ISLAMABAD, 22 December 2003 — Import of machinery and capital goods is rising sharply as the economy picks up and industry upgrades to face the challenges of WTO.

Capital goods were imported from UK, US, Japan, Germany, and China besides other sources. These imports in the first five months — July-November — of the current fiscal 2004 have risen 18 percent, compared to the same period of 2003, according to Ministry of Commerce (MoC) and the Federal Board of Statistics. It offers a significant opportunity for companies and countries exporting machinery and industrial raw materials to Pakistan.

These rising imports come on the back of larger overall imports, which are being increasingly funded by domestic resources — chiefly the growing export earnings and partly from home remittances sent by overseas Pakistanis.

Import of capital goods during the five months was $1.265 billion, out of overall imports of $5.282 billion. The imports ranged from autos, to power generators, construction, mining, and electrical machinery, aircraft, boats and ships. As a result of a reduction in customs tariffs, and a long waiting period for customers of the domestically assembled autos, car imports rose sharply to 6,000 over the last 10 months. Pakistan reduced import duty on autos, in July last, especially in view of the EU demand to open its market for autos, as Europe had provided Islamabad with an enlarged, duty-free access to certain categories of textiles. Import of industrial raw materials also rose, confirming larger production activity and growing exports. These included plastics, pharmaceuticals, synthetic fiber, artificial silk yarn, rubber, steel, iron, aluminum wrought, iron & steel scrap, jute, cork, paper & paperboard, chemicals, fertilizers, insecticides, and edible oils. Petroleum, petroleum products, and food grains imports, however, declined. But, petroleum crude surged 14.5 percent. Import of data equipment, farm and textiles machinery, somewhat declined.

After two years of extensive upgrading at a cost of $4 billion textile industry seems to have become abreast to face WTO challenges. But considerable requirements can again, be generated with establishment of new units.

Overall imports during five months rose to $5.282 billion, from the like period of last year. The projection of imports for full 2004 is $12.8 billion.

Exports totaled $4.834 billion, a growth of 11.53 percent during the period, compared to the like five months of 2003. The export target for entire 2004 is $12.1 billion.

The trade gap during the period widened to 3.67 percent to $448.65 million. The trade gap projection for the whole of 2004 is $700 million — that is half of what it was in 2003.

Pakistan will have to watch out, also because its current account surplus declined to $1.422 billion over July- October, the first four months of fiscal 2004. It was $1.597 billion during the like period of 2003, according to the State Bank of Pakistan (SBP). SPB attributes it chiefly to a reduction in home remittances sent by Pakistanis working in the Gulf, UK and US, to $1.235 billion in the first four months of fiscal 2004, down from $1.431 billion in the same period of 2003. The overall current transfers, inclusive of home remittances, fell to $2.036 billion during the period, compared to $2.234 billion in 2003.

While monthly exports are rising, in November alone recorded a decline to $860 million, down 14.60 percent compared to October 2003.

At the same time, the high cost of cotton and its reduced availability also hurt some textile exports.

Pakistan had set a cotton production target of 10.55 million bales this year. But, the actual crop is now estimated at around 10 million bales — even short of 10.20 million bales of last year. Some businessmen claim the crop will not go beyond 9.5 million bales because of intensive pest attacks. Cotton consumption is projected at 11.50 million bales, though it can vary.

In order to pay for its growing imports — and expand the economy — Pakistan is trying to increase its exports through diversification to various markets and increasing the number, variety, and value-addition, of its products. It has concluded numerous bilateral and regional trade and economic cooperation agreements to achieve this objective and to face the competition, expected under the WTO regime.