AS Pakistan’s trade deficit surged to an alarming level of 56% in October, the policy shifts announced on Monday are expected to provide immediate relief to exporters while laying the groundwork for a more competitive and innovation-driven export sector.
In a major policy development aimed at boosting Pakistan’s export competitiveness, the government decided to withdraw 0.25 per cent Export Development Surcharge (EDS) with an immediate effect besides reducing prescribed gas prices, approving over Rs507 billion in development projects and strengthening oversight of key state-owned enterprises (SOEs).
The decisions taken in this regard at a meeting chaired by Prime Minister Shehbaz Sharif signal commitment of the government on economic revival, institutional reform and public welfare. Low productivity of firms, weak export competitiveness, lack of value addition and innovation, complex and inefficient incentive mechanism, limited export destinations and low R&D at the firm level are the key causes for stagnant exports. Significantly, the PM also directed for formation of an interim steering committee to be led by private-sector representatives, which will oversee the utilization of the Rs52 billion currently available in the Export Development Fund (EDF). The committee has been mandated to ensure that funds are spent strictly on R&D, skill development and competitiveness-enhancing interventions rather than infrastructure-related projects. This shows determination of the government to promote innovation and it is now up to the export sector to utilize the money on genuine research and development for their own benefit and that of the country. Other factors responsible for a stagnant export sector are lack of focus on value addition, exchange rate volatility, over-regulation which discourages the businessmen and exporters to expand their activities, institutional barriers and massive decline in cotton production. It is because of all this that we are exporting more products than Bangladesh but export values of Bangladesh are higher than Pakistan. It is also good that the government has demonstrated willingness to examine the issue of taxation on the export-oriented sector, which is considered to be distortionary and uncompetitive. It may be pointed out that both the internal and external environments are conducive and exports can be increased meaningfully through hard work and dedication.
