MEDIUM-TERM strategic frameworks are important for policy continuity and consistency. Both are crucial for attracting new investments to the economy. Governments use such frameworks to give their preferred direction to the economy and to set targets that they plan to achieve over a certain period of time. These documents also spell out the strategy and initiatives a government intends to launch and the interventions it will make in the market to facilitate private business to attain policy objectives. They also bring about the element of certainty and predictability in the markets, which is essential for businesses to grow, to make informed decisions on their future investment plans and to diversify their products. This was precisely why the business community overwhelmingly appreciated the government’s decision in 2009 to do away with the annual trade policy regime and substitute it with a three-year strategic trade policy framework.
But, as they say, the proof of the pudding is in the eating; the private sector has learnt to its peril that it can neither trust annual policies nor rely on medium-term strategic regimes. The strategic trade policy framework 2009-12 remains buried in bureaucratic files just like most other government policies. The government blames paucity of funds for the lack of implementation of the promises made. Now the commerce ministry has announced its second strategic trade policy framework for 2012-15. With more than seven months already lost, few believe that it will ever take off. Many of the initiatives — such as the formation of Exim bank, development of land ports, establishment of sectoral export promotion councils, and the execution of measures to improve domestic commerce — will boost regional trade, drive up exports and reduce costs of capital investment and production if implemented.
However, doubts about implementation remain. Although the total cost of the incentives and initiatives announced in the new trade policy framework is less than $250m or five per cent of the total power and other untargeted subsidies given by the government during the last fiscal, not many are optimistic about the release of the funds.
The aim of the initiatives and incentives is to boost cumulative exports to $95bn by the end of fiscal 2014-15. The target appears to be ambitious and unrealistic given the fact that a large portion of the installed manufacturing capacities, especially in Punjab, is lying idle due to energy shortages. Even if the trade policy framework is implemented, we will not be able to produce enough to export. After all, how can we sell something that we cannot make? Still, we keep our fingers crossed.