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Back and forth

Governance standards of the outgoing government are still under discussion, perhaps also vital to guide the voters in the coming general elections. While analysing their policies one notices some good decisions in promoting trade partnerships. They gave two strategic policy framework orders – 2009-2012 and 2012-2015 – aiming at enhancing exports primarily through boosting regional trade. The implementation process of these decisions, however, was dismal and eventually faltered the path to export-led growth through regional integration.

Improving trade relations with India was one such policy initiative – rightfully taken to augment our deplorably low export potential and strengthen the impoverished economy. Three years of successful bilateral engagement and consultations led to a ‘cooling down’ of relations; opening the doors of foreign investment, liberalisation of visa regimes, improved customs cooperation and greatly improved infrastructure.

When the gains were just around the corner, the federal government chose to delay the MFN implementation against a deadline of December 2012. The reasons were thought to be possible political backlash and concerns of some segments of the economy. Delay at such a crucial juncture, as explained by Dr Maleeha Lodhi, was due to “lack of adequate preparation by the government on MFN” for taking the stakeholders on board.

All the good work collapsed like a house of cards due to subsequent developments. The visa liberalisation agreement was suspended by India; Pakistani hockey players and artists were sent home embarrassed, and Indian Prime Minister Manmohan Singh declared on January 19 that it would no longer be “business as usual” with Pakistan.

The strategic policy objective, which aimed at increasing bilateral trade from a mere $2 billion to a reasonable $6-10 billion was an opportunity lost, without conferring any substantial boost to the export-led growth of Pakistan.

Trade relations with the European Union (EU) are a similar story. Although the EU is its largest trading partner, accounting for 25 percent of Pakistan’s total exports, it unilaterally imposed a ban on fish imports from Pakistan for six years (2007-2013) to the blatant injury of this thriving export industry.

The EU did not welcome the prospect of signing a Free Trade Agreement with Pakistan due to the latter’s protectionist policies. The best the EU could afford was offering certain duty-free trade concessions on conditional basis, under the Generalised System of Preferences (GSP) to the vulnerable export sector of Pakistan. It is this conditionality that made trading relations uneven and placed our developing economy at a razor’s edge.

For example goods will have duty-free access to the 27 member EU block, on GSP+ basis, if Pakistan is able to implement 27 international conventions pertaining to human rights, labour rights, environment and good governance. The previous government not only delayed submitting a timely application to the European Commission by March 15, 2013 to avail the duty advantage beginning from January 2014, it has also not ratified all relevant conventions so far. Hence another opportunity of trade and consequently economic advantage seems to be in the doldrums due to poor implementation and follow-up.

Building trade relations with Iran, particularly with reference to the Iran-Pakistan (IP) pipeline was another feasible policy decision poorly managed. The project was delayed for three years after being signed in 2010, while during this time the energy crisis went from bad to worse.

Completion of the pipeline within tenure could have led to utilisation of 4000MW of power generation capacity, adequate enough to kick-start the stagnant wheel of industry and save billions annually by replacement of imported furnace oil with Iranian gas.

Indeed it was an opportunity missed to raise Pakistan’s share of trade with Iran hovering at a negligible one percent, as compared to other regional players like China, Turkey and India with share of trade to an enviable 20 percent and seven percent each respectively.

Afghanistan is the only regional trade partner where balance of trade is in favour of Pakistan. However, advantage, if any, was minimised by the damage caused to the economy due to the menace of illegal trade. It seems that efforts to regulate transit trade by signing of the Afghanistan-Pakistan Transit Trade Agreement (APTTA) in December 2009 could not effectively deter the malpractices including smuggling.

An inquiry conducted by the FBR last July into the misuse of transit trade facility by the International Assistance Security Force (Isaf) revealed that 28,900 commercial Afghan transit trade containers were missing, causing an estimated loss of Rs55 billion in revenue to the government.

Poor implementation thus remained the major cause of poor results of good policies, delayed or postponed decisions. Time wasted in never-materialising prolonged consultations incurred heavy economic cost and a grave fiscal burden on the economy of this poor country. The above instances amply illustrate the point. Dr Ishrat Hussain, the former governor of State Bank, diagnosed this problem as the “policy paralysis” of Pakistan, a malady which is believed to have compromised many lofty national objectives over the years.

It is imperative that the next elected government appreciate this problem right in the beginning and ensure a comprehensive implementation mechanism and instead of abandoning good projects in the pipeline, implement them in a timely manner and in the best interest of Pakistan.

The writer holds an LLM degree in international economic law from The University of Warwick. Email: beelam_ramzan@yahoo.com

Beelam Ramzan, "Back and forth," The News. 2013-04-09.