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  • Jul 20th, 2018
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Export diversification has played an important role in the development of the economies of various countries over the past few decades. The success of the Asian Tigers also lies partly in the adoption of outward oriented and market friendly policies, which helped the economies in reaping the benefits of expansion of trade. Due to this, exports growth and diversification is considered as the new engine of economic growth, which determines the trajetory of the economy. Regional countries such as China, India, Hong Kong, Korea, Taiwan, Singapore and Malaysia have changed the structure of their economies from primary exports to manufactured goods exports.

Unfortunately, Pakistan, a land of huge opportunities in term of natural resources and human resources, still depends on the export of primary commodities to a few developed markets. The export performance of Pakistan demonstrates that our share in the global market has declined to 0.13% from 0.21% in 1999, which indicates that the demand of Pakistan's exports is declining continuously. At present, the exports of Pakistan stood at US$ 21 billion (approx) declined from US$ 25 billions in 2013, which is drastic for the economy of Pakistan. The reason behind the declining of exports is global recession, high cost of doing business, nonpayment of refunds and lack of diversification of exportable products and markets etc. Our exports are still concentrated on textile and food items which contributed around 80 percent in Pakistan's exports. Traditionally, the exports markets are also concentrated in a few countries like the EU, USA, China, and OIC countries. The share of these markets is currently 74.8% in total exports. The exports of Pakistan are narrow based, low technology-based and labour intensive, which have opened the door for easy accessibility of other competitors.

During the last decades, the global trade has undergone a major structural change as far as the product composition and geography of trade is concerned. The government of Pakistan has also understood the new dynamics of trade particularly the export competitiveness and exports diversification and gave special attention in the Strategic Trade Policy Framework. Moreover, incentives to the trade of services are also under consideration, because globally services have a more stable demand pattern and less prone to detrimental external shocks. For enhancing the exports competitiveness, as like the other regional countries Pakistan needs to give incentives to the exporters which may decline the cost of production and make our products competitive in international market.

Africa, South and Latin America and Central Asian countries are the non-traditional markets for Pakistan's exports and have huge potentials for enhancing of exports. Diversification of both export markets and products is of utmost importance for ensuring sustained growth of exports of new products and expanding of new markets as any economic instability and crisis in the USA and EU significantly affects the exports of Pakistan. Moreover, the exploration of these markets is the need of the time for enhancing economic growth and macroeconomic stability. After the implementation of WTO rules and regulation, the compliance of international standards in the USA and EU also creates challenges to Pakistani exports; whereas the compliance of WTO rules and regulation are lower in non-traditional markets. Pakistan is also facing such as Sanitary and Phyto-sanitary (SPS) measures and technical barriers of trade (TBT) to the traditional and developed countries.

Africa is the second largest continent of the world with 54 sovereign states and and population 1.2 billion with collective GDP US$ 3.3 trillion and imports market of around US$ 500 billion. Many of the African countries like Nigeria, Egypt, South Africa, Angola, Tunisia, Morocco, Algeria, Libya, Mauritius, Namibia and Botswana are the countries whose nominal per capita income is more than US$ 3000 and twice of Pakistan. Africa is varied continent in term of living standard and productive economies which demanded different range of products in term of quality. The World Bank expected that most of the African countries will reach at middle income status by 2025 which indicates the current and future market potentials of African region.

At present, the trade between Pakistan and Africa stood at US$ 3.6 billion with Pakistan's export volume US$ 1.4 billions and imports volume US$ 2.2 billions from Africa. At present, Pakistan has not been able to realize its full potential despite being enjoying cordial relations with the African countries. All African countries are currently dominant by China and India due to aggressive marketing and continuous presence in this continent. The volume of exports to Africa by China and India stood at US$ 90 billions and US$ 30 billions respectively. The goods pharmaceutical products, cereals, textile, machinery and leather goods are the main exports of China and India to Africa. Pakistan has also a competitive advantage in these commodities and by exploring the African markets Pakistan can maximize the benefits of exports and minimize the risk of exports uncertainty. At present, Pakistan is mainly exporting cereals, cotton, textile products, sugar and paper products to Africa and importing tea, coffee, crude oil, iron, steel, inorganic chemicals, cotton and textile products from African region. Africa is rich in natural and mineral resources and is called world's storehouse of strategic raw materials. Lack of information, mutual understandings, business interactions, connectivity and people to people contact between Pakistan and African countries are the ground of the low economic relations.

Pakistan should encourage investment in agro-based industry in Africa, as phosphates and other fertilizers are abundant in many African countries. Many African countries import meat despite being rich in livestock, which gives Pakistan an opportunity for investing in meat processing units in Africa. A significant majority of the population is Muslim in Africa, which also represents the potential for Halal products. Due to the scarce supply of Halal products in the world, there is a great opportunity for Pakistan to capture this market as a supplier of Halal certified products to African countries. Kenya, Mauritius, Ghana, South Africa and Morocco are the gateway to African continent due to geographical advantage. Pakistan and Mauritius signed a Preferential Trade Agreement (PTA) in July, 2007 and it has been operational since November, 2007. Under the agreement, Pakistan offers concessions to Mauritius on 130 items, whereas Mauritius gives concession on 102 items.

A part from trade and economy, Pakistan has significant relations with African countries in other fields. Many of the African countries students are studying in Pakistani universities in different fields and also many delegates are getting training in military academies, Foreign Service Academy, and other institutions of Pakistan. Pakistan also provided financial and moral assistance to African countries at the time of famine and other natural catastrophe which represent the cordial and close relations among the Pakistan and Africa.

In order to explore the new market for exports, the following recommendations need consideration;

-- Africa offers a good market for our manufactures as well as certain primary commodities. The prospective items of our export to African countries are spices, certain kinds of chemicals and pharmaceuticals, footwear, leather and leather products, cotton and synthetic textiles, tents and canvas goods, cotton, surgical, instrument, tyres and tubes, hosiery henna powder etc. There is an earnest need for strategic and aggressive marketing of Pakistani Products in African Market. Kenya, Mauritius, Ghana, South Africa and Morocco are the gateway to African continent due to geographical advantage and Pakistan should use these markets for exploring the Africa.

-- For the diversification of products, there is need to shift the exports base towards value-added goods from primary commodity. Pakistan should learn from the experience of Asian economies like Taiwan, Hong Kong and Korea, which started with exports of textile, based commodities and then gradually shifted to the capital intensive production of electronics and other light and heavy engineering goods.

-- Countries across the world are engaging themselves in the different regional and bilateral trading agreements to get the preferential or free market access. The Government should also enter into such Preferential Trade Agreement (PTAs) and Free Trade Agreement (FTAs) with the African countries along with successful implementation of the agreements already entered. At present, Pakistan has a trade agreement with Mauritius but that agreement is insignificant for enhancing Pakistan's trade with African countries.

-- Pakistan needs to send fact-finding missions to Africa for exploring business opportunities. For this purpose, Pakistan can utilize embassies or trade missions in that region with the objectives of exploring long-term sustainable export market.

-- Pakistan needs to increase its diplomatic presence in all friendly African countries. Presently; there are 14 countries which have Pakistan diplomatic missions. Every country should have a separate designated Pakistani mission which can be utilized for exploring and establishing new opportunities for collaboration. Moreover, having a wide coverage and network of diplomatic missions in Africa will serve the benefit of more profound representation, cooperation on regional and global issues and most importantly, an opportunity of closely interacting and establishing relations with local communities. Such an engagement will provide a strong foundation to Pakistan's bilateral relations with Africa.

-- All embassies of Pakistan need to open a display centre in their premises for showcasing exportable products of Pakistan. The Pakistani Ambassadors may be requested to send market studies on the products, so that Pakistani businessmen could decide to enter in the potential markers of African region.

-- Participation in the African countries exhibitions and holding of single countries exhibitions may also help in identifying the potential market. As India and China are regularly hold Annual single countries exhibition in different African countries on rotationary basis. Moreover, Product specific exhibitions may also help in exploring African Market.

-- There is a lack of interaction between the Private sector and business community of Pakistan and African countries. In this context, the Chambers of Commerce and Industry of Pakistan and Africa should regularly interact and may also activate their joint business councils for arrangement of business to business meetings and other activities and for exploring new avenues of Africa.

-- The EXPO Pakistan exhibitions may also give special attention in bringing potential buyers of Africa for enhancing trade and economic relations.

-- Enhancement of connectivity by creating direct air connectivity may also helps Pakistan in improving economic relations.

-- Pakistan's geo-strategic location and connectivity offers opportunity for African goods to Central Asia and South Asia. After completion of China Pakistan Economic Corridor (CPEC) Pakistan can offer transit to African countries to expand their trade relations with Central Asian Economies.

Copyright Business Recorder, 2018


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