Pakistan’s Export Industry
By: Moez Akbar
Tags: Industry, Politics, Export, Economics, Pakistan

Pakistan’s export industry has been struggling since the beginning of time. When many countries today are rapidly expanding their exports, Pakistan continues to face difficulties exporting goods. Many countries started their development process at the same time as Pakistan and with the same conditions, however, they seem to have been far more successful than Pakistan in terms of their export industry. What is the reason for Pakistan’s export industry struggling to get a breakthrough even after all these years of development?

Pakistan has one of the lowest values of exports of goods and services as a percentage of gross domestic products (GDP). People generally believe that this is because the country’s exports are not ‘good enough’ for international markets. Local firms complain that the reason for this is the lack of investment to produce specialized local goods. This reduces competitiveness in the international market. The major factors that affect export competitiveness include lack of trained labor, financial inputs, energy, infrastructure, and political issues. Furthermore, the absence of a clear long-term strategy is also a reason why the export industry has not lived up to its potential. Pakistan has always relied on low-value products that are sold in the local market at high prices. No incentives are given to encourage local firms to specialize or improve the quality of their products. Moreover, a lack of investment means a lack of Research and Development (R&D) on machinery and technology to produce and sell goods at a lower cost in the international market which will increase competitiveness.

There are also other threats to Pakistan’s export industry. The major export markets, such as the US and China, have shown a reduced demand for our products. This is extremely disappointing when considered that these products were already facing tough competition in the international market. On top of this, many importing countries have set guidelines that raise concerns about issues such as child labor, gender discrimination, pollution, low-wages, etc. Pakistan does not have a clean image when it comes to these sociopolitical issues which are why some countries have reduced imports from Pakistan. Countries are also finding it difficult to have confidence in Pakistan when it comes to timely delivery of export goods because of Pakistan’s energy crisis. There is also a shortage of skilled labor in factories that do not require much educational background or institutional training. Other than this, COVID-19 and lockdown have also affected the exports of the country. Its impact will likely last for a long period of time.

While Pakistan continues to face these hurdles that serve as barriers to the export industry, the current Prime Minister Imran Khan on the other hand has vowed to promote the local industry so that people rely on local products. “Our government is vigorously pursuing ‘Make in Pakistan’ policy to promote export-led industrialization in the country and our efforts in the last two years have been to further this objective through various interventions, particularly in ease-of-doing-business,” said the Prime Minister.

Exports had dropped from $25.1 billion in 2013 to $20.5bn in 2016. Since then, exports had been on an upward trajectory, rising 5.1pc a year to reach $23.8bn in 2019. In 2020, they have increased to 333500 PKR Million in July from 263846 PKR Million in June of 2020. However, the exports were contracted during the peak of COVID-19 in Pakistan. For example, Exports in April 2020 decreased to $960 million, which is a 54pc reduction when compared to April 2019. Moreover, other exports such as ready-made garments and knitwear were also negatively affected in March 2020.

Prime Minister Imran Khan has assured that he is committed to overcoming the hurdles faced by exporters. He stressed the need for greater focus on the goods produced locally which have the greatest potential. He further went on to say that product diversification is the key to maintaining the momentum of an increase in exports. The government has also reduced duties on hundreds of tariffs in order to make the local goods more competitive.

I believe that the first step towards making sure that the exports live up to their potential is creating an appropriate policy framework. These policies should include incentives for local firms to produce high-quality goods with services such as R&D to increase competitiveness in the international market. Moreover, the government should work on promoting the export goods of Pakistan which have full potential. This promotion should not only be limited to the goods themselves, but also the environment in which they were created. This can be done by imposing strict laws on child labor and improving the working conditions for workers. This will portray a clean image of Pakistan which is necessary to avoid any sociopolitical concerns of importers. Solving Pakistan’s energy crisis should also be made a priority so that Pakistan is not dependent on other countries to import energy in order to produce export goods.

While Prime Minister Imran Khan has mentioned that he is satisfied that Pakistan’s economy is moving in the right direction, he needs to make sure that in order to keep this momentum going he is committed to replacing the hurdles faced by the export industry with long-term sustainable solutions.