After the sluggish growth in exports in the first four months of the current fiscal, the annual projected target of $19.2 billion seems to be a far cry. Exports were up by 6.33 per cent to $5.865 billion during July-October but fell significantly short of projected growth of over 12 per cent for this fiscal year.

To make up for this lower growth in the initial months, the exports need to be increased by over 16 per cent per month to hit the annual target. Over the last couple of years, the growth in exports has been around five per cent.

The first three years of the military-led civilian government recorded an impressive average 17 per cent rise in export earnings which had stagnated at $8-9 billion a year between 1996-2002.

The export suffered from many snags including narrow base of exportable commodities, focus on a few countries, improper subsidies, macro- policy imbalances and the law and order situation. Many exporters also complained about shortage of skilled manpower to meet the buyer’s quality demand.

A higher economic growth is required to sustain a rapid surge in exports. A 7-8 per cent GDP growth is only maintainable through a 20-25 per cent annual export growth. For the last many years, hardly 36 exportable items contributed more than 90 per cent of the export earnings.. The remaining 10 per cent comes from a variety of miscellaneous goods which do not show consistent export trend.

More than 65 per cent of total proceeds come from textile and clothing sector. Among the non-textile products, export of leather, surgical, footwear, carpets etc has been steadily on the decline for the last couple of years with no apparent move from the government to arrest the decline. Rice is the only primary commodity which crosses the one billion dollar mark, but it is also stuck around the same figure for the last two years.

To address these adverse trends, some incentives were given by the commerce ministry in the recent years to encourage export of new products to new markets. Unfortunately, the facility was misused by some unscrupulous elements in connivance with the trade officials and the whole scheme came to a halt. A probe was initiated to identify the persons who plundered the taxpayers’ money, the results of which are yet to be made public.

The country is dependent, in addition to textile and clothing, on the large-scale manufacturing (LSM) sector for generating exportable surplus. However,” the declining growth trend in the LSM sector during the last couple of years has reduced the export capacity,” says the former commerce minister Humayun Akhtar Khan.

A draft industrial policy was announced by former minister for industries Jahangir Khan Tareen, but the same was put in a cold storage.The ministry is looking after the interests of highly protected auto manufacturers and some other industries catering to domestic consumers. .The industries-specific policies only protect profit margins of some top businesses.

On the other hand, farm products were not available for export except rice and some seasonal fruits and vegetables. Again the ministry of agriculture commonly known as a ‘two-crop ministry’, has yet to take some practical steps to increase the farm production for export purposes. There is not much agriculture surplus to be exported from the country.

The destinations of exportable products are very few. The United States and European Union absorb more than 55 per cent of the total exports. If there is any unrest or policy change, exports to these destinations suffer. The EU anti-dumping duty on import of home textiles into Europe since 2003 has impacted Pakistan’s exports.

The Middle East and East Asia are the other areas where some of exports are absorbed. Exports to Africa, South America and a few other regions have increased but not very significantly. Afghanistan emerged as a new market, but again not for the value added goods and only for food stuffs and products required for reconstruction activities.

The government’s policy of increasing exports through subsidies in the past years led to mushrooming of exporters but did not improve the quality of products and skills of workers, particularly in the textile sector. Pakistan’s export history is replete with subsidies, such as bonus voucher scheme, refinance scheme, cash compensatory rebates, freight subsidy and research and development support. In addition to these subsidies, both covert and overt duty exemptions and tax concessions were also given.

Most of the people join the export trade with their eyes on incentives instead of focusing on improvement, innovation and value addition. This is evident from the misuse of freight subsidy given for promoting new products and exploring new markets.

Analysts said subsidies intensified cut throat competition and price war among the exporters, resulting in reduction in per unit price. Consequently, more goods are exported for a lower price. The exporters lower prices rather than improving the quality of products. Subsidies have promoted the rent-seeking culture. Efforts to improve the ways of doing business, better marketing strategies and higher productivity, have been largely neglected.

So ,there is a need to revisit this concept of six per cent subsidy being given to textile exporters for research and development, which is rather subsidising the purchasing power of the rich countries at the cost of our taxpayer’s money. Strict monitoring of R&D subsidy is necessary to ensure that the money is being spent for the purpose for which it had been advanced.

The caretaker minister for commerce and textile industry, Shahzada Alam Monnoo told Dawn that he has accepted the assignment as a challenge. However, he was satisfied with the previous government’s policies for promoting the exports. He said that if the current geo-political situation improves, the exports would grow at a higher pace.

Expressing concern over the prevailing law and order situation he said foreign importers were reluctant to visit Pakistan because of the security situation. This, he said, had led to trade diversion from Pakistan to Bangladesh, China and Vietnam, especially in textiles.