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Exports — Déjà vu

A while ago, definitely been more than a year (albeit I’m too lazy to try to trace out that particular article), I wrote on the nature of our imports and exports – which, rather discouraging analysis, even back then, strengthened my age-old belief that we need to move towards planned protectionism and industrialization.

Continuing with my reading, this week I came across a publication, Pakistan’s Trade Data (July’19- June’20) issued by The Pakistan Business Council (Source: Pakistan Bureau of Statistics), and it was Deja Vu.

Unhappily, whilst the good news is that the trade deficit on goods, services, and primary income (the Deficit) for the period July to June 2020 is down to US$ 28 billion, compared with US$ 38 billion in 2019, the problem is that there in not much else to cheer about.

One clarification: there are some differences in amounts between those in the above publication and those posted on the State Bank of Pakistan website (my go to source for trade figures) – without going into why, to pacify the jokers who are quick to discredit any write-up because the figures don’t match, the differences, whilst not immaterial, are irrelevant to the conclusion.

And the conclusion is not merry. If workers’ remittances, contrary to all expectations, had not increased to US$ 23.1 billion during this year, compared with US $ 21.7 last year, we would have been thoroughly fished. But that has been the case now for many years: workers’ remittance has been our knight in shining armour for almost two decades. The big worry is that, by and large, we are clueless as to why these remittances go up and down – which, unfortunately, suggests the absence of any policy action to ensure the continuity, let alone growth, of this lifeline of the economy.

The primary reason for the US$ 10 billion fall in the Deficit was the decline in petroleum group imports by US$ 4 billion from last year, another factor largely uncontrollable. Actually, if you consider that total exports fell by around 7% during the year, then the entire decrease in the Deficit can logically only be because of lower imports. But I will take it! For the record, the second largest drop in imports was in the Transport Group, of about US$ 1.5 billion – because we imported lesser cars and buses and the like; again, nothing to do with policy.

At this point, pundits will argue that exchange rate is policy too. Well, yes, but my guess is that those who import within the Transport Group are hardly deterred by price.

Definitely, on the face of it at least, Machinery Group imports by and large were stagnant – a good indicator of capital investment? Well, generally, yes. But when you find out that we imported mobile phones of a higher value than power generating machinery, the bubble does burst. Possibly, imports of electrical apparatus may even be the second largest component of Machinery Imports – albeit, I have not made the effort to confirm that hypothesis. Common sense strengthens the view that we continue to run up our import bill because of consumption of finished goods – a luxury!

We imported Palm Oil worth US$ 1.8 billion; hopefully, the olive plantation initiative starts giving dividends soon and we can substitute these imports with olive oil, by hook or by crook – even if the Government needs to nudge tastes. The more upsetting statistic is that imports of Pulses went up to US$ 614 million this year, and spices up to US$ 173 million. Dear Readers, we drank tea worth US$ 532 million this year. Seriously, we are all having a party on borrowed money.

I have for a long while maintained that for a developing country only three indicators matter: net trade, external borrowing, and capital investment – and we continue to do poorly in all three. Increasing or decreasing interest rates, floating the rupee, credit incentives, increase in taxes, and all other fiscal initiatives, in my humble opinion, will all fall short. Without direct State intervention in controlling net trade and planning capital investment, we are not getting out of this economic mess ever. We may have periods of uptick, but more likely than not those will be followed by crises.

In so many years, why could we not license a domestic investor to set up manufacturing in Pakistan, and thereafter have banned all, or put extremely excessive tariffs on, imports of mobile phones?

While everyone made a mockery of the national airline, and there was a competition over who ridiculed it more, we paid more than 2 billion dollars to foreign airlines in passenger freight and personal travel; last year it was US$ 3 billion. What did you think – that Emirates gets paid in Rupees, and that dollars grow on trees?

Venting on imports alone took a lot of the limited space that the publisher allows. In summary the picture is not pretty when it comes to exports either. If you add the textile group and the food group, they combined are almost 80% of all exports – meaning we are still an agriculture economy. But nothing wrong with that: except that agriculture is what we are not focusing on at all! Perhaps the reason we have a mess in sugar and flour while our imports of pulses, spices and tea continue to rise. Something is crazy in Denmark.

Looking at textile exports, perhaps our value added goods aren’t even 50% of our exports; as for the rest, we generally trade in semi finished or raw produce. Definitely, it is a proud moment that the FIFA world cup uses Sialkot made footballs, but be aware that the total exports of footballs this year was US$ 144 million – nope, not billion!

Frankly, we can be happy about the smaller things in life and keep arguing about the Emperor’s new clothes, or we can get serious.

I have a simple question: we listened to the IMF and the World Bank and the WTO and the Economists, and adopted free market policies as best as we could – reduced tariffs, floated the rupee, and what not – for the last two decades, so, are we better off?

If the answer is still yes – so be it!

Myself, only looking at imports and yet to get to exports, Deja Vu!

BAKHTIYAR KAZMI, "Exports — Déjà vu," Business recorder. 2020-08-08.
Keywords: Economics , Economic growth , Pakistan website , State Bank , Palm oil , Capital investment , Economic mess , Foreign airlines , Denmark , FIFA , IMF , WTO

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