Reasons behind falling exports enumerated


The Economic Survey 2015-16 has acknowledged that the country’s falling exports are alarming during the current fiscal year citing a lacklustre economic growth, jittery global equity and current market weakening in China and policy reversal in the US.

However, the present government is cognisant of this issue and has taken a number of measures and recently launched STPF 2015-18 which, the Survey maintained, is a welcome development for our exports.

According to the Survey, although Pakistan trades with a large number of countries its exports are highly concentrated in a few countries.

About 60 percent of Pakistan’s exports go to ten countries namely, the US, China, the UAE, Afghanistan, the UK, Germany, France, Bangladesh, Italy and Spain.

Furthermore, the USA has largest share in exports with 17 percent followed by European countries 22 percent in our total exports.

Pakistan’s exports to China have dropped from 10 percent in FY 2014 to 8 percent in FY 2016 while compared to imports China’s share improved from 17 percent in FY2014 to FY2016 (July-March) to 27 percent which suggests that the FTA signed with China is not supportive and needs a careful impact assessment.

During recent years, Pakistan exports recorded a sluggish growth. The exports target for FY2016 was set at US $25.5 billion.

Exports during July-Mar FY2016 remained at US $15.6 billion as compared to US $17.9 billion in July-Mar FY2015, a decline of 12.9 percent.

The main reasons for lower performance of exports are generally weak external demand, a slowdown in economic growth of China, lost textile share to new competitors in international markets, and unfavourable terms of trade for exports with little value-addition.

For the last few years Pakistan’s exports are showing a declining trend. Global trade without any quota restrictions has created opportunities for developing and emerging economies.

Some countries availed this opportunity and consolidated their exports whereas others failed to take advantage. Pakistan was among the latter category. India, Bangladesh, Cambodia, and Vietnam doubled their exports.

However, it is observed that since last two years, a slowdown in global economy has also adversely affected the exports of regional countries.

India’s export declined by 17.2 percent in FY2016 as compared to 1.3 percent decline in FY2015. Lower trends in exports are the results of both supply and demand side factors. On supply side, structural impediments in commodity producing sector, higher cost of production, low level skill and in-competitiveness have also hurt exports.

Investment in exporting sectors has remained disturbingly low, as a cut-throat competition with countries like Vietnam and Bangladesh gives tough time to Pakistan’s exports.

On the demand side, the major factor impeding Pakistan’s exports growth is the slump in the economies of major trading partners, like China and the EU. In case of the US, although its import demand remained modest through these years, Pakistan has not been able to supply this market due to change in market preferences.

To enhance exports the government announced a number of initiatives in the Budget 2015-16 which included establishment of Exim Bank which will be helpful in enhancing export credit and reducing cost of borrowing for exporting sectors on a long-term basis and help reduce their risks through export credit guarantees and insurance facilities.

The government through the State Bank of Pakistan had arranged to reduce its mark-up rate on Export Refinancing Facility (EFR) from 9.0 percent in 2010 to 7.5 percent in 2014 which was further reduced in February 2015 to 6.0 percent and further reduced to 4.5 percent from July 2015 till date.

Similarly Long Term Financing Facility (LTFF) for 3-10 years duration from around 11.4 percent to 9.0 percent and further reduced to 7.5 percent in February 2015 and further reduced to 6.0 percent in July 2015 till date, to allow export sector industries to make investments on a competitive basis.

A Cabinet sub-committee comprising members of M/o Commerce, Planning & Development, Industries and Privatisation, Parliamentary Secretaries of Finance and Industries & Production was formed under the chairmanship of the Finance Minister to accord greater attention to exports-related production sector.

The Committee has been tasked to devise steps and measures which could enhance exports in short-term on one hand and deepen the orientation of economy towards exports on the other hand.

The Committee is proactively working on the assigned task to increase export level of the country. The government also announced STPF 2015-18 for the exports enhancement.

During July – March FY2016, the exports reached US $15.6 billion as compared to US $17.9 billion in the same period of last year – a decline of 11.6 percent during July-March FY2016 compared to the same period last year.

An analysis of group-wise exports suggests that Basmati rice declined by 27.9 percent in value and 7.5 percent in quantity. While other varieties under rice group witnessed a decline of 5.9 percent in value and improved by 9.9 percent in quantity, compared to the corresponding period last year.

Fish & fish preparations also declined by 5.3 percent in value and 7.3 percent in quantity, compared to last year. Export of sugar declined both in quantity and value ie; 35.6 percent in quantity and 36.4 percent in value, compared to last year.

The exports of spices remained favourable by 17.8 percent in value and 7.5 percent in quantity during the period. Export earnings from fruits also registered a decline of 5.3 percent in value and 10.9 percent in quantity, while vegetables also witnessed a decline of 5.4 percent in value and 4.8 percent in quantity.

Meat and meat preparations, however, posted a growth of 16.8 percent in value, and 7.8 percent growth in quantity during July – March FY2016 as compared to the corresponding period of last year.

The share of exports to Afghanistan in total exports, however, witnessed a decline in recent years from 8 percent in 2014-15 to 7 percent during current year.

Likewise the share of exports to the UAE also dropped from 7 percent in FY2014 to 4 percent in FY2015 and remained the same in FY2016 .The share of exports to the EU countries like France, Italy, Spain, etc remained relatively stagnant.

Like other developing countries, Pakistan also benefited from falling global oil and commodity prices. This steep fall of oil prices is clearly reflected in Pakistan’s overall import bill which resulted in a US $3.3 billion saving, from import of petroleum products.

Pakistan’s overall import remained 4.3 percent less during July-March FY2016 compared to the same period of last year. Import target was set at $43.2billion (an increase of 6 percent) during FY2016. In July-March FY2016, imports were 4.3 percent lower compared to same period last year.  -Business Recorder

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