ISLAMABAD: Pakistan should formulate an export-oriented strategy with a particular focus on the development of the export-boosting Special Economic Zones (SEZs) being set up under the China-Pakistan Economic Corridor’s second phase to send positive signals not only to local exporters but also to the global market.
The world economy is opening up for international trade as trade as a percentage of the global GDP rose from 41.08% in 1992 to 60.40% in 2019.
Until early 1990s, Pakistan was a fairly open economy, but afterward, it started experiencing a decline in its trade openness. Pakistan’s trade as a percentage of the GDP declined from 32.4% in 1992 to 27.3% in 2019. This is the outcome of Pakistan’s flat export growth, which is lagging behind most of its Asian competitors, especially in textiles and garments.
Pakistan has been mainly following an import-substitution strategy by restricting imports to protect local industries. Local industries flourish as long as the government ensures foreign competitors are out of the domestic market. Local industries receive all sorts of financial and other incentives, and the role of government is to ensure that the industries face no risks at all at a great cost to the economy.
Import-substitution policies generally result in inefficient and uncompetitive industries.
Pakistan’s domestic market is very small in comparison with the global market. If we have to secure the benefits of the global market, we have to be there with our export goods. This is mainly because the global markets offer their participants ways to innovate products through superior technology and practices. In other words, through exporting, domestic firms learn from the best international practices to produce and export.
Talking about the steps needed to establish a sustainable export base, Dr Zafar Mahmood, an economist, said that an export-oriented strategy should be for export promotion and not at the cost of reducing imports from trading partners.
He further said that this will show to our trading partners that from now onwards our trade openness index will clearly show a consistent upward trend. “Local export firms will feel assured that anti-export bias in policies will be eliminated.”
“Therefore, while rationalising the tariff structure, the needs of export-oriented industries, especially small and medium enterprises, for raw materials and intermediate inputs should be kept in mind,” he said.
Zafar Mahmood underscored that free trade policies enabled a country to reap the benefits of specialisation and economies of scale. “Pakistan has a living example of sports goods and surgical goods clusters in the city of Sialkot, where firms are progressing without much assistance from the government. The efficient ecosystem that is developed in the city through sheer private effort is quite different from other parts of the country, where productive and efficient firms are comfortably competing with large international players. This model needs to be emulated by other industries as well.”
While commenting on Pakistan’s potential export base in sync with CPEC’s Phase-II, Zafar Mahmood said Pakistan needs to capitalise on the investment opportunity offered by China in the labour-intensive, export-oriented SEZs by taking the right decisions without delay to facilitate the speedy establishment of these enterprises.
The economist called for constituting an export committee chaired by the prime minister and comprising ministries, chambers of commerce, large and SMEs export firms, and academics to promote exports on a sustainable basis.
“Pakistan needs to formulate a ‘Make for World Markets’ export policy and try to implement it in letter and spirit and ensure its continuity for sustained improvement in export-oriented industry for a robust economic growth,” he underscored.
