NationalVOLUME 18 ISSUE # 02

Pakistan’s exports: A sad story of neglect and decline

The two most intractable problems of Pakistan’s economy are low exports resulting from low productivity and rising current account deficit. This situation has brought us close to a default which we are now trying to avoid by various means.

The story of our exports is a sad story of missed chances and wasted resources. While all other countries have gone ahead of us by finding new markets and new destinations for their products, we have lagged far behind. The prime example is that of Bangladesh which has a much smaller economy and a narrow resource base but has reached the mark of around 40 billion dollars. But for the last 20 years we have remained stuck at 25 billion dollars, with a slight spurt in the last year of the PTI government. In the last seven months of the PDM rule, our exports have again stagnated.

It will come as a surprise to most people that in the 1950s Pakistan’s exports were more than South Korea’s. Similarly, in the 1990s our exports were more than that of Vietnam. Today, South Korea’s and Vietnam’s exports are 18 times and six times more than Pakistan’s respectively. It is a sorry tale of neglect and mismanagement by successive governments, especially the PML-N and PPP regimes with the Musharraf interregnum in between. When Gen Pervez Musharraf imposed martial law in 1999, our exports were 16 per cent of GDP. When he left, our exports had decreased to 12pc of GDP. The situation continued to deteriorate in subsequent years.

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. By comparison, the global average was 30.3pc of GDP in 2013 and 26.5pc of GDP in 2020.

This means not enough attention has been paid to penetrating deeper into existing and new export markets and to the manufacturing of more value-added products. In 2010, the list of our top export destinations, according to volumes of export earnings, included (1) USA (2) UAE (3) China (4) Afghanistan (5) 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 $1.21b in 2010 to $2.04b. On the other hand, imports from China went up from $3.28b in 2010 to $13.3b in 2021. Pakistan could have increased its exports to China to new heights year after year during these 11 years but we did not make the required effort.

Last year, our imports were $80 billion and exports only $31b. Needless to say, the number one priority of the government should be to make exports cheaper and imports costlier. But for years we kept the rupee overvalued artificially with disastrous results for the external sector.

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 high value gains.

According to experts, export growth depends on a number of factors, including identification of potential markets, developing new lines of products, focusing more on existing markets and products and 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 businessmen.

A mechanism needs to be developed to seek greater input from provincial governments and the private sector representatives in the framing of trade policies. In this connection, the Pakistan Trade Development Authority (PTDA) can play a vital role which it has not done. It should regularly consult 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 agency for promoting services exports along the lines of PTDA with due representation of the private sector leaders in services exports. Experts say that developing countries like Pakistan should engage in trading more with neighbouring countries. With the prospects of regional scenario improving, there is tremendous potential for Pakistan to increase its exports to India, Iran, Afghanistan, Bangladesh and Nepal.

We can also do what Bangladesh has done. We need to develop our manufacturing capacity to meet the needs of the international market. A major window of opportunity is IT export. India earns over 100 billion dollars from this sector, while our earning is a little over 3 billion dollars. If our exports are to rise, it is the IT industry on which we should focus our attention.