Road to diversified trade policy

At last the necessity of formulating a multidimensional trade policy has been realised. Advisor on Commerce, textiles and production Abdula Razzak Dawood gave a detailed briefing to the Prime Minister Imran Khan on the proposed Strategic Trade Policy Framework (STPF) 2020-25. The briefing was attended by Energy Minister Omer Ayub Khan, Minister for Economic Affairs, Advisor on Finance Dr. Abdul Hafeez , Special Assistant on Petroleum Nadeem Babar and Governor State Bank Reza Baqir. It merits mention that long term trade framework, as vital component of national economic policy being an important engine of GDP growth, had remained discarded and neglected in elected governments during 1972-77 and 2008-18. In two unelected government and one elected government of PML-Q three year trade policies had been implemented which almost achieved the desired results notwithstanding neglect of improvement in technology and product innovations.

The proposed five year trade policy framework encompass fiscal, and monetary measures for boosting both quantum and value of exports of finished goods and primary commodities in which Pakistan still have comparative advantage over its competitors in the global market.

Advisor on Commerce outlined the broad parameters of the STPF, pertaining to enhancing efficiency of local industry to produce products of international standard; removing the bottlenecks that hinder manufacturing of export quality goods; evolving a mechanism of easy refund to business community; and ensuring continuity of exports facilitation policies on long term basis. It may be recalled that a month ago a news report revealed about strategic textile export policies for 2020-25 and 2025-30. The recommendations and targets of those policies were critically examined in these columns. It is worth much appreciation that STPF include wide range of value added items and primary commodities.  The proposed five year trade policy framework will tap export potential of textiles, leather and surgical products, sports goods, carpets, cutlery, engineering goods, pharmaceuticals, auto-parts, footwear, gem and jewelry, processed food and beverages and agriculture commodities such as rice, vegetables and fruits.

In the prevailing business environment, input-output ratio cast doubts on the success of such an ambitious long term trade policy. The prices of electricity and gas are very high. But even then power division has allowed three tier tariff adjustments on increasing electricity tariff by Rs.2.69 with retrospective effect from the first quarter of financial year 2018-19. It is no longer a secret that shady power purchase agreement made with IPPs for allowing inflated power tariff and its indexation with currency depreciation against the US dollar serves one of the major compelling factors for increasing electricity price from back dates. The advisor who gave briefing on trade policy framework and the Special Assistant in attendance has major great in IPPs.

Industrial raw material is another basic input of exportable goods. There is total reliance on the import of dyes and chemical for textiles and leather goods and raw material for pharmaceuticals. After the suspension in trade with India, the import cost of this raw material has gone up. The auto sector is in deep crisis due to steep drop in the sale of cars, trucks and tractors and import of completely knock down and semi knocks down automobile kits has declined. The cartel of assemblers has managed to block the entry of some leading automobile companies including Renault, Kia and Hundai to set up manufacturing plants in Pakistan. Moreover, Nissan Motors has stepped back from investing in setting up auto parts localisation unit due to unfavourable economic environment. Auto-parts vendor industry is in deep crisis. Then how can auto parts exports be included in the trade policy framework.

Efficiency of local industry can be enhanced only when latest technologies are inducted, indigenized by modernizing the hitherto redundant and obsolete institutions of Research and Development and skill building of local talent is done on large scale. The increase in exports of primary commodities needs agriculture development and crops diversification. The SPTF needs to be backed by long term industrial and agriculture policies and reduction in input cost if the intended targets are to be achieved. Implementation of the industrial and agriculture policies require liberal fiscal and monetary incentives, technology advancement, and R&D and skill development.