Accepting a weakness is always a good first step. There should never be any shame in acknowledging 'we don't have what it takes'. It is how you build on this acceptance that distinguishes prayer from policy. The need for expertise is self-evident. The challenge is getting the right kind of expertise, and then giving it 'actionable space'. The problem with finding private sector expertise in export matters is that there is precious little. Private sector typically responds to demand, of which there has not been much. By not associating the private sector professionals in export policy matters all these years we never gave them a fair chance to develop the requisite skills.
What we have outside the government is some academic work, and more recently the top business houses' rich and exclusive club that churns out report after report, euphemistically labelled 'research'. The latter has reportedly offered to the government its 'research' services on a gratis basis. The possible issues of conflict of interest and policy capture apart, whatever work it has so far produced hardly inspires confidence. It betrays a lack of basic understanding and a seriously flawed methodology.
Some of the academic work, most notably out of Pakistan Institute of Development Economics (PIDE), and more recently the Lahore School of Economics, is of high quality but by definition it is of an analytic nature: good at determining causes of policy failure and not so good at putting meat on policy bones. Rarely does one come across academic (research) work that can be fed into policy formulation; not in a universal sense but in a Pakistan specific context, factoring in the implementation constraints as well.
Paradoxically, when the donors commission a study on Pakistan's trade matters they almost invariably hire retired civil servants as the local consultants! The dearth of expertise is best illustrated by our FTA negotiations. It is not that our negotiators failed to secure our best interests - they did a pretty decent job of getting concessions without giving too much away. The real failure has been the failure to identify 'our best interests' - not knowing when the cash cow becomes a dog.
Our negotiating strategy was driven by our existing export-mix, and not how to reshape our export base; to diversify, to graduate to higher value-addition, to get a toehold into the global value chain. Had these objectives been clearly delineated, via quality research, we wouldn't have been fighting for lower rates for what we produce but what we should be producing. We should have been weary of getting concessions for products organically prone to preference erosion over time. The objective should have been to leverage FTA to diversify and add value - through export-oriented FDI.
You don't really need research to tell you the criticality of export-oriented FDI - just look at the export success stories. You need research at two levels: products for which you should be seeking concessions; and which countries to market these concessions to in order to attract FDI. More than likely, good research will not be driven by exportable surplus; it will not come up with a list of 'soft products' - basic textiles, cheap leather goods, or low end sport goods - for which we should be negotiating concessions. Instead, it will identify products in the FTA partner country that have high import duties and a sizable domestic market. Follow up research will focus on how to leverage these concessions in third countries.
In a certain basic sense, export issues and response options are well known. Bared to the bones, our issue is that market for products where we are competitive is shrinking and where the market is growing we are uncompetitive. We do not need experts to tell us doing more of the same - trade fairs, trade missions, trade offices abroad - is not going to help, even if they are 'state of the art'. We do not need to buy expertise to tell us the path to the holy grail of exports is through a proactive industrial policy, a competitive exchange rate, a sane tariff policy, trade facilitation that works, a compensation policy that levels the playing field......
The first order issue, then, is not expertise. It is not even our inability to act on expert advice. It is our failure to reconcile competing policy imperatives; to make the government work as a whole, not compartmentalised and decision-making dominated by one player to the virtual exclusion of all others. We know for a fact that our tariff policy is anti-export. What will Ministry of Commerce's hired guns do to set it right? Even if the idea is to correct the course over time, you first need an acceptance - that our tariff policy is hurting exports - before you get the experts in to chart the course. Ego gets in the way?
Few can dispute that our exchange rate is out of sync. The SBP acting governor decides to let the rupee find its equilibrium level. Of course, it was an erratic decision - more a case of bravado than bravery; not knowing the difference between floating and plummeting - but the reaction from the heavens above was of Panamanian proportions. Ego hurt?
If you can't allow tariff rationalisation, exchange rate realignment (slow and steady, not abrupt), legitimate refunds, a compensation regime to offset the higher costs of production or to countervail the export subsidies of competitors - for reasons of financial compulsions - at least allow us read your lips that exports is not a priority. Ego won't allow it? Exporters know where the shoe pinches. Hear them out before you throw good money after bad, or let the other show drop, even if you don't want to hear 'ego trumps expertise'.
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Copyright Business Recorder, 2017