The latest State Bank of Pakistan figures show healthy growth in exports. During the first nine months of the current fiscal year, July 2021 to March 2022, Pakistan’s overall exports, including the exports of goods and services, fetched $28.85 billion as compared to $23.11 billion during the same period of the last year. This denotes a year-on-year growth of 24.8pc.
But while exports have grown, imports too are increasing fast. During the nine months of this fiscal year, total imports, including those of goods and services, totalled $62.131 billion against $44.409 billion last year. This means imports grew faster than exports—by 39.9pc to be exact.
Needless to say, large gains made in exports mean little if imports outweigh them, because in the final accounting the country has to pay more foreign exchange than whatever it receives.
Pakistan’s overall exports, as a percentage of its GDP, are far below what they should have been. In 2013, the country’s total exports, including exports of goods and services, were equal to 13.3pc of GDP. Then, they fell year by year and sank to 8.3pc in 2017. From there, the situation started improving and in 2020 total exports made up 10pc of GDP. This is obviously a very low share of exports in GDP (Global average was 30.3pc of GDP in 2013 and 26.5pc of GDP in 2020). This means not enough attention is being paid to penetrating deeper into existing export markets and to the manufacturing of more value-added items of existing product lines.
In 2010, the list of our top export destinations, according to volumes of export earnings, included (1) USA (2) the UAE (3) China (4) Afghanistan (5) the UK (6) Germany (7) Bangladesh (8) Spain (9) Belgium and (10) the Netherlands. Unfortunately, in the next 11 years Pakistan could not make gains in export earnings from any of these countries — except China and the US.
In the case of China, export earnings increased from $1.21bn in 2010 to $2.04bn. That’s it. On the other hand, imports from China went up from $3.28bn in 2010 to $13.3bn in 2021. Pakistan could have increased its exports to China to new heights year after year during these 11 years but that did not happen. There is an urgent need, therefore, to seek trade concessions from China and prepare our exporters to produce more and better quality items for Chinese markets.
Though Pakistan has not been able to push its exports as high as it could in the US markets, its total exports to the US which stood at $3.56bn in 2010 gradually went up to $5bn in 2021. It is relevant to note here that Pakistan now runs a trade surplus with the US. Our imports from the US in 2021 stood slightly below 2.5bn.
The basic weakness of our foreign trade is that we have few value-added products for export, while we spend much on inessential imports. This situation needs to be corrected. The solution lies in producing more value-added export products so that even a small growth in exports can lead to big value gains.
Export growth depends on a number of factors, including the identification of potential markets, developing new lines of products, focusing more on existing markets and products, improvement in manufacturing processes to produce quality products with higher average per unit price.
Boosting exports is not an easy task. It calls for action on a wide front with input from policy makers as well as proposals from industrialists and businesspeople. A mechanism needs to be developed to seek greater input from provincial governments and private sector representatives in the framing of trade policies.
In this connection, the Pakistan Trade Development Authority (PTDA) can play a vital role if it consults representatives of the private sector and experts on specific lines of exports on a continuing basis. It has also been suggested to create a federal governmental body for promoting services exports along the lines of PTDA with due representation of private sector leaders in services exports.
As the freight cost of foreign shipments has skyrocketed due to higher insurance and container charges due to Covid-19, experts say that developing countries like Pakistan should engage in trading more with neighbouring countries. With the regional scenario improving, there is tremendous potential for Pakistan increasing its exports to India, Iran, Afghanistan, Bangladesh and Nepal.
We need to learn from the Bangladesh example. Bangladesh has gone ahead of Pakistan through sheer hard work and developing its manufacturing capacity to meet the needs of the world market. Services export is also its strong point. We should try to follow in its footsteps.