Finance Minister’s optimism

Briefing the media about the outcome of Prime Minister’s concluded visit to China, the Finance Mister Asad Umar claimed that Pakistan has overcome an “immediate balance of payment crisis.”He did not divulge the details how the crisis of external balance is averted. However, he did say that Saudi Arabia is supporting Pakistan with $ 6 billion whereas country’s exports are likely to witness a big jump during this year. He expressed the optimism that Pakistan would be able to stem over the balance of payment issue once and for all.

The finance minister said Pakistan was earlier facing a $12 billion financing gap for the current fiscal year and added that China, in principle, has agreed to immediately provide financial support for Pakistan. He said that access to Chinese markets would also help double Pakistan’s exports in the current fiscal year, paving the way for long term solution to the lingering balance payment issue of the country. The minister said that government is taking strong measures to boost the exports, which are major element in bridging the trade gap.

Asad Umar said that the present government has made fundamental changes in the economic policy and criticised the lopsided one of the previous government which was mainly focused on throwing the scarce resources into the nonproductive megaprojects of building roads and metro bus projects run by massive subsidies. He said that the present government policy is focused on human resource development, increasing exports and elimination of corruption. “We have given subsidy on gas, electricity to exports oriented private sector industries besides reducing electricity tariff on agriculture tube wells,” he said, adding that due to these measures, taken to increase the exports, it is hoped that by the end of current fiscal, the exports from the country will be doubled.

Explaining the utility of currency swap arrangement with China, the finance minister said the use of local currencies in trade between China and Pakistan would benefit the private sector as well as public sector as China offers subsidized exchange rate when the two countries trade in local currencies.

Present in the media briefing, foreign minister Shah Mahmood Qureshi said that two sides decided to complete bilateral negotiations on the second phase of Free Trade Agreement (FTA) by April 2019. It may be recalled that it was Asad Umar who as law maker of opposition party made a scathing critique of the terms of this agreement which the previous government was willing to agree and PTI was the only opposition party which compelled the PML-N government to postpone the finalization and signing of FTA phase II. In retaliation China withheld the electronic data exchange of trade with Pakistan. China was anxious to get the concession of zero duty on 75 percent tariff lines whereas the concession of zero duty on 35 percent tariff linens envisaged in FTA-1virtually converted Pakistan into a trading nation instead of producing and exporting nation, creating a trade deficit of over $ 12 billion with China. Under this trade agreement even primary commodities like onions and fruits had to be imported under the concession of zero duty and the previous government spent $ 50 billion of costly foreign loans on imports from China during 2013-18. It remains to be seen how the interest of Pakistan are safeguarded by the present government in the FTA-II.

China is opening up its markets to all his trading partners and exports from Pakistan will face tough completion from the products of India, Bangladesh, Thailand Vietnam and Philippine. These countries use fourth and fifth generation technologies with highly skilled but low paid labour and appreciably lower tariffs of electricity and imported gas. On the contrary, in Pakistan second generation technology is used with not that skilled labour and the highest in the region electricity and gas tariffs in addition to a very regressive taxation regime, pushing the country to 147th ranking on the World Bank Ease of Doing Business Index. Will Pakistani low quality and high in price exports be able to compete in the market of China? It is of course a million dollar question for which the government has to provide a satisfactory answer.

The incentives given to export industries will not be sufficient enough to give competitive edge over the identical products of other countries. The industrial sector direly needs technological improvement, labour skill development and product innovations to become competitive in the international market. For human resource development, recruitment of young, capable and dedicated faculty has to be recruited strictly on merit and honest educationist should be placed in the administrative prostitutions. Moreover, research environment should be made conducive by providing state-of-the art equipment for laboratories and access to top notch research journals.

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