Commerce Ministry''s top officials are engaged in internal discussions on whether the newly appointed Secretary Commerce, Younus Dagha, would be empowered to arrest and reverse declining exports. The country''s exports declined by 12 percent during the first eight months of the current fiscal year as compared to the same period last year but contraction is above 17 percent if compared with $25.13 billion of 2014.
Commerce Ministry is engaged in identifying the pros and cons of domestic and international factors that are acting as impediments to exports and invariably shift the major responsibility for the decline in exports on other Ministries including Finance Ministry and Federal Board of Revenue under its administrative control as well as Ministry of Water and Power and Petroleum and Natural Resources.
Commerce Ministry believes that the Pak rupee is overvalued. Since November 2013, many currencies have significantly depreciated- Indian Rupee by 7 per cent, Chinese Yuan by 8 per cent, and South Korean Won by 10 per cent; however Pakistan''s currency remains over valued with the objective of understating the rising external indebtedness, a policy supported by the Ministry of Finance and which has had a major negative impact on our exports.
In addition, exporters have been priced out of the international market due to delays in refunds by FBR which have compelled exporters to procure loans from commercial banks for operating expenses - loans that have driven up the cost of production making our export items uncompetitive internationally.
Pakistan''s exports performance has witnessed a declining trend since 2015. After a positive growth of 2.75 percent, exports registered a negative growth of 4.88 percent in FY 15 and 12.11 percent in FY 2016. Minister for Water and Power, Khawaja Asif, stated that Younus Dagha had been transferred to the Commerce Ministry, to arrest and reverse declining exports. Younas Dagha in a message to his friends after the transfer from Water and Power Ministry said "the new assignment as Secretary Commerce is even a tougher challenge in view of falling exports".
The sources told Business Recorder that the day the newly appointed Secretary Commerce was to attend his new office Commerce Minister Engineer Khurram Dastgir arrived at his office at the official opening time of 8 o''clock but found no official present in the Ministry.
Commerce Ministry recently conducted an analysis of the effectiveness of Trade officers in Pakistani Missions abroad, a posting that cost the exchequer Rs 1.71 billion in 2016-17 - reflecting a year on year increase of 27.3 per cent. The bulk of the expenditure went on salaries, repair and maintenance of offices. However, Senate Standing Committee on Commerce headed by Senator Syed Shibli Faraz argued that Trade Officers'' performance was not up to the mark despite expenditure of billions of rupees.
"The decline in export performance is an outcome of a combination of both endogenous and exogenous factors. Apart from these two broad categories of factors, there are certain product specific issues that have led to the decline," the sources continued.
According to Commerce Ministry, a major factor constraining Pakistan''s exports growth has been the slowdown in the economies of its key importing partners- China and the EU. China has experienced the lowest growth over the last 25 years. The demand for consumer items from Pakistan like seafood and leather products has also declined as the overall Chinese economy slowed down. Another reason, Commerce Ministry claims was a steep decline in exports of Singapore, China and Afghanistan. China has continued to reduce its demand for Pakistani yarn and fabric as competing countries are undercutting their prices significantly. Another significant factor is that China''s imports are now more inclined towards high-tech products instead of low-tech products like textile and footwear.
Other factors which impacted on Pakistan''s exports are: (i) change of taste and preferences; (ii) supply side constraints; (iii) low investment in export sector; (iv) market concentration; (v) lack of value addition; (vi) trade facilitation ; ( vii) narrow export basket; (viii) petroleum top naphtha; ( ix) jewellery; (x) agriculture products; (xi) cotton and textile; (xii) cement; and (xiii) Basmati rice. Interestingly, both Strategic Trade Policy Framework (STPF) 2015-18 and recently announced Prime Minister''s export package have so far failed to arrest the decline in exports.
Copyright Business Recorder, 2017