There is a need to shift from an inward-oriented to an outward-oriented economy that puts greater emphasis on exports to achieve high and sustained growth, said State Bank of Pakistan (SBP) Governor Reza Baqir while speaking at ‘Firms and Growth’ seminar on Monday.
He said that one-fourth of the emerging economies have grown at an average rate of seven per cent since 2001. “To reach this average growth rate it was critical for Pakistan to achieve significantly higher export growth,” Baqir said.
"Pakistan is in a club of worst five countries whose exports of goods and services are less than 10 percent of GDP.
Pakistan's exports to GDP (2015-18 average) is better than only Afghanistan, Yemen and Ethiopia." https://t.co/bsDo35LqwH
— AY (@Anas_Younus) December 22, 2019
The seminar was organised by the SBP, International Growth Center, and Consortium for Development Policy Research and Pakistan Business Council in Karachi.
Pakistan has a major export problem. As recently pointed out by the SBP governor, in the last couple of years, Pakistan’s exports of goods and services stand at 10 percent of GDP, only doing better than Afghanistan, Yemen, and Ethiopia.
The currency has devalued by 30% since July 2018, but more catalysts are required for PTI to achieve export success in 2020. So far, in the five months of this fiscal year, exports have only increased by $500m or 5 percent. This is a far cry from the numbers needed. There has been insignificant growth in textiles, apart from the garment sector, which has seen a 36% volume rise but only an 8% increase in value. Since most of Pakistan’s exports are low value-added, even if the quantity of exports increases, their dollar value and revenues do not significantly rise.
On the exchange rate, Reza said that addressing exchange rate overvaluation has helped boost country’s exports. While the exchange rate had done its part, more fundamental growth in exports needed to come from structural reforms beyond the exchange rate.
Pakistan exports up by 9.6% in Nov’ 19.
Exports of goods during Nov’19 have increased by 9.6% to $2.02Bn while imports declined by 17.53% to reach $3.81Bn as against in Nov’18. pic.twitter.com/OddJO4M4RZ
— Govt of Pakistan (@pid_gov) December 4, 2019
Baqir said the country’s exports had largely remained concentrated in very few sectors and have been on a declining trend since 2012. He added that there is a need to go beyond the traditional commodities of textile and agriculture while highlighting the importance of export diversification.
Pakistan needs to diversify its exports by capitalising on sectors it has a competitive advantage in. The food, dairy, and meat sectors display high potential given the quality of Pakistan’s cattle and crop compared to Middle Eastern countries due to climate conditions and natural resources. Innovation in diversification will show that the textile chemicals sub-sector within the textile industry can be manipulated as businesses from this sector are looking to move out of their countries where they face stricter environmental standards and would thereby consider Pakistan a potential location for investment.
SBP has launched a subsidized credit scheme which is being taken up by the usual players (‘textiles sector’). It promises to expand this to other potential exporters. Greater focus is needed to promote low hanging import substitution industries towards exports. This policy should be driven through at the SEZs – this year will see a couple of them launched. The commerce ministry has also announced it will introduce a new export policy that will give tax breaks to new sectors such as engineering, chemicals, and footwear to increase the country’s exports.
A key issue will be gaining market access in foreign countries for increased trade. If Pakistan cannot guarantee market access to potential investors in the export business they will not find little reason to establish a foothold in the country.
Boosting Industrialisation in Khyber Pakhtunkhwa :: Construction of 132 kv Grid Station continues at Hattar Special Economic Zone. Hattar SEZ will boost exports of Pakistan to China as it’s located on newly constructed Hazara Motorway, and thousands of new jobs will be created pic.twitter.com/h3DeaIECHi
— PTI (@PTIofficial) December 24, 2019
The seminar was also attended by PM’s Finance Adviser Abdul Hafeez Shaikh, Minister for Planning and Development Asad Umar and representatives from the World Bank. Sheikh also stressed on the need for exports diversification saying that government was committed to work in partnership with the private sector to address the factors which had previously constrained growth.
Minister for Planning and Development Asad Umar said the government is committed for job creation and competitiveness while highlighting governments’ protection of noncompetitive sectors over the last few years which remained detrimental to economic growth.
Speaking at the seminar, International Growth Center Chairperson Dr. Ijaz Nabi pointed out the need for improving export strategy in order to ensure sustainable growth, and the role of fiscal responsibility to avoid recurrent external account crises.
The seminar highlighted importance of creating an outward-looking economy and the different contours of an export-oriented economic strategy that the country would have to adopt in order to remain competitive in the international market, especially with regards to countries such as India and Bangladesh.
Pakistan needs to emphasise on manufacturing, value addition of products and competitive prices to enhance its exports manifolds: Ambassador Yao Jing
#CPEC #BRI @zlj517 @CathayPak@GameChangerYR https://t.co/uzGUQOZ8KJ
— CPEC Official (@CPEC_Official) October 28, 2019
Following the lacklustre growth in exports during the first six months of the current fiscal year, Prime Minister Imran Khan on Monday directed the Commerce Division to set targets for enhancing exports in the next six months and determine the roles of various departments to assess their performance.
Prime minster said that enhancing exports is the top priority of his government. He reviewed the performance of exports and current incentives offered to the sector. The meeting was attended by PM’s Commerce Adviser Razak Dawood, Commerce Secretary Ahmad Nawaz Sukhera and other senior officials.