investment into the country? Pakistani pavilion has proven how efficient is the private sector is at delivering, which we all know from Economics 101 – that the private sector is better at these things.
Mr. Abdul Razak Dawood: They have already started. Several companies have already had events; they want to show something to the world they just go to our pavilion. In October alone, we must have had 12 of them, and now in November, it will pick up.
Najma Minhas: Any other regional initiative that you’re looking at right now?
Mr. Abdul Razak Dawood: Yes, there is a very important one. The PM is going to go to China in December, and we are going to ask our Chinese friends that we analyzed the exports and imports, and it’s still so heavily in your favor. We are going to ask for some revisions.
Najma Minhas: Can you tell us something about the sort of revisions you will ask for?
Mr. Abdul Razak Dawood: You see, where Pakistan is at a disadvantage is that the same goods going into China from ASEAN countries go at a low duty rate than ours, so we are going to ask our Chinese friends to help us and give us the same rate duty, similarly, they have given some additional benefits to Bangladesh. So we will ask them to give us the same rates and help us in our diversification. Our textile is going to the other side of the world, but if the Chinese can take some of the non-traditional goods from us, that would help us develop. I will ask for the additional benefits not for the textile industry but for our non-traditional goods.
Najma Minhas: Slightly moving away from trade. Currently, there’s a trend across the world where the foreign service and the trade department are increasingly merging into one; the reason is that trade is an essential part of any country’s development; for example, Australia has one department for it – DFAT. Is this something we can think about in Pakistan, especially in light of the statement from the NSA Moeed Yusuf that we are now much more focused on geo-economics rather than geopolitics in Pakistan. That would imply that we should go for a structural change amongst our ministerial departments as well. Is it something that you have thought about or maybe plan to think about?
Mr. Abdul Razak Dawood: Your statement about many countries worldwide are doing this, the answer is Yes. Are we ready for that? 20-30 years ago, these countries were not ready. Are we ready? My answer is that we are not ready. I know the weaknesses in each of the ministries, and we have got to sort out a lot before we take such a drastic measure.
Najma Minhas: You feel it’s a very drastic change?
Mr. Abdul Razak Dawood: It is. I don’t think we should do it because I know how tough it is for the MOFA to do their thing, what they have got to do, and for them to start thinking in these terms, it’s a major change for the MOFA to now start thinking in terms of economics. I have been to many countries during my last term, and I used to talk to ambassadors, and they never even thought economics was their subject. Now they have started, and now you can see everywhere I go the PMs talking about it, the F.M. is talking about it.
Najma Minhas: This is in other countries that they are talking about it. Should we not be having similar discussions in Pakistan, given the urgency that Pakistan has, in developing itself economically, our Ambassadors should be given trade targets, for example, that they are expected to generate some sort of business from the country they are serving in.
Mr. Abdul Razak Dawood: We certainly want to do this, and it won’t be too long that we will be maturing to that level. It was difficult enough to give targets to the commercial attaches.
Najma Minhas: Have you done that?
Mr. Abdul Razak Dawood: Yes, we have started.
Najma Minhas: Is this new under your government that commercial attaches are given targets? Were they never given targets before?
Mr. Abdul Razak Dawood: Yes. They have got dollar-valued targets. Now the cycle is starting. We’re actively asking them for their figures, how much was the exports from Pakistan to your country and give us your target in the next two months.
Najma Minhas: One of the things I wanted to ask you is what you think you’ve brought into this position due to your background.
Mr. Abdul Razak Dawood: One of the first things that I feel I am trying to bring in, and still, it is difficult. Whenever a businessman walks through this corridor, please think of him as a customer. He’s not somebody who has come to fleece something out of government; he’s a customer, treat him like that. And then whatever he talks about, you have got to communicate back to him. Before, it didn’t happen.
Now people say that whenever we call the ministry, at least we get a callback. It never used to happen before, so that is a big change. Stakeholder consultation is another big thing. I tell the ministry of commerce you don’t have the expertise, and it’s not your fault because the businessman who comes is working on a narrow platform but has a deeper understanding. The bureaucrat is working in a broader platform but shallower, so he doesn’t know the details. But you have got to have the mental mindset, so you’re wise enough to know that you don’t know, and these are the people who know. So there is a change.
Najma Minhas: My final question would be, you have been in this position for almost three years. Is there a legacy that you want to leave behind?
Mr. Abdul Razak Dawood: Yes, one of the first things that has happened is that we have taken tariff rationalization away from the FBR and is now clearly with the commerce ministry, so that’s a significant achievement. The second thing now is regional connectivity. It was so difficult to get our people to accept that if we want our trucks to go into other countries, their trucks will come into ours. Both of these achievements on their own are a legacy.