The Pakistan Business Council (PBC) has proposed a five-year exports charter and import substitution plan to the Commerce Ministry. The plan includes a moratorium on signing new trade agreements, according to well-informed sources.
On April 8, 2024, Commerce Minister Jam Kamal visited the office of the Pakistan Business Council to discuss the country’s economic issues, focusing on obstacles in export growth and the substitution of massive imports.
The PBC shared its proposals with the Commerce Minister in writing, stating that without a long-term export policy underpinned by a well-articulated industrial policy that brings all stakeholders together under the leadership of the Prime Minister, Pakistan’s exports are unlikely to grow and diversify sustainably.
Pakistan’s current exports are limited to a few commodities (textiles, rice, leather) and a few markets (the US, EU & the UK). The country needs to reindustrialize to increase its exports. Without a strong outward-looking manufacturing base, Pakistan will continue to be stuck in the manufacture and export of low-end, non-sophisticated products.
The key building blocks for robust export growth include:
A 5-year National Charter for Exports: Owned and monitored by the Prime Minister to give exports consistent priority. This policy should shift the mindset of the bureaucracy from “control” to “empowerment” and facilitate planning and investment.
Integration of exports into an industrial policy: This policy needs to promote manufacturing, including sensible import substitution, and address all elements of manufacturing, including exports and import substitution.
Accountability of export incentives: Export incentives funded by taxpayers require proper accountability, with performance measured against medium to long-term objectives.
Revision of the Export Facilitation Scheme (EFS): The EFS needs to be revised to encourage integration into global supply chains, allowing multiple domestic firms to work together as part of exporting firms’ supply chains.
Energy at competitive rates for all export sectors: All exports should have access to energy at globally competitive rates to broaden the export basket and render energy costs globally competitive.
Maintain a competitive Pak rupee exchange rate: Pakistani exporters have lost market share due to an artificially higher value of the currency. The Pak Rupee needs to maintain a real exchange parity of about 100%.
Investment to promote export growth: The government should invest substantially from the Export Development Fund (EDF) for non-core and new markets to diversify both products and destinations.
Incentivize export of services: Export of services should be incentivized to encourage full remittance of sale proceeds.
Integrate Pakistan into regional value chains: Pakistan needs to trade more with its regional neighbours to take advantage of similar cultures and reduce transit time and freight costs.
Moratorium on signing new trade agreements: Trade agreements should be driven by economic considerations, with a properly developed template before initiation.
Import substitution: An industrial policy should promote import substitution without depriving Pakistani exporters and consumers of quality products.
Remove duties on industrial inputs: Tariffs on raw materials and intermediate items not available in Pakistan should be accelerated to promote domestic manufacturing.
Provide reliable energy at competitive prices: Industry needs electricity at competitive prices to compete with imports, especially energy-reliant sectors like petrochemicals.
Encourage “Greenfield” investment: The definition of new investment should be changed back to “Greenfield” to allow newer, more efficient firms to enter existing markets.
Realistic exchange rate of the Rupee: The Pak Rupee should maintain a Real Effective Exchange Rate close to 100%.
Incentivize investments in plant and machinery: Duty and sales tax should be exempted on plant and machinery for new and BMR investments.
Crackdown on under-invoicing in imports: Under-invoicing in imports should be curbed through better monitoring and implementation of electronic data interchange (EDI) systems.
Curbs on Afghan Transit Trade & Smuggling: Leakages in the Afghan Transit Trade (ATT) need to be curbed through better monitoring and cooperation between provincial governments and Customs officials.
Walk the talk on SEZs & industrial parks: Special Economic Zones & industrial parks should be operated on a “plug & play” mode to ensure industrialization.
Enforce national standards and expiry dates: The government needs to ensure compliance with global standards and rules and impose punitive fines for violations.
Protect IPR: Violations of Intellectual Property (IP) should be viewed seriously by all stakeholders, including the government.
Incentivize indigenization of currently imported inputs: Incentives should be provided for the indigenization of imported materials to reduce reliance on imports.
Effective and timely enforcement of anti-dumping duties: The review process for anti-dumping duties should be improved to ensure timely implementation and overcome legal challenges.
