Monthly analysis shows that globally synchronized slowdown has started hitting our economy and after showing some resilience exports started to retreat. However, March 2018 showed a phenomenal growth with $ 2.2 billion exports in one month so it was expected that March 2019 might not be that much phenomenal. April 2019 has registered highest export figure in the current fiscal year. Exports remained above US$ 2 billion in four months of FY2019. However, overall exports have dampened due to global headwinds.
The government has taken number of initiatives including economic reform package (2019), supply of gas and electricity to zero rated industry at lower cost, continuation of prime minister's export package of 2017, sales tax refunds and duty drawbacks, incentive package (2019) and formulation of Strategic Trade Policy Framework (2018-2023). Government has reduced cost of production of textile sector by abolishing regulatory duty on cotton imports. Moreover, second free trade agreement has been signed with China, providing tariff concessions to 313 items. Pakistan is expanding its marketing and trade promotion campaign to all the major markets.
While addressing the occasion of the launch of Economic Survey of Pakistan 2018-19, the Advisor on Commerce, Textile, Industries & Production and Investment Abdul Razak Dawood highlighted the following prominent achievements of the current government relating to trade: (i) deindustrialization has been stopped. Now the industries have got more production orders than in the previous year; (ii) Pakistan's exports have increased in quantity terms and shown sustainability in value terms despite a downturn in the global market. In quantity terms, exports have increased by 7.14% in the last 10 months; (iii) due to the policy of the current government imports have contracted by around $ 4.5 billion in the last 11 months (July-May). The trade deficit has reduced to US$ 29 billion which was US$ 33 billion last year (July-May); and (iv) Pakistan has recently gained market access to China and Indonesia which will enhance exports of the country. Pak China FTA Phase-II has been signed and Indonesia has granted unilateral market access to Pakistan on 20 tariff lines.
The State Bank of Pakistan has maintained low rates for export refinancing schemes and fixed investment to allow export sector industries to make investments on competitive basis. In order to increase exports, the government continued the five export oriented sectors - including textile, leather, sports goods, surgical goods and carpets - as part of zero rated sales tax regime. Devaluation has increased the cost of imported raw materials. However, this has been largely offset by the export incentives provided including larger export rebates, withdrawal of import duties on inputs of raw materials and intermediate goods and, more recently, the issuance of promissory notes against refunds due along with subsidies on gas and electricity consumed. All these measures likely to pay dividends with a lag effect.
During July-March FY2019, the exports reached to $ 17.07 billion as compared to US$ 17.06 billion in the same period last year, which shows a meager growth of 0.1 percent as compared to 11.6 percent growth same period last year.
Food group constituting 19.6 percent of overall exports posted a decline of 2.4 percent as compared to same period last year. Within the food group, export of rice comprising of 44.4 percent of total food group declined by 0.5 percent causing a major setback in overall food exports. The quantum drop in rice was 5.0 percent but its value declined by 0.5 percent. This underwhelming picture is attributed to the competition faced by Pakistan from its competitors like Africa and China. Pakistani exporters are facing tough time against Chinese competitors as they are offloading their stock at lower prices.
However, to tackle this situation government is taking necessary steps including reclaiming traditional markets besides accessing new markets. Removal of restriction by Qatar on Pakistani rice export is a step in this direction that will reclaim Pakistan's share in the global rice market. Moreover, China has agreed to give duty free access to 200,000 tons of rice from Pakistan in the current calendar year. The other important components of food group which registered a positive growth include oil seeds, nuts & kernels, spices and wheat. Sugar exports declined by 68.2 percent on account of the withdrawal of subsidies and completion of earlier announced quotas.
Exports of textile manufacturers, which accounts for 58.5 percent in total exports witnessed a trivial growth of 0.1 percent and remained at US$ 9.99 billion in July-March FY2019 as compared to US$ 9.98 billion during the same period last year. Within the group, knitwear and bed wear registered positive growth but it was offset by the decline in cotton yarn and cotton cloth. Low demand from EU and lower unit prices, particularly for knitwear, contributed to the lackluster performance of this group. Textile trade agreements have been signed at Texpo Pakistan 2019 which will support textile exports.
Export of the textile items like knitwear comprises 12.6 percent of total exports and 21.6 percent of textile exports increased in both quantity and value by 14.8 and 9.29 percent respectively. Readymade garments with 11.5 percent share in total exports and 19.6 percent share in textile exports registered a positive growth of 2 percent in value and 28.1 percent in quantity. Value-added exports increased due to growing demand and improvement in export competitiveness after exchange rate adjustment.
Cotton cloth having 9.3 percent share in total exports and 16 percent in textile exports declined by 2.1 percent in value but its quantum increase was 18.1 percent. Bed- wear with a share of 10.1 percent in exports and 17.21 percent in textile group, increased both in quantity and in value by 10.3 percent and 2.7 percent, respectively. Cotton yarn has 4.9 percent share in total exports and 8.35 percent in textile group, decreased in both quantity and value by 15.7 percent and 15.4 percent, respectively.
Towels' having a share of 3.4 percent in total exports and 5.88 percent share in textile group decreased both in quantity and in value by 11.0 percent and 1.8 percent, respectively.
Raw cotton having a share of 0.1 percent in total exports and 0.16 percent in textile group, decreased in both quantity and value by 71.2 percent and 71.8 percent, respectively may be due to declining international cotton prices from 2.15 $/kg in June 2018 to 1.92 $/kg in April 2019.
Petroleum group having a negligible share of 2 percent in total exports registered a negative growth of 0.2 percent on account of 7.6 percent decline in petroleum exports. Other manufacturers accounting 14.6 percent of total exports registered a negative growth of 1.5 percent during the period July-March FY2019.
