Friday, December 12, 2008

pakistan trade gap

Pakistan trade gap has been widening ominously, consuming the reserves that
had been built as a consequence of several political and economic
policies and arrangements. The most recent and immediate cause has
been the rise in energy, food and commodity prices internationally,
on which there is no control or leverage of our poor governments.
Infact even the rich and powerful governments and countries have not
been able to do anything about it. The problem is structural
embedded in capitalism as an ideology. This can be an interesting
and long debate that would continue across the world governments,
corporate board rooms and academia.

Government has taken some short term measures like devaluation of currency and
controlling imports. In this article, we will discuss and propose
some measures to curb the trade gap, enhancing exports and curbing
imports. However our focus would be more on exports than imports,
the latter to be tackled in a separate section. On the import side,
the main items are oil, cooking oil and raw materials. Currently
there is no substitute to oil. However falling steps could be taken:
firstly, enhancing oil production from 70,000 barrels per day to a
100,000 bpd, which is feasible in the short run, provided certain
active measures are taken. Due to lack of space, we leave the
mechanics of this to a future date. CNG has made a lot of
contribution towards reducing oil consumption in the transport
sector. More can be done, especially in converting buses to CNG,
which would not only reduce pressure away from oil, but would
contribute to reduction in the cost of public transp

It would also have a salutary effect on urban environment as well.
Fuel rationing and pricing would have to be used for curtailing
petroleum imports. Our economy can not afford unlimited imports of
oil at 100 – 150$ per barrel. It is being hoped that the oil
price in the short run may stablise around 80$ per barrel. In the
long run, however, the days of cheap oil and other fossil resources
are gone. If the oil prices do not come to a reasonable level, fuel
rationing would have to be introduced. This is not something new.
In 1970’s Several European Countries introduced fuel
rationing. Space does not permit the mechanics of such rationing but
it is certainly feasible. Rationing can be made a little benign for
the well to do by exempting high octane from rationing, but pricing
at Rs. 150 –Rs. 200 . per litre. Fuel rationing would bring
and popularise energy conservation measures , which otherwise would
not be adopted. Pricing alone has not been successful in achieving

A lot of oil goes into firing cement kilns and electricity
generation.. Implementation of Thar coal mining project,
installation of mine – mouth coal based power generation, and
conversion of oil fired utility boilers to Thar coal (eventually)
would cause a major reduction in domestic oil demand.

A more than two decades now, the need and issue of planting palm oil
trees in the 700 kms long coasted line of Baluchistan and same Sindh
has been discussed and debated. Technical feasibility has been
demonstrated. Cheaper imports from Malaysia probably thwarted the
Palm tees plantation proposals.

It has come, indeed it is overdue, that the present Government takes
serious steps to bring self sufficiency in this sector in the next
five years. However, plantation in a 700 kms area is a tall order
although achievable. Malaysia could be provided incentives, to enter
into corporate plantation and installing local refineries, the
latter they are doing already.


Erstwhile EPB, and new TDAP has in the past taken many initiatives, and as in
the process of implementing many others, fresh thinking is required.

On enhancing exports, following strategies and actions are suggested.

Reform Textile Sector
Look into Africa & South America

Develop export Synergy with China.

Develop food processing & exports to Middle East.

Export surgical and sports goods.

Improve foreign buyers access through ICT.

Open border trade with Iran ,China and even India.

Capacity building of SME exports in light manufacturing.

Broaden the export product list, especially automobile components,
engineering and capital goods.

Improve workers remittance by launching high skill training &
certification programme..

Launch quality schemes & initiatives along with revamping ISO -9000
services and regime.

Launch Productivity Initiatives.

Promote rise in workers salary & welfare, improve EOBI..

Reduce cost of doing business by improving inputs supply especially
industrial and commercial space/land.

Conduct research in foreign markets; buy research .

Disseminate research resources such as UN’s trade data bank.

Bring in corporate farming.

introduce workers cooperative.

Doubling exports in five years is not a utopia. It is feasible, if the economy
grows, barring short term problems, at the rate of 7% p.a..

Iwould select a few of these proposals for elaboration, as the rest
may be well understood in its own right.


When I was a boy, every fifteen days, I used to visit a designated ration
shop, with a ration card in my hand and may be20or25 Rupees in my
hand.. The ration walla used to weigh and supply quite some atta and
sugar, which I had to hire a labourer to carry home. The ration walla
used to write the amount of atta and sugar supplied by him.. A widow
used to visit our house every month, with a few kg of sugar bound in
her dupatta, and used to sell it to my mother, perhaps at double the
price. Those were the days of food shortage and the green revolution
of fertilizers, pesticides and tractor s had not started yet, At that
time combined West and East Pakistan was --Today (West) Pakistan
alone is 160 millions, with its strategic depth Afghanistan of
-------- million who produce nothing but poppy. Why cannot we ask the
US the supply Afghan’s requirements of food, and why donot we
introduce the ration shop again. Their new version utility stores are
still there. Their number could be increased. However, the staff and
management are thoroughly corrupt and involved in black marketing.
But this is due to no ration card and recording. Now with the advent
of computerisation , NIC cards and NADRA, there can be a significant
control. Rich should not be issued the ration cards, and they should
buy from the open market. Similarly fuel rationing can be introduced.
Present Government has converted wheat subsidy into Benazir Cards,
whereby Rs.1000 would be transferred monthly to poor families. Many
people are skeptic of the feasibility of such a scheme. Passing the
subsidies, through ration shops/ utilities, may be more practical.
One can include one or two more items. Through rationing, Government
could also have a handle on smuggling and hoarding . Reportedly,
there are significant wheat losses at the post – harvesting
stage. Modern storage system should be introduced both at farm,
district and provincial level.. Modern storage system increases life
and hygiene of the stored crop. These storages can be made in 2 or 3
months. Private sector could be involved in building and renting out
such storage facilities ala IPPs in electric power sector. Countries
like Turkey,Iran and now India have introduced such facilities at a
large scale. This is a standard practice. Long term storage should be
built at sea ports and other efficient locations.

Outof total of $ 17 billion of exports in the year 2007,$ 10 billion of
export was to Europe and the US. Imports from South East Asia are $10
billion, from the Middle East another $10 billion .With Africa, all
of it, exports are $1000 million and imports are roughly the same.
Similarly to South America, exports and imports remain at under $300
million each.

Exports of processed food is only $258 million, vegetable/ horticulture
another $1600 million and animal products at$ 245 million o/w
fisheries products are about $180 M. This all adds upto $US
2000million . With modest effort this figure can be doubled in a few
years and in a time frame of five years, this can go upto 10 Billion
US dollars, bulk of it to the Middle East, consumes of Halal food,
where Made in Pakistan brand would be an advantage

Metal products including light engineering, cutlery, surgical goods are
less than 500 M$. Other light manufacturing is around 300 – 500
M$ range. There is a potential of guadrupling these exports in the
next five years to 5 Billion dollar level, and has potential of
replacing textile made ups, and became number one export sector. For
a period of 5 – 7 years, a target of 20 billion US dollars
should be made. How could this be achieved would be out lived at same
length in the other sections.

Much can be done to export regional trade which stands at 1700 Million
US$, a region with a population of ----. There are political problems
with India, but how about Iran.

Broadening and deepening democracy

Trade Gap;
In the year 2003, there was virtually no trade gap with exports of
11.160 billion US$ and imports of 12-.22 Billion US$. Five years
hence in the year 2007 size of the economy almost doubled from 75 B
US$ to 140 B US$. Exports did not double, and stagnated at 17 BUS$,
and imports increased by 2.5 times to 30.5 B US $, resulting in a
trade gap of 13 B US dollars. In this period economy grew at an
average rate of 6.5-.7% p.a. Agricultural sector grew but at an
unstable rate with highs of 5.0% to 6.5% and lows of 1.6% to 2.4% ,
giving an average of 4%. Manufacturing sectors growth has averaged to
7.42%, with a high of 14-15% to a low of 5.2%. Median figure for
inflation has been 8-9% p.a. Lending rates have increased from. 8 to
12%, while deposit rates increased for 2 to 4% - giving an enormous
spread of 7 present to the bankers, contributing to hefty
profitability to the latter, and bad debt for the depositors and
borrowers both, having negative effect on savings and investment. In
terms of physical output in the period 2003-07, sugar fertilizers and
chemicals stragnated at constant level. Textile yarn and cloth
increased by 50%. Cement and tractors output doubled. Motorcycles
production became 5 times, leaving cycles behind. therefore the
growth scenario has been rather satisfactory.

Going to South America & Africa

The two continents have a combined population of ------, and total
imports of -------, Pakistan textile exports should be promoted in
both the regions. Light engineering and other manufactured items have
a lot of potential in Africa. American items have a lot of potential
in Africa. American & European goods and capital projects are too
expensive and there are travelling issues of time and security etc.
Our SMEs from Gujranwala can do wonders in African countries, who
donot have a lot of money to spend on expensive plant and machinery.
We can be highly competetive in installation, commissioning and
training as well setting up of workshops, light engineering
factories. A wide variety of machinery and capital goods are produced
in Gujranwala belt. These are enterpreuners require support in
initial match – making, documentation and some engineering
management capacity. This is all feasible. It is not Utopia. It can
be done. Some body has to provide leadership and institutional
support. Engineering Development Board in cooperation with the TDAP
should launch a programme in this respect.

ICT in Export Promotion:-

Is is extremely difficult for a foreign buyer to approach Pakistani
exporters. They have to almost always resort to physical travelling.
In textiles, quite a few buyers community has become familiar with
the Pakistani producers,but the basket is too small. Mostly larger
companies are known. Rest steal buyers address from custom documents.
There is a thriving small business going on providing such services.
In the industrialised countries,Thomas Register kind of suppliers
directory were well known. Now Thomas Register has gone global,
instead of being an American companies register. It is now available
on the net. There are similar other business portals, linking buyers
with sellers. A recent success story is Alibaba, originally a
Singaporean software portal, but seems now to be bought by Chinese.
Ali Baba is playing a major role in boosting Chinese exports, through
linking foreign buyers with Chinese producers and exporters. A
similar portal is badly needed for Pakistani exporters. TDAP could
buy services from portals like Ali Baba. It should, however be noted
that it is not simply an IT or ICT issue. A major effort would be
required to prepare the database of Pakistani companies products and
profiles in major sectors of interest like textile, food engineering
, furniture etc. Perhaps more than 100 sectors, 5000 products and
10,000 companies. But it would certainly go a long way towards
boosting Pakistan expors.. Imagine a buyer sitting in Kenya or
Ethopia linked to our producer in Gujranwala and making a deal on
the net. Most such portals are only informational and transactions
are not conducted on it. TDAP may support establishment of B2B
transactional parts as well

Provisionof ICT based market Research Tools:-

While reportedly, export promotion bureau has been commissioning studies on
international markets of interest, more focussed initiative is in
order TDAP could lend a supporting hand in acquiring access to
international data bases. A useful online database an international
trade is a UN portal, which is available at reasonable prices. Few
people in our business circles know about it and still fewer would
know how to use it. TDAP would do well to familiarise itself with it
, providing and encouraging regional chamber of commerces to acquire
access rights to these databases. Workshops should be conducted to
train the marketing and research personnel of the industry in
efficient uses of such tools. There are new 200 countries, not just
20 or 30 which our companies do business with.

Quality Initiatives and Revamping of ISO-9000 Systems:

ISO 9000 had been a global initiative by world businesses to standardise
quality systems and introducing certification to ease national and
international trade. It is now more than two decades that it is in
vogue, and a lot of body of knowledge has been developed and linked
to it. Export Promotion Bureau, the predecessor of TDAP had invested
considerable resources in popularising ISO– 9000 and created
capacity in ISO -9000 services sectors. It even provided direct
finances to companies for acquiring ISO - 9000 system and its
certification. Such initiatives even continue todate under ADB
supported programme.

However, the impact of ISO – 9000 in either enhancing quality and
consequently enhancing exports has not been a significant one. This
is rather unfortunate world wide business and companies have been
able to improve quality through ISO – 9000 processes and the
momentum is carrying on and even expanding to include environment,
safety, corporate social responsibility.

As is normal in Pakistan, ISO – 9000 became perverted in Pakistan.
Many companies have acquired the ISO – 9000 labels, but very
few could improve their quality – Reason, the “DO number”
culture prevailed . Companies got interested in just buying the
label and an army of service providers including consultants,
trainers and certification companies started issuing false or near
false ISO – 9000 certification. The fact that certification
companies are based in UK/ Europe, USA, with their representatives in
Pakistan, where regulatory control is excercised.. They were however
interested in making money through issuing certification. And why
should they be interested in genuine efforts for improving our
quality systems, if we are not interested in it ourselves. The result
ISO – 9000 certification of Pakistan companies does not impress
any buyers. They are convinced, it is fake. Majority of ISO –
9000 manuals and documentations are locked in cupboards and are
treated as confidential documents. Every year or so the certification
companies are issuing certificates of compliance of renewal of

It should be remembered that ISO – 9000 system is a first step in
the long drawn and continental process of improving quality. It is
not the last. And if the first step is faulty, what can be expected
of the next.

TDAP should take stock of the situation. Fortunately PSQA has acquired
quite some infrastructure. Some legal and administrative steps should
be in itiated. Certificate companies should be warned and blacklisted
if they don not reform themselves.

PSQA should initiate additional initiatives to improve upon the situation.
TDAP/ PSQA combined should be able to deliver in this respect as
well. The new leadership at TDAP has an immediate task, if he wants
to go getting, before the sitting bureaucracy pollutes and absorb him
into complacency and contempt for new inititiatives.

Goneare the days when people used to buy their food from near by street
vendors selling new vegetable, meat, fruit and the milk man. This may
still be in vogue in Pakistan, but is fast changing due to the
induction and proliferation of retail chain stores/ departmental
stores like Metro/ Macro etc. The trend would further expand, broaden
and deepen. Elsewhere in the world it is established. Even street
vendors sell processed and certified food. In Pakistan a major issue
in the expansion of food processing and its export is the poor
hygiene and harsh hot climate. If any head way is to be made cool
chain from farm through transportation and processing has to be
established. Such facilities are lacking, where they are, output and
sales are limited and expensive eg., processed milk. Ironically most
milk vendor shops have installed rather innovative refrigeration
products made out of stainless steel, giving a very attractive look
and providing adequate hygiene. (16)

The need is to introduce, popularise and support such innovations at all
levels, small, medium and large enterprises. A particularly deficient
area is refrigerated transport especially of milk, meat etc.
Companies and technologies are there in Pakistan who can provide cost
effective solutions. TDAP has to provide leadership and initiatives
in bringing the users, producers and bankers together with some seed
money for development of models and prototype facilities that may
later be replicated. With the continuing sacriligious activities of .
European food exporting companies, and the credibility of Halal
nature of Pakistan food products, food exports can be quadrupled in
not such a distant future. Such initiatives could be indigineous or
joint ventures could be encouraged with multinationals. However, one
should not be mistaken about the food processing industries already
established in the middle eastern countries, especially Saudi Arabia.
Saudi JVs in Pakistan can be very successful integrating market and
food chains in the two countries. Pakistan Horticulture Board was
formed with some very competitive professionals, some 5 – 7
years ago. I do not know where it is now. It is not visible. Either
close it down or re energise it, if it is not already closed. The
problem in Pakistan is that initial enthusiasm is evaporated very
soon, if immediate successes and break through do not occur.
Sustained effort or a reasonable period is a normal requirement, if
one wants to achieve anything. One should think beyond one’s
tenure. New comers reap the bounty of the predecessor work. Seeders
and harvesters are never the same in the development process

& Human Development:

World Economic Forum has announced its Global competition indices/
rankings for the year 2008.

Pakistan is among bottom one third of the countries, ranking 92 among 131
countries. This is almost identical with HDI – Human
Development Ranking. The two rankings lead to a very straight forward
conclusion. The lower the human development, the lower the
competitiveness. Gone are the days when competitivenesss was based on
keeping people poor, and a devalued currency and cheap raw material.

There are 50 other countries who are in this game. There is no bottom.
Todays competitiveness lies in productivity, which comes out of
rising wages (chicken – egg relationship). The highly
competitive countries have high salaries, strong currencies and after
poor raw material base.Pakistan

GCI has been washed out at 92, as composes to ----- for India,
------- Malaysia, ------- China, ------- Sri Lanka, ------
Bangladesh. We are slightly better than Bangladesh, but lower even
with Sri Lanka. India is even more, while Malaysia and China may
always remain as unattainable. The bad news is that our
competitiveness is stagnating. It has even slipped down from 91 to 92
(higher number indicates lower achievement; America has a CGI rank of
1. One should not be that dependant.One point of difference can be a
margin of error of measurement. Afterall these ranking s are based on
opinion surveys rather than hard data.

My old friend who died recently, a consummate patriot and super
efficient bureaucrat, always faulted the GDP system for measuring the
welfare, output and stage of development. He did not like being
classed as low GDP country. Similarly, these days, my patriotism is
demanding fro me some fault finding with GCI and HDI, which bring a
bad name to our country and give a jolt to the happy elite.

Competetive Support Fund Pakistan , an organisation supported and funded by the
US AID, has further analysed the issue of Pakistan competitiveness
and has released its report.

Before I deliver further into sectoral aspects of competiveness, let me beat
the relevance of human development once again, Today’s
competitiveness and productivity drives from literate, trained and
healthy workers. Public spending on education and health must be
doubled as is being demanded for more than two decades by informed
people. The current level of social sector spending can only produce
efficient suicidal terrorist. How to do this is not very difficult.
Reduce unproductive expenditure on military & bureaucracy and
divert the same to social sector. For foreign resources in addition
to lender’s economy conditionalities you have to permit bombing
on your territory by the so called friendly forces.

An important and depressing finding of the WEF survey is s significant
fall in Business Competitive Index from ------- to -------. The
archaic seth culture, antiquated management, penny wise, pound
foolish expenditure syndrome, poor human resource practices are to
name the few. Therefore in addition to training our workforce, we
should train our entrepreneurs also, imparting management,
entrepreunal advice and training much to the chagrin of our often
cockey local mouthed seths and business men. The good news, and a
positive contributor to our GCI ranking, has been the improved
banking and financial sector, thanks to our erstwhile obedient Prime
Minister Shaukat Aziz. Perhaps the only laurel in his basket. We
should not forget to include Mr. Ishrat Hussain the former state bank
governor, who while criticising the elites in his laudable book
joined the elite or was naturally absorbed. Life is too short; learn
to benefit and enjoy as soon as you can.

Improving and Planning & Planning Commission:

Planning Commission has traditionally been a PC–1 processing house,
among other tasks such as sectoral planning. For a number of decades,
the PC-1 system has worked well, largely for physical projects. There
are four such proformas; PC-1 for project planning; PC-2 for funding
request for pre-planning work and studies & PC-3 for progress
monitoring and PC-4 for post-project evaluation. One comes to see
and hear more of PC-1. There is less talk of PC-3 and still less of
PC-4. Many involved and knowledgeable people have not even seen a
single PC-4 in their life time.

There is a need for improving upon these planning proformas. While PC-1,
may still continue to serve well for physical projects, having fixed
shapes, inputs and outputs. It is highly unsatisfactory for programme
planning especially in the social sector. PC-1, there is to be
augmented with LFA – logical frame work analysis, widely
understood in the international donor circles and fairly developed
methodologies and formats. The need in this area perhaps has not been
felt, because most programme planning is done by foreign consultants
who are already aware of these techniques and activities these
systems abundantly

Local know-how should be developed for past-project evaluation. That is the
assessment of achievements of project or program goals, targets,
impact, outreach, efficiency, sustainability or replicability and the
lesson learned. PC-4 was reportedly designed for this. Currently,
foreign consultants undertake such mission, wherever local “also”
play some role in the appraisal mission teams. But how about local
programmes and initiatives. Capacity should be built in this area
training local consultants, 3rd party experts, programme
mangers, NGOs etc.

Improving the effective and efficiency in project and programme planning,
monitoring and post fact evaluation would go a long way in speeding
up development activity.

the business leaders:

There are thousands of experienced professionals and businessmen in the
private sector who can help develop policies and assist in their
implementation as volunteers. These successful professionals and
businessmen would not demand any remuneration. But recognition.
Currently only very limited number of such people have been inducted
in the governmental system. In order to encourage such participation
of individuals and experts in assisting the governments development
work and schemes, civil awards system should be liberally extended to
include such experts who may have made useful contributions currently
only government , military persons, artists and social workers are
awarded Tamghas, and Hilals. I have seen government functionaries
with rather modest contributions, getting away with Tamg

Reform SMEDA or close it down:-

SMEDA had been formed by the Newaz Sharif government in 19??, as the name
implies to support the development of SMEs in all sectors of the
economy. Mr. Sharif and everybody had a lot of hope from this new
organisation, which had been headquartered in Lahore. Mr. Nawaz
Sharif reportedly heard even some junior executives of SMEDA to
elecit useful ideas for promoting industrial development.
Unfortunately not much output has come out of this organisation. A
Performance review of SMEDA should be undertaken with a view to
either close down this organisation and divert the resources to
better use, or reorient it to be able to perform its designated
functions. All we see is a website on which some data feasibility
studies and a few soft wares are listed for free down load.

Our SMEs are run by people of modest means and education. They require
down-to-earth practical guidance, institutional facilitation, export
market linkage assistance, access to finance etc. They do not need
long speeches and seminars in five star hotels. Instead of opening
their offices in bazars ,industry clusters and adopting a lifestyle
that could foster communication with their target group, they have
chosen to sit in aloof air conditioned offices, where access of
ordinary folks is hardly encouraged. The writer himself a former
technocrat had difficulty going past the security operators of their
office(s), much before the current problem of terrorism. They are in
need of complete transformation. The should be asked to vacate their
posh offices, and rent modest facilities among the target group,
without air conditioning and fancy furniture. English should be
banned from these organisations and they should be asked to speak in
regional or national language. They should ride motor bikes and wear
Shalwar Qameez. Acquire skills, be ready to sit together with SME
people, develop comraderies with them and solve their problems of
accounting, finance, materials technology etc. With the kind of
prescriptions that I have made, the sons of elite and near elite
would leave the organisation and vacate the place for induction of
people from poor and lower middle class who would have an
understanding and cultural affinity with their target group. As a
model, study the extension officers of the agricultural department.
The way they work, live and move about, although that is another
extreme. As always, mid path is always better.

Engineering Development Board
It is another white elephant and drain on national exchequer. As the
word goes by, EDP was established by a powerful technocrat for
keeping multiple options for his-------, should things get difficult
at several positions that he wanted to cling with at the same time.
Having been retired recently due to government change, at a very
advanced age but declared very low in the official records. If he
does not manage to come back, EDB would eventually be phased out.
They have literally no output or usefulness. Whatever little they are
doing may be done by expert consulting groups or external
consultants. If government somehow does not want to cause
unemployment, it should either merge this board undertake reform and
restructuring with a worth while programme and output. I am afraid
that same powerful cronies may discourage this to be a good parking
place to engage in ego busting and draw perks and give life to it for
another five years. This life would go on.

It is time for putting in life into this dead organisation – which
has reduced itself to collecting rent of the PIDC building and
providing a safe place for surplus staff of the privatised public

PiDC had done wonderful job in industrialising Pakistan in the Ayub era
identifying, launching and developing most of the important public
enterprises in almost all sectors of the economy. It was considerably
weakend with the advent of sectoral corporation like PACO, PERAC etc.
PIDC had the scale of economies to accumulate the pool of expertise.
A lot of policy advice came from PIDC. As said earlier, corporations
and public sector DFIs started playing major role in advice and
development of government policies. Now all these being gone, there
is a need for a dedicated and central organisation for launching a
3rd or 4th round of industrial revolution. If
you will after Ayub, ZAB and Zia. I am not including Musharaf as his
contribution lies with mobiles, media, banking and stock market. PIDC
should be energised, with the merger of small and failed
organisations like SMEDA, EDB, ----, and inducting fresh blood, a
private sector board and professional cadre and leadership. After
1980s, no new industrial technology (except mobiles) has been
introduced in Pakistan.

We have been eating the fruits of the eartier initiatives. There are no
fruits, as the trees are no more or are too old. A lot of saplings
ought to be planted. Our Chinese friends are reportedly eager to help
as they did in 1970s with HMC, HFF, --- etc There are additional
reasons for Chinese involvement which would be elaborated elsewhere
in these lines. I would only hint at “China Plus One”
policy of western nations in making DFIs in China. The y want to have
an alternative to China. It can be Pakistan and with the assistance
of China itself.

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