Pakistan’s exports have been stagnating for years but successive governments have done little to remedy the situation. According to recent media reports, exporters of seasonal fruits have failed to meet their winter export orders due to non-payment of sales tax refunds pending since 2022 in addition to the usual bureaucratic hurdles created by the FBR.

This has resulted in serious loss to the national exchequer. No reason has been given why there was no facilitation by the concerned RTO (Regional tax Office) which failed to clear exporters’ claims for two whole years without any explanation whatsoever. The FBR head office is no less to blame for neglecting to take action in the matter for so long. Sales tax refund is a serious issue and its blockage is a big hurdle to export expansion. The incident should be thoroughly investigated and the officials responsible for the lapse should be penalized to serve as an example for others.

The episode comes as another proof of the low priority given to exports by our officialdom. There has never been any systematic effort to revamp the sector and boost value-added exports. The stagnation of Pakistani exports can be attributed to several factors. We have a limited export base and low product diversification. Pakistan’s exports are heavily concentrated in a few sectors, particularly textiles and apparel, which account for over 60% of total exports. This reliance makes the economy vulnerable to demand fluctuations in key markets. Most of our exports comprise raw materials or low-value-added goods rather than finished, high-value products.

We have also made little investment in modern technology and automation which hampers competitiveness. Also, poor emphasis on research and development leads to a lack of innovation, reducing the attractiveness of Pakistani products in global markets. On the other hand, our economy is faced with severe energy and infrastructure challenges. Expensive and unreliable electricity raises production costs, while poor logistics and inadequate infrastructure increases delivery times and costs, reducing export competitiveness.

In recent years, Pakistan has been facing increasing competition from countries, like Bangladesh, Vietnam and India, which have captured a big market share in sectors like textiles by offering lower costs or better quality. Further, changes in global consumption patterns and preferences, such as a move towards sustainability, have left Pakistan lagging behind.

Our exports have also suffered from inconsistent government policies. Frequent changes in trade and industrial policies create uncertainty for exporters. Limited government support and cumbersome procedures hinder export growth. On the other hand, high duties on raw material imports discourage manufacturers from producing export-quality goods.

According to experts, Pakistan has fewer and less advantageous trade agreements compared to its competitors. Non-tariff barriers and issues, like compliance with international quality standards and certifications, restrict access to new markets. Currency volatility and fluctuating exchange rates create unpredictability for exporters, while high costs of borrowing and limited access to affordable financing discourages small and medium enterprises (SMEs) from entering export markets.

Macroeconomic challenges (e.g., inflation, fiscal deficits) also undermine investor confidence and disrupt export planning. It is a matter of grave concern that except for the Americas, the EU, and some African countries, Pakistan’s exports are declining across the world, especially Asia (down 20 percent in the first quarter alone). Exports to China, Vietnam, Malaysia, Indonesia, Turkey, and a number of other countries have declined in recent years.

What is the way out of the morass into which our exports have fallen? The other day, the commerce ministry held a brainstorming session to identify reasons for the recent dip in exports and find new ways to increase export revenue. No information was made available about the  plans drawn up for this purpose. Only the commerce minister was reported as remarking that the success of our economy depends on a strong export base, while emphasising the importance of executing an export-led growth strategy.

One of the biggest problems the sector faces is that we do not have surplus production for export. Our industry is geared to production for domestic consumption. We have done little international market research to find items in demand that we can produce based on our comparative advantages. Also, there has never been any concerted effort to add value to the traditional export basket. Recently there has been much talk of raising IT exports to 25 billion dollars but paradoxically the government has taken a number of steps lately to restrict IT activity, including internet shutdowns and use of firewalls.

Needless to say, the solution lies in developing a comprehensive long-term plan to diversify export products and markets and invest in non-traditional sectors like IT services, pharmaceuticals, and agro-based products while exploring untapped regions. We should also go in a big way for value addition and promote high-value manufacturing through subsidies, training, and modern technologies. Equally urgent is the need to improve infrastructure, upgrade logistics networks and ensure consistent energy supply. Experts also emphasise to strengthen policy frameworks so as to reduce bureaucratic hurdles. Last but not the least, the government should negotiate beneficial trade agreements with emerging and developed markets. Addressing these issues holistically could help Pakistan unlock its export potential and achieve sustainable economic growth.