Pakistan’s exports potential: Growth opportunities and strategy

A container is loaded on to the first Chinese container ship to depart after the inauguration of the China Pakistan Economic Corridor port in Gwadar in 2016. (File/Reuters)
Updated 22 March 2018
0

Pakistan’s exports potential: Growth opportunities and strategy

Pakistan is the 25th-largest economy in the world. The country has a sound manufacturing base and well-developed agriculture and service sectors. Additionally, the country is abundantly blessed with natural resources.
It is the sixth-most populated country in the world, and 60 percent of the population is young. Geographically, it is ideally located between east and west.
All these factors make Pakistan ideally placed to become one of the world’s leading trade partners.
Despite having all the positive essentials of an export hub, annual global exports from Pakistan are only about $20 billion, much lower than its potential. This untapped potential provides the best opportunity for investors across the globe looking for maximum returns on their investments.
The following are some of the best avenues for investment in the emerging Pakistan.
The textiles sector is the mainstay of our exports sector which, together with cotton and yarn, accounts for more than half the total value of Pakistan’s annual exports.
Pakistan is one of the few countries where the complete value chain of textiles manufacturing exists. Pakistan annually produces more than 11 million bales of cotton. The cotton is domestically ginned and then spun into yarn by a robust spinning sector. Weaving, knitting and processing sectors produce a wide variety of fabrics that are stitched to produce world-class garments.
The blossoming fashion industry renders ultimate value-added products. However, some of the subsectors are not completely integrated. Due to value-chain constraints, Pakistan exports more than $3.5 billion of cotton, yarn and woven fabric each year.
These are relatively low value-added products and the proper placement of value-chain addition through investment can bring three to four-fold export proceeds and a handsome return for investors.
Similar potential for huge value-addition exists in other sectors. Gems and jewelry are one example.
Emeralds mined from the Swat region are considered some of the best in the world. Careful mining of precious and semi-precious stones through advanced equipment, and artful cutting, polishing and rendering into jewelry, immensely increases the value of finished products. There is equally great scope for product diversification, as is the potential for raising new sectors.
Pakistan has overcome to a great extent its short-term issues affecting the exports sector. The law and order situation has long been restored to normalcy. The success of the Expo Pakistan event in November 2017 in Karachi is clear testimony to this.
Hundreds of business delegates from throughout the world participated in this mega event and discussed and concluded business agreements with their Pakistani counterparts. In view of the interest of investors and businessmen traveling to Pakistan, the government has recently relaxed its business visa regime.
Great emphasis has been laid on improving energy availability. More than 10,000 MW of electricity is being added in the national grid as a result of recent initiatives. After operationalization of all energy-generating projects, there will be surplus electricity. Already the situation regarding industrial load shedding has been markedly improved. In addition to this, the State Bank of Pakistan has recently made adjustments to its exchange rate regime to make it more attractive to exporters.
These interventions have started to yield positive results. After registering negative growth over the past four years, exports from Pakistan are picking up. The first six months of the current financial year have seen a more than 11 percent increase in our exports, and the trend is continuing. February 2018 registered the highest month-on-month increase of 16 percent in the dollar value of exported commodities.
Apart from immediate measures, the government is pursuing a comprehensive plan of medium to long-term interventions aimed at realizing the true export potential of Pakistan.
To enhance the competitiveness and strengthen the manufacturing base, a number of schemes have been launched to help industry modernize its machinery; improving access to utilities; enhancing labor productivity; and ensuring quality infrastructure. Apart from schemes for the general industry, the government has incentivized the setting up of Special Economic Zones (SEZs) that additionally provide the benefits of subsectors integration, improved connectivity and economies of scale.
In addition to already notified SEZs, the government has recently announced the setting up of nine more zones along the China-Pakistan Economic Corridor to better leverage emerging opportunities in the region.
Product diversification and branding are also being given attention. Dedicated funds have been set up aimed at promoting research and development. Pakistan has elaborate laws and the necessary organizational setup for the effective protection of intellectual property rights to provide a conducive environment for promotion innovation.
Pakistan is also moving toward achieving more market diversification and improved market access. The “Look Africa” plan is a part of such efforts. Pakistan has achieved some notable successes in the field of trade diplomacy in 2018. In January, successful negotiations earned unilateral concessions by Indonesia in 20 tariff lines. In February this year, Pakistan successfully had the GSP Plus facility reviewed by the EU Parliamentary Committee on International Trade. The committee expressed satisfaction over the progress made by Pakistan and decided in favor of the continuation of the facility.
In short, Pakistan is poised and ready to become a regional hub of connectivity, investment and productivity and the coming days will witness the emergence of this nuclear power as a significant player on the global trade landscape.
“Emerging Pakistan” is the best place for all investors, specially investors from Saudi Arabia.


Iran looms large over OPEC summit

Updated 5 min 25 sec ago
0

Iran looms large over OPEC summit

  • Saudi Arabia only country in Mideast, and perhaps world, with enough capacity to keep market supplied, say experts
  • At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies

LONDON: The Opec summit in Algiers on Sunday meets amid widespread fears of a supply crunch when a forecast 1.4 million barrels a day of crude is lost from Iran in November when US sanctions kick in.
If, on top of that, more supply shocks hit the market in worse-than-expected disruption from Libya and Iraq, the price of crude could surge, said Andy Critchlow, head of energy news at S&P Global Platts. “At the moment, the market looks finely balanced,” he said.
There isn’t a lot of slack in the system. As Critchlow points out: “Upstream investment in infrastructure and new wells is historically low and it will take a long time to turn that around.”
At Algiers, Opec and leading non-Opec countries are expected to discuss how to allocate supply increases to offset a shortage of Iran supplies. The gathering comes after a tweet by President Trump on Sept. 20 calling on Opec to lower prices. He said on Twitter that “they would not be safe for very long without us, and yet they continue to push for a higher and higher oil price.”
Critchlow reckoned KSA still had spare capacity of about 2 million bpd. And KSA would get oil back as they go into winter as it had needed 800,000m bpd merely to generate electricity for the home market to meet heightened demand for air conditioning in the summer.
But there is uncertainty about what will come out of Algiers. For a start, the Iranians say they will not attend. That could be tricky in terms of an Opec communique at the end of the meeting as statements need unanimous support from member nations. And Iran has indicated it will veto any move that would affect Iran’s position, ie, one where other countries absorb its market share as sanctions bite.
Jason Gammel, energy analyst at London broker Jefferies, said: “The magnitude of the drop in Iranian exports is likely to be higher than any hit in demand as a result of problems linked to emerging market currencies, or trade wars. That’s why we expect oil prices to continue to strengthen. The Saudis and their partners will keep the market well supplied, and I think the issue is that the level of spare capacity in the system will be extremely low. Any threat or interruption will mean price spikes. Possibly by the end of the year demand will exceed supply; for now, the market remains in balance, but threats of supply disruption will bring volatility.”
Under the spotlight in Algiers is a production cuts accord forged by Opec and 11 other countries in 2016 which has been extended to the end of this year. The agreement helped reboot prices and obliterate inventory stockpiles that led to the crash in crude prices nearly three years ago. But how long will the agreement last? Algiers may kick that one into the long grass.
Thomson Reuters analysts Ehsan Ul-Haq and Tom Kenison told Arab News: “OPEC members would like to maintain cohesion within the group around supply ahead of Iran sanctions and declining Venezuela production, However, they are expected be in favor of maintaining stability in prices while doing so. On the other hand, they need to find a consensus around how their market share would be affected by a decision to pump more oil in the market. Any decision around production will likely be offset until the November meeting.”
Critchlow said that it is what KSA and Russia say and do that matters. “They speak for a fifth of the global oil market, producing a combined total of 22m bpd.” Together, they are the swing producers when it comes to crude production and supply.
Another factor about Algiers is that it is a meeting of the Joint Ministerial Monitoring Committee, which is not a policy-making forum. Big policy statements may have to wait for the main Opec summit in Vienna at the end of year. That said, there will be some very high-level delegations in Algiers, including the Saudi oil minister and his Russian counterpart.
A statement about the demand picture could emerge, especially as there are fears about the impact on the global economy from the US-China tariff war.
Looking to the future, Critchlow thought the Opec production cuts accord would carry on into 2019. “Oil priced between $70/bbl and $80/bbl is a sweet spot for Middle East producers. Its’s good for Saudi as it helps stop further drainage of their foreign reserves and moves the budget back toward balance. Do they want (the price) to go higher? I think that would cause a lot of political problems for them.”