ISLAMABAD, 1 August 2005 — Pakistan has unveiled a new foreign trade strategy to push its exports to a historic high by reducing costs, and larger imports to feed global and domestic markets. Humayun Akhtar, minister for commerce, announcing the new foreign trade strategy, also identified the key areas, concessions and incentives to boost foreign trade, as the economy stays on a high growth track — 8.4 percent in just ended fiscal 2005, and moving to 9.0 percent or more over the next two years. It will enlarge trade in the region, and with Pakistan’s traditional and new trading partners abroad. It will also encourage inflow of FDI to $3.5 to $4.0 billion -much higher than $1.5 billion, recorded in 2005.
Exports, in 2006, are targeted at $17.0 billion — up 18 percent from the actual $14.4 billion in 2005, against a $13.7 billion target. Imports are projected at $21.79 billion. These are up 32.27 percent from $ 20.623 billion in 2005, and $15.591 billion in 2004.
Imports 2005 increased because of machinery was up 37.86 percent, food 28.68 percent, petroleum products 20.41, farm chemicals 28.09 percent, and metals 74.85 percent. A $4.79 billion trade gap is projected for 2006, lower than $6.2 billion in 2005. But, business and industry already feel it may be difficult to narrow down the deficit, for three reasons: international oil price spiral may not stop, still larger imports of machinery are needed to upgrade and expand capacity, and still more imported industrial inputs to feed the growing domestic demand and to create larger exportable surpluses.
Pakistan can take care of such a trade deficit and can fund it with the its current official forex reserves of $13 billion, a projected inflow of more than $4.0 billion as home remittances from overseas Pakistanis working in the Gulf, Saudi Arabia and North America, and the likely FDI inflow of $3.5 to 4.0 billion. “We can fund the projected imports, but exports will have to be pushed faster,” says Dr. Ishrat Hussain, governor State Bank of Pakistan, the central bank. How can exports get a boost? Islamabad hopes to seek, and enlarge, access to major global markets, including United States, Europe, Japan, Canada and the Far East. It will strengthen its trade diplomacy and promotion infrastructure. Professional skills will be upgraded through intensive training. Step for export facilitation and marketing have been undertaken.
Export competitiveness will be enhanced by slashing the cost of doing business. Export of a range of products, including gems, jewelry, garments, pharmaceuticals, granite, marble and products, footwear, poultry, meat, horticulture and farm products is being raised. Professional services will also be exported. The national budget for the current fiscal 2006 provides several incentives, tax breaks and reduction or zero-rating of customs duties in order to help reduce the cost of imported and domestically produced industrial inputs. Investment in industry and a number of corporate businesses will get a boost as a result of a significant reduction of industrial, production, business, corporate and personal taxes. This strategy is geared to reduce cost of production, create large exportable surpluses, upgrade quality of products, and bring products in line with the modern consumer tastes.
Professional services will be exported in larger numbers. These include the expertise developed by government’s National Database & Registration Authority (Nadra) for data collection, national identity cards, machine readable passports, and other online data services. Other expertise cover fields such as medical, legal, banking, financial sector operations, accounting, construction, engineering and architecture, software and IT skills.
Pakistan is seeking markets in various regions, including Central Asia, Africa and Latin America. Pakistan-US Bilateral Investment Treaty (BIT),being negotiated, focuses on attracting buyer-driven investment. Akhtar said, “US is the largest and most important export destination for Pakistan, after the European Union, with textiles as the main export.” Pakistani exports to US rose from $2.3 billion in 2002 to $2.9 billion in 2004. Textiles alone were 88 percent of all exports.
EU’s 25 countries are a very important market for Pakistan. Akhtar said, “eighty percent of our exports now are excluded from EU Generalized Scheme of Preferences (GSP). But, Pakistan will be included in EU’s new GSP Scheme, effective Jan. 1, 2006. That will, again, allow all Pakistani exports, including textiles, and clothing to enter EU markets at concessional tariff rates.” On the trade deficit Akhtar says, “our record imports in 2005 comprised investment goods, not consumer goods. A 38 percent increase in oil import bill-rising from $3.2 billion in 2004 to $3.8 billion in 2005 — and a 32 percent increase in import of machinery and industrial raw materials caused the trade deficit.” He said, irrespective of the deficit foreign trade, in future, too, will be kept free through a constant trade facilitation, deregulation and tariff cuts. For example, machinery for marble and granite, poultry and meat, gems & jewelry , horticulture, pharmaceuticals, and several other industries, the customs duty and sales tax have been zero-rated. Import of a large variety of used machinery like weighing machines, weights, electric-powered fork-lift trucks, rolls for rolling mills, calculating machines, data recorders, postage machines, ticket-issuing machines, cash registers, office machines, automatic banknote dispensers, drawing instruments and mechano therapy appliances have also been allowed. Akhtar, said, the key focus of the Trade Policy-2006 will be on Uzbekistan, Kazakhstan, Kyrgyzstan, Brazil, Chile, Argentine, Mexico, South Africa, Nigeria, Morocco, Kenya, and Senegal to serve as the base for West Africa.
Pakistan is encouraged by removal of textile quotas under WTO. Textiles, its biggest export, have recorded a good growth. Export of other items like engineering products, also rose. Overseas Pakistanis, specially those working in the Gulf and Middle east have been demanding to be allowed to import used cars. The demand has been accepted. They will be allowed car imports under the gift, personal baggage and transfer of residence rules.
