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Friday, May 17, 2024

Empowering the export sector – Germany vs. Pakistan

Germany's proactive measures in export promotion and strong safety nets have contributed to its economic stability. In contrast, Pakistan's industry faces obstacles related to energy shortages and inconsistent policies.

The German government and the Pakistani industry have both faced economic challenges, albeit in vastly different contexts. Germany, known for its robust economy, has implemented measures to stabilize its economic performance. In contrast, Pakistan’s industry has been grappling with various hurdles.

The German government has been actively involved in supporting and promoting its export sector through a range of measures and initiatives. Recognizing the significance of exports for the country’s economy, numerous strategies have been implemented to facilitate and boost German exports.

One of the major measures is that the Economic Ministry of Germany has recommended a fixed power tariff of 6 cents per kilowatt-hour until 2030 for its industry. The German export industry welcomed the proposal as “a clear game changer”. This proactive measure ensures their competitiveness and supports their industrial growth and preeminence in manufacturing.

Read more: APTMA concerned about declining Punjab export industry

Amid the energy crisis fuelled by Russia’s war against Ukraine, both private and commercial consumers have faced drastic price increases for gas, oil, coal, and electricity. Therefore, the German government has introduced support schemes to help the industry.

In contrast, Pakistan’s industry faces the burden of rising power prices (∼15 cents/kWh),
making it increasingly challenging to compete internationally. The current power tariff for the export sector is clearly unsustainable as it burdens the industry by imposing irrational cross-subsidies and stranded costs which clearly cannot be exported in the current world markets.

The All Pakistan Textile Mills Association (APTMA) has requested a new tariff structure from the government on multiple occasions to support the struggling manufacturing industry and revive textile exports.

Textile exports have already declined 14 percent in the first ten months for the FY 2023-23 and 22.6 percent on a monthly basis compared to last year. APTMA has named nearly three dozen prime users from the textile spinning and weaving sectors to consider new support tariffs for electricity and gas otherwise the exports are bound to decline further.

The dire situation is further exacerbated by the energy crisis. Pakistan faces chronic energy shortages, resulting in frequent power outages and hindering industrial productivity. Insufficient electricity supply poses a significant challenge to the country’s export sector, especially the textile industry.

Furthermore, Germany’s economy thrives on exports, and the government has actively supported its export-oriented industries. Policies promoting international trade, such as free trade agreements and export subsidies, have played a crucial role in stabilizing the German economy.

Read more: APTMA reveals steps for textile sector’s growth at first ever EconFest

Meanwhile, Pakistan has faced challenges in maintaining consistent and business-friendly policies. Frequent changes in tax regulations, bureaucratic red tape, and corruption discourage investors and impede the growth of the industrial sector.

Germany’s proactive measures in export promotion and strong safety nets have contributed to its economic stability. In contrast, Pakistan’s industry faces obstacles related to energy shortages and inconsistent policies. To overcome these challenges, the Pakistani government must focus on first addressing energy crises and then ensuring policy consistency to create a conducive environment for industrial growth.