The PBC’s Contours of a National Charter for Exports - III

With exports the only sustainable solution to Pakistan’s recurring external account crises, the Pakistan Business Council (PBC), as part of its “Make-in-Pakistan” thrust, is advocating for fundamental structural reforms to the economy to promote value-added exports, encourage sensible import substitution and to create jobs. The three main pillars of “Make-in-Pakistan” are “Grow More/Grow Better”, “Make More/Make Better” and “Serve More/Serve Better.”

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: