The Report aims to answer the following questions:

• What is E-Commerce?
• What is cross-border E-Commerce?
• What is meant by the term Fashion Products?
• Which companies from Pakistan are major players in E-Commerce?
• Which are Pakistan’s major markets for cross-border E-Commerce?
• What are the major findings of this Study?
• Which are the major recommendations for promoting exports using E-Commerce?

What is E-Commerce?

E-commerce (Electronic Commerce) is defined as the activity of electronically buying or selling of products using online services or the internet.  Among the various categories of E-commerce, B2C E-commerce receives the most attention due to its simplicity and familiarity.

In 2022, global E-commerce sales were estimated at about $5.5 trillion, accounting for about 19.7% of total global retail sales.

What is cross-border E-Commerce?

Cross Border Trade occurs when products are sold to customers beyond the geographical boundaries of a country. It can be B2C (Business 2 Consumer) or B2B (Business 2 Business), this report will focus on B2C. Cross border trade benefits both sellers and brands in providing access to new markets, increased sales, higher revenues, all year demand, brand visibility and finally to help gain a competitive advantage over rivals in international markets.

In 2021, the global cross-border E-commerce trade was estimated to be about $784.6 billion and was expected to grow at a CAGR of 26.2% between 2022 & 2031  reaching $7.9 trillion by 2031.

What is meant by the term Fashion Products?

Fashion Products have three major categories; these are Apparel, Footwear, and Accessories. Accessories include women, men and children clothing accessories, bags, eye wear, watches, jewelry, etc.

Globally, most revenue in retail E-commerce has been generated through Fashion sales, wherein Apparel constituted 57.3% of the revenue, followed by Accessories (29.3%) and Footwear (13.5%) in 2022.

Which companies from Pakistan are major players in E-Commerce?

In Pakistan, the top 5 websites in terms of Domestic Net Sales were all websites selling Fashion Products in 2021. The top three websites; limelight.com, gulahmedshop.com and khadi.com hold 2% of the online revenue in Pakistan (ecommerceDB, 2022).

Top E-commerce Websites in Pakistan in Terms of Domestic Net Sales in 2021

Which are Pakistan’s major markets for cross-border E-Commerce?

Main markets for Pakistani Fashion using the E-commerce platform are the U.S.A., the U.K., the U.A.E., Canada, Australia, Europe and Gulf countries. Even though Saudi Arabia and the U.A.E have the highest number of Overseas Pakistanis, the sales of Fashion products are mainly dependent on the purchasing power of the diaspora, the currency conversion rate, and the customs regulations of that country.

What are the major findings of this Study?

• Covid-19 has boosted domestic E-commerce fashion sales
• Pakistani eastern wear is well-established amongst the Pakistani diaspora
• Pakistani fashion products are catering narrowly to the Pakistani diaspora
• The demand for eastern wear among the diaspora is cyclical
• International marketing strategies are dependent on international platforms, such as Facebook, Google, etc.
• Logistics are inefficient & expensive.
• There is a shortage of tech talent for local E-commerce merchants
• Government processes are mostly manual
• There is a disconnect between merchants, government and the financial sector
• Pakistani fashion manufacturers lack the expertise needed to cater to a wider international customer base.
• Pakistan’s poor international reputation & the lack of a complaint redressal mechanism impacts demand
• Smooth product return mechanism for international orders is not available
• The requirement of 3-D verification for credit card payments reduces online sales
• Multiple websites using same or similar sounding names as those of leading brands cause suspicion in the minds of buyers
• Prices displayed on websites are exclusive of customs duties and vat
• Target market is primarily female
• There is a lack of standardized dress sizes
• Short window to realize export proceeds impacts ability to stock to sell in major markets

Which are the major recommendations for promoting exports using E-Commerce?

• Training and awareness sessions for fashion designers and merchants
• Facilitate international logistics in Pakistan
• Creation of third-party service providers in Pakistan to handle specific E-commerce tasks
• Banking, and customs procedures need to be digitalized
• Revision of SBP and customs laws in consultation with merchants
• Promotion of Pakistani fashion through collaborations with international designers
• Issuance of certification or badges to genuine websites of fashion brands
• Improvements in Pakistani payment gateways
• Facilitating digital marketing services providers in Pakistan
• Development of ancillary products, fusion wear and western wear brands
• Industry needs to implement standardization
• Focus towards a more diversified client base

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 98) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

In the first edition of “Contours of a National Charter for Exports”, published in early 2020, the PBC outlined the directions that a long-term export policy needed to take. “Do nothing new” was not an option. A “business unusual” approach was called for. The first edition was immediately followed by the global onset of the Covid-19 pandemic and its resultant effects on global trade.  In 2021, an update of “Contours of a National Charter for Exports” was published in order to assist the then members of the newly formed National Export Development Board (NEDB). The third update is intended to provide a framework for the three tiers of the Strategic Trade Policy Framework (STPF) (2020-25) which are: 18-20 sector-specific councils; an executive committee that evaluates outcomes of the councils; and the NEDB.

In the Contours of a National Charter for Exports, PBC has identified the major factors affecting Pakistan’s manufacturing and trade as follows:

• The country has deindustrialized prematurely, and it has resultantly lost share of world exports.
• The economy is consumption oriented, reliant on imports even for basic goods.
• Investment in manufacturing lags our South Asian peers by a ratio of 1:2.
• In the last 20 years, whilst Pakistan has lost share of world exports, Bangladesh and Vietnam increased theirs, respectively by multiples of 2.2 and 7.1.
• A large part of Pakistan’s exports is of commodities, or of low value-added products, unlike countries like Vietnam. In Pakistan’s case FDI plays no meaningful role in exports.
• Smuggling and under-invoicing impacts the formal sector as well as tax revenues. Fiscal policies do not support capital accumulation or consolidation.
• Successive governments have failed to broaden the tax base. Existing tax payers carry a disproportionate burden.
• Pakistan suffers from one of the highest import tariffs in the region.
• The private sector is crowded out by the government from bank credit.
• Energy costs are 40% higher than the region for all except the five core export sectors.
• Intellectual Property issues have denied the country adequate supply of global quality cotton seeds. Supply of cotton is a requisite for the country’s principal export sector.
• The export basket is narrow, with Textiles and Cereals accounting for 68.5% of exports in 2021. Export reliance on the USA and Europe exceeds 50% in aggregate and is sharper at 74% for Textiles. Exports to the EU are vulnerable to continuation of the GSP Plus programme.

The 2021 update reiterated the horizontal and vertical measures required to achieve meaningful and sustainable growth in exports. This policy document titled “The PBC’s Contours of a National Charter for Exports – III (Revised September 2022)” is an update with a focus to providing a policy framework for boosting exports in general, promoting non-textile exports/services and accelerating market diversification. It also contains a strategy to widen the geographical reach of Pakistani exports into non-traditional markets.

Horizontal measures applicable generally across sectors

A long-term policy, owned and regularly monitored by the Prime Minister, is required to generate investment, scale, competitiveness, product sophistication and range/market diversification of exports. There is evidence that a PM-led oversight on exports has benefited Bangladesh.

Quantum change from small and retrospective to significant, prospective and targeted investment to drive export growth. There is a need for more focused plans/actions to address specific export potential sectors. Currently more than 70% of export reliance is on traditional products (textiles, rice) and with Textiles alone comprising 61% of exports, of which in turn, 74% are destined for the European and American markets.

The current 10% retention allowance from remittances for non-core sectors is inadequate in size to fund such development.  Instead, a leap of faith is required on the part of the government to set aside a substantial amount for up-front investment from the Export Development Fund (EDF) for non-core and new markets.

It is essential to make exports more competitive by removing all incidences of import duty and taxes, no matter where incurred in the supply chain. The final exporter should be able to receive a refund based on standard costs updated periodically. Taxes must not be exported.

A new strategy is required to facilitate the acquisition and development of international brands by Pakistani exporters. The former is a capital investment, whilst the latter is expensed when incurred. Pakistan could learn valuable lessons from the Turkish “TURQUALITY” Programme through which the Turkish government has been funding the development of 10 worldwide Turkish brands.

A more forward-looking policy relating to buying and developing brands abroad as also in allowing exporters to warehouse goods abroad and not being prosecuted for delayed remittances and bad debts. Certainly, integrating into the fast-growing online portals abroad will require a totally different approach than hitherto.

Plug and play facilities must be provided in industrial zones for manufacturing and exports.

All exports should be entitled to energy at a cost which is globally competitive.

Economic diplomacy should focus on negotiating market access, at a minimum to achieve parity with key global sourcing competitor countries. One stark difference in access to global markets is Vietnam’s trade agreements. Bangladesh too enjoys low or no tariffs by virtue of its LDC status. Negotiating and retaining market access are the combined responsibilities of the Ministries of Commerce and Foreign Affairs.

The export house model of Japan and Korea may be emulated to promote greater integration of the SMEs into the export chain.

An export development and credit guarantee bank owned by the government can take on the task of helping to fund SMEs and to build non-traditional and riskier markets in Africa, Latin America, and Central Asia.

A differentiated FDI policy which factors impact on the external account is recommended for fresh foreign investment. This will generate higher and more value-added exports through infusion of technology.

With 40% higher utility costs for industry vs. regional players, more priority should be given to non-energy intensive sectors such as services, light engineering, agriculture etc.

A National Industrial Policy is needed to address all elements of manufacturing, including exports and import substitution.

In order to expand the export eco-system, it is essential to develop a formal sector programme to educate small and medium-sized enterprises (SMEs) on the potential of exports and the procedures involved in international trade.

There is a need to establish and enforce competitive labour laws to be compliant with global norms.

Those businesses that specialize in exports and make capital expenditures may be excluded from paying customs and sales taxes on imported plant and machinery

Diversification of exports must not be at the expense of traditional sectors.

To encourage investment that would eventually build scale and generate exports, it is necessary to make reforms in two fiscal policies: the levy of minimum tax based on turnover and the premature withdrawal of tax credit on investment in plant & machinery.

There are a few vertical measures that have been identified to promote the expansion of specific key industries such as textiles, pharmaceuticals, footwear, leather, furniture, cutlery, sports goods, surgical instruments, dairy, livestock, horticulture and rice and services.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 and is now composed of 95 of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives and activities can be found on its website: https://www.pbc.org.pk

The Other Business Services Sector

As demand for professionals is increasing, the other business services sector has expanded at a healthy rate. The sector had the highest global exports in services exports ($1,292.8 billion in 2020), along with the fourth-highest growth rate. The sector comprises of three sub-sectors: Classification 10.1 “Research and Development (R&D)”, Classification 10.2 “Professional and Management Consulting”, and Classification 10.3 “Technical, Trade-related, and other Business Services”. In 2020, the USA and the UK dominated the world’s export markets for these services, with market shares of 14.2% and 9.9%, respectively. On the import side, Ireland and the USA lead in global imports of other business services, with market shares of 11.4% and 9.0%, respectively.

In Pakistan’s case, the export value of other business services amounted to $1.4 billion while imports were worth $2.4 billion in FY21, making this the second-largest export and import services sector for Pakistan.

The Global Accounting Services Sector

Accounting services include accounting and bookkeeping (measuring and recording the financial flows and positions of an enterprise), auditing (verifying and attesting/certifying the accuracy of the financial position and results of the enterprise, for internal or external purposes), and tax preparation, amongst other services. The Big Four – Deloitte, PwC, Ernst & Young, and KPMG – dominate the accounting arena globally, with revenues of $50.0 billion, $45.1 billion, $40.0 billion, and $32.1 billion in 2021, respectively.

The accounting process is becoming more and more automated. New dimensions have been developed in the area of fin-tech, algorithms, analytics and assurance. Emerging trends in the industry include cloud-based accounting, blockchain technology, artificial intelligence, advisory services, and so on.

Pakistan’s Accounting Services Sector

Pakistan’s exports under this classification increased sharply between FY15 & FY18, before declining slightly till FY20, it then reached an all-time high of $41.4 million in FY21. Meanwhile, imports of such services have remained low throughout, amounting to around $0.7 million in FY21.

There are a number of professional accountancy organizations in Pakistan such as ICAP, ICMAP, PIPFA, ACCA, and CIMA. More details on these organizations can be seen in Chapter 5. ICAP has been assigned the responsibility of developing and adopting accounting standards in Pakistan by the SECP.

Main Findings

Digitalization in the accounting arena: Pakistan’s progress in this area has been relatively slow and the country needs to keep the emerging trends in mind and to invest in new technologies to become globally competitive. Cloud-based accounting, software, blockchain technology, communication technology, and artificial intelligence are areas where Pakistan needs to catch up. Moreover, the lack of a virtual portal or platform for the services and accounting sector poses a challenge for Pakistan. Foreign markets are unaware of qualified professionals in Pakistan and the services that they can provide which limits the export of such services.

Continual professional development: The technical knowledge of a fresh accounting professional in Pakistan is excellent and in line with international demand. However, these fresh talents mostly struggle in areas of critical thinking, negotiation skills, presentation skills, and communication skills.

Lack of marketing of services: Pakistan needs to work on its branding and marketing as a country to create awareness and to market the availability of the talent present in the country. One restriction in this area is that Chartered Accountants are not allowed to market themselves.

Costly compliance requirements: Working on licensed products such as Microsoft office, cloud servers (Amazon, Oracle), putting firewalls, and anti-viruses in place are some compliance requirements that foreign buyers expect adherence to. While large firms do not face any issue in these areas, medium & small-scale firms might find adhering to such requirements costly.

Lack of credit insurance and payment gateways: This translates into reluctance on the part of service providers to export their services. There is also a general lack of trust in digital transactions.

Unsupportive infrastructure: Stable, uninterrupted, high-speed and affordable internet connections and power supplies, along with a proper workspace set up with computers or laptops are a few of the most vital things needed to provide services abroad.

Main Recommendations

Pakistan needs to create awareness of the latest global trends: The Pakistani services providers need to be made aware of emerging trends, this will be the first step towards digitization. More webinars and seminars will help increase awareness.

Inculcate and integrate emerging accounting trends:  Emerging accounting trends such as Robotics Accounting in educational examinations, as well as, in professional trainings need to be integrated in the curriculum. There is also a need for a network of education providers to help talent progress alongside technical exams, and a network of employers who not only train this talent, but also provide continuous professional development.

Career counselling sessions in schools: To increase awareness regarding the profession and future opportunities that might become available, local professional accounting bodies need to interact frequently amongst themselves to devise strategies for promoting the profession of accountancy in Pakistan. New ideas and making use of appropriate technology needs to be discussed and implemented in the country.

Financial support to small and medium-sized accounting firms: Since accounting and auditing software is expensive, some type of handholding is required for the firms in the SME sector.

Digital promotion platforms need to be used: To market and promote Pakistan as the preferred destination for such accounting services, email marketing can be used to target potential clients. Foreign Trade Officers based in current and potential markets should make a joint effort to increase awareness about Pakistan’s high quality accounting services. Pakistan can arrange conferences, outsourcing expos, exhibitions, and meet ups with international clients to create awareness. Services knowledge platforms need to be established in the country to fill gaps in knowledge.

Technology parks for provision of such services are vital: Where the required infrastructure is present, technology parks should accommodate firms which cater to accounting services, this is especially important for start-ups who might not be able to initially pay the high cost of renting real estate.

Domestic regulations need to be redrafted & regulatory bodies strengthened: Gaps in domestic regulations should be addressed by a gradual adoption and effective implementation of basic internationally recognized regulatory principles such as the OECD good regulatory practices. Further, there is a need to improve capacity in the regulatory bodies which oversee the sector.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 94) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

The textile sector is a major manufacturing and export sector for Pakistan. To begin the process of reversing the premature deindustrialization of Pakistan and for increasing the contribution of manufacturing in GDP, it is important to start with a sector in which Pakistan has a global presence. In 2018, textiles contributed 8.5 percent to the GDP, 25.0 percent to industrial value-addition and employed 40.0 percent of the industrial labor force.

As part of PBC’s Make-in-Pakistan initiative, an initiative which aims to revive manufacturing in Pakistan, leading to jobs, an increase in value-added exports, import-substitution initially of labor-intensive products and an increase in tax collection. The PBC has published reports on the Knitted Apparel and Denim Apparel sectors with the purpose of identifying key impediments to achieving export competitiveness. This report titled “Strengthening the Export Competitiveness of Pakistan’s Towels and Terry Made-ups Sector” is part of the PBC’s Make-in-Pakistan Series and relies on existing secondary research supplemented with field interviews of firms in the towel industry.

A significant portion of Pakistan’s exports comprises of textiles. In 2018, textiles contributed 59.9 percent to Pakistan’s exports. Pakistan’s total exports of textiles in calendar 2018 amounted to $13.7 billion. In 2018, Cotton (raw, waste, yarn, thread & cloth) was the major contributor at 25.4 percent to Pakistan’s textile exports. Knitted garments contributed 20.7 percent while woven apparel contributed a further 18.5 percent to Pakistan’s textile group exports. Bed ware was the fourth largest export in the textile group contributing 16.6 percent. In made-ups, the towel’s subsector commands the second-largest share after bed ware in terms of exports with a 9.6 percent share.

Source: ITC, Trade Map

Pakistan has been ranked as the second-largest exporter of towels with exports of $1.3 billion in 2018. China has been a dominant player in this sector since 2001. China, with exports of $4.7 billion, dominated the global market for towels in 2018. Global exports of textiles and towels have increased substantially after the end of the MFA quota regime. The MFA shaped global competitiveness for many countries, and in Pakistan’s case, only 20-25 companies were able to export in the MFA phase. In the post-quota regime, many exporters, especially SME’s, took time to get on track. Despite the significant exports of towels, Pakistan lags behind its peers. Bangladesh’s exports grew from $91.9 million in 2006 (post MFA) to $275.1 million in 2018 (exports increased by 199.3 percent). Similarly, Viet Nam’s exports grew from $96.6 million in 2006 to $306.4 million in 2018 (exports increased by 218.2 percent). Pakistan’s exports, on the other hand, grew from $864.3 million in 2006 to $1,328.8 million in 2018 (exports increased by only 53.7 percent). If Pakistan does not maintain the same rate of progress as our competitors, our export share in global trade will continue to decline.

Pakistan’s exports of towels and terry made-ups suffer from market concentration. Out of the $1.3 billion worth of towel exports, nearly 90 percent went to two markets; the USA (57.6 percent) and the EU (32.7 percent). It would be better for Pakistan to tap non-traditional markets such as the Russian Federation, Chile, Korea and Mexico for market expansion. These markets have witnessed higher growth over 2014–18, as shown by their CAGRs (2014-18).

Pakistan’s underperformance in exports can be attributed to a number of factors given below:

1. Supply-side and Productivity Constraints:
   1. Quality, Price and Availability of Cotton.
   2. Reliance on Imported Polyester and other MMFs.
   3. Labour Productivity and Skill Development for Job Creation.
   4. Limited Access to Technology and Outdated Machinery
   5. Low Capacity Utilization Preventing Economies of Scale.
2. Ineffective Market Expansion Strategies for Trade Promotion:
   1. Lack of Market Penetration.
   2. Ineffective Strategies for Image Building and Brand Development.
   3. Towel industry as a whole has been lacking in potential foreign collaborations and joint ventures.
3. Business Environment and Trade Related Issues:
   1. Automated Mechanism for Tax-based Export Incentives.
   2. Effect of Exchange Rate Movements on Exports.
   3. Harassment by Different Government Agencies.
   4. Limited Access to Credit hampers Investment in Working Capital.
4. Socio-Economic and Environment Issues:
   1. Business Compliance with International Standards.
   2. Installation of Common Effluent Treatment Plants (CETPs).

Although, the Government of Pakistan has in the past announced a number of textile policies and sector specific incentives to tackle these issues, they have not been successful due to poor implementation.

In order to devise a strategy to increase Pakistan’s towels and terry made-ups exports, 21 exporters were interviewed to share their views on the policy framework required to make Pakistan a major player in the global towel market.

Following were suggested to enhance export competitiveness of Pakistan’s towels and terry made-ups sector:

• Despite being one of the top cotton-producing countries in the world, the cotton crop in Pakistan is not at par with the world in terms of yield. According to the Economic Survey of Pakistan 2019-20, the total seed requirement was 57,205 metric tonnes. However, the amount of seeds locally available and imported was 21,844 metric tonnes. It is recommended that emphasis needs to be on improving cotton seeds and adopting better farm management techniques through the transfer of technology. Improving the yields of the cash crop will help the manufacturers in the entire value chain enhance competitiveness.
• The government imposes a regulatory duty on imports of cotton and yarn, putting towel manufacturers out of the international market by protecting the spinning sector. However, with the devaluation, the spinners will already be getting a much higher price for their cotton in the global market. There is certainly no requirement to impose a duty on cotton and cotton yarn.
• The sugar mills owners have established their sugar mills in close proximity to the areas where cotton was grown. As a result, the growers started growing sugarcane instead of cotton. The government must start from the base and encourage growers to grow cotton by incentivizing the growing of cotton and do away with the support prices for sugarcane.
• To promote the exports of high value-added embroidered towels, Pakistan needs to focus more on the production of towels made from man-made materials blended in cotton to increase the towel’s aesthetic effects. Therefore, to increase the production of artistic towels, manufacturers must use low percentages of white and high proportions of dyed yarns using MMFs and cotton both. Hence, it is suggested that the government may abstain from increasing custom duty on polyester to promote value-addition and competitiveness in the international market.
• The towel industry of Pakistan is highly labor-intensive. However, the limited availability of skilled labour force hinders quality, productivity and value for growth in exports. It is recommended that training staff be given exposure to the international syllabus and to make course content more relevant to the challenges that the industry faces today.
• There is a need to make considerable investments in the areas of processing to catch up with our competitors like India and Bangladesh. Technology adoption rates are low in Pakistan as investment in technology is risky and not subsidized sufficiently. By installing modern processing machinery, it is possible to achieve a high average unit price for Pakistani towels in the global market. To compete in global markets, Pakistani manufacturers must upgrade both technology and processing. Upgradation should be funded through either tax incentives or lower rates of mark-up for capital investments. The government formulated a Technology Upgradation Fund (TUF) scheme to facilitate the textile sector. Still, the exporters complain that this scheme has not been effective because it does not reduce the risks associated with technology adoption. Furthermore, chemicals and dyes used in textiles should be zero-rated as well, to make technological investment more attractive.
• To move into the higher end of the markets, towel manufacturers need to produce towels using dyed yarns, which fetch better prices than piece-dyed towels. The printing aspect will add another dollar to the value of the towel. The value addition in the form of reactive printing on towels is currently being done by only a few manufacturers in Pakistan. Hence, it is suggested that the government may abstain from imposing custom duty on reactive dyes (CD: 16 percent) to promote value-addition and competitiveness in the international market.
• The fairs being arranged locally should be well-advertised throughout the world to attract international customers and should also be included in the regular world exhibition calendar.
• In order to improve unit prices, more international brands should be invited to Pakistan as more foreign investment and joint ventures are being attracted successfully by our competitors. It is suggested that a ‘Brand Fund’ should be introduced to achieve the desired results. With the help of this fund, full support should be provided to the manufacturers and exporters who invest in building their brands.
• It is important to promote foreign collaborations and joint ventures to improve trade in marketing and manufacturing processes, to introduce new technology and build brands. This will lead to an improvement in Pakistan’s image and a rise in the unit values compared to the current values.
• To mitigate the impact of COVID-19 on the towel industry and to sustain employment and exports of the country, sales tax “zero rating” should immediately be restored for 5 export-oriented sectors to support the already struggling export sector and ensure that their liquidity issues are resolved. The rebate and sales tax refund structure should be audited based on the input-output coefficients and timely adjustments are made to maintain exporters’ competitiveness in the international market.
• The government should provide incentives and boost lending to the private sector by reducing the export refinance rate in order to improve the competitiveness of the towel sector.
• To retain the towel industry’s competitiveness amidst the COVID-19 crisis, the government must extend the concessionary rates for utilities for the next three years.
• Environment, Health and Safety (EHS) and Corporate Social Responsibility (CSR) practices are not an integral part of doing business in the towel sector. The government needs to help spread awareness regarding EHS laws, especially in the SME sector.
• The world is moving to zero discharge of hazardous water, for which Common Effluent Treatment Plants (CETPs) have to be installed. There should be a common treatment facility for all units, especially SMEs, and the government should subsidize and incentivize the installation of the treatment plants.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 82) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

The EU’s imports from Pakistan have risen from USD 6.8 Bn in 2013 to USD 9.7 Bn in 2019. However, Pakistan market share has remained stagnated during this period.

In the USD 6.2 Trillion EU import market, Pakistan’s share in 2019 was a mere 0.16%. One of the major reasons for this is that despite having duty-free access for nearly all tariff line for the past 6 – years, Pakistan has not focused on items which are imported by the EU in large quantities, nor has it focused on items which have witnessed high rates of growth in the EU’s import basket. The lack of a focused strategy has meant Pakistan is missing out on an opportunity to increase its market share in EU imports as well as to have a strong presence in items which are seeing large increases in demand in the EU.

As an example, apparel made from man-made fiber is in popular demand in the EU due to its low cost, design opportunities, adaptability and wrinkle-resistance. However, Pakistan’s textile industry has by and large ignored this opportunity for reasons to be listed later.  Apparel and Homes Textiles imported from Pakistan by the EU at best have a cotton-PSF mix of around 80:20.

Textiles is Pakistan’s strength and the sector needs to undergo a paradigm shift and diversify its range of products that it offers to its buyers in the medium to long term. Pakistani manufacturers need to penetrate aggressively in the global synthetics products market as the global market for synthetics has long surpassed that for cotton.

According to Pakistani exporters, high rates of customs duties on polyester fibers have hindered Pakistan’s entry into the synthetics apparel market. In comparison, to Pakistan, Vietnam applies zero duty on import of raw materials including cotton and man-made fiber. As a result of these among other policies, Vietnam’s exports of apparel to the EU have grown from USD 2.4 Bn in 2013 to USD 3.5 Bn in 2019.

Pakistan needs to reduce or eliminate duties on raw materials necessary for the manufacture of synthetic apparel. Import of machinery for manufacture of high thread count garments should also be 0%. In addition, a tax holiday of 5 years may be provided to manufacturers of high-thread count garments to establish the fledgling industry in Pakistan.

Pakistan’s exporters need to focus on items which are in high demand in the EU. Pakistan should seek to secure contracts with a myriad of SME buyers instead of focusing on only a few large buyers. This will increase the overall volume of exports from Pakistan.

Under the Duty and Tax Remission for Exporters (DTRE) scheme for exporters, the amount is refunded after 3 months which creates liquidity problems for businesses. Permissions from the Customs Collectorate takes 2 months for approval which adds to further delays for businesses which makes it undesirable for foreign buyers to order from Pakistan. Faster processing of refunds will alleviate liquidity problems for manufacturers.

Pakistani manufacturers need to be aware of branding and marketing techniques. This will move their products from a commodity-level to a category-level and enable them to fetch a higher price in the EU market.

Lastly, the issue of negative travel advisories needs to be negotiated with relevant foreign governments. Buyers from USA and the EU are not able to visit Pakistan and see samples or monitor production since their insurance policies do not cover travel to Pakistan due to negative travel advisories from these countries. This leads to buyers visiting other countries in search of manufacturers such as Bangladesh, India and Vietnam.

Focusing on post-GSP Plus i.e. after 2023, Pakistan can look to negotiate the inclusion of several items which are exported to the EU but are not covered under the current GSP Plus scheme including basmati rice, brown rice, sugar, molasses and salt.

The Pakistan Business Council is a research-based business advocacy body composed of the most significant local and foreign investors with long-term commitment to Pakistan. The PBC pursues advocacy free of sectoral and investor origin biases, “Make-in-Pakistan” is PBC’s primary thrust aimed at creating jobs, value-added exports and encouraging import substitution. More information on the PBC and its areas of research are available on our website: www.pbc.org.pk.

In the “Contours of a National Charter for Exports”, the PBC outlines the directions that a long-term export policy must take. “Do nothing new” is not an option. A “business unusual” approach is called for.

The export policy must be owned and monitored by the Prime Minister to give exports the importance that it clearly deserves. And this policy or charter should be empowering rather than controlling, as many of the policies impacting businesses in general, and exports in particular have been controlling and restrictive in the past.

Secondly, Pakistan needs to invest to grow exports. This requires a shift from retrospective investment, meaning a percentage of realized export proceeds being utilized for this purpose, to prospective investment, requiring up-front investment in the well premised strategies of higher and more diversified exports.

Finally, it also means a more enlightening policy on buying and developing brands as also in allowing exporters to warehouse goods abroad and not being prosecuted for delayed remittances and bad debts. Certainly, integrating into the fast-growing online portals abroad will require a totally different approach than hitherto.

In a nutshell, the PBC urges a quantum change from suspecting, doubting, untrusting and controlling to an empowering and more brand-led risk-taking approach. At the same time, PBC recognizes that in the past some unscrupulous exporters have misused policies. It is a sad fact that “Made-in-Pakistan” carries a negative perception abroad.

The PBC therefore advocates an in-depth engagement with responsible exporters to develop checks and balances leading to high standards of governance and accountability. Denying the formal, responsible and accountable sector from benefits of an empowered policy because of misuse by others in the past is not valid.