Trade policy

It has been a week of new economic policies. Following on from the announcement of the auto policy, the federal government on Tuesday announced its new trade policy. The Strategic Trade Policy Framework has made headlines by setting an export target of $35 billion by 2018. Up from the current $30 billion, the target may not be that high but given the various fundamental pressures faced by the Pakistani economy, including a crippling energy crisis and the security situation, the target is an ambitious one. Around Rs18 billion in funds have been earmarked for the implementation of the trade framework in the next three years. The government has thus set itself four challenges: boosting exports, improving competitiveness, increasing efficiency and increasing regional trade. In order to improve efficiency, the government will provide support of Rs1 million a year per company to upgrade technology in various sectors. A shift in focus will lead the government to focus on promoting regional trade with Afghanistan, Iran, China and other Central Asian countries. Progress on trade with India is expected to be slower due to strained relations. Why it has taken Pakistan so long to prioritise regional trade is anyone’s guess but the strategy is a promising one. While announcing the policy, the commerce minister noted that the ministry was limited in what incentives it could offer. These limitations are clear once one works through the fine print of the trade policy. The Ministry of Commerce has promised to remove the procedural and budgetary bottlenecks that marred the last two medium-term frameworks. But the use of fancy words such as creating an ‘efficiency-driven’ or ‘innovation-driven’ economy mean very little in themselves. Major export-oriented sectors, such as fans, home appliances, cutlery, leather, pharmaceutical, surgical and sports goods have been hampered by the use of inefficient technologies.

Government support in upgrading existing technologies is welcome, but this can hardly be termed as ‘innovation’. The government has also correctly noted that most export-oriented manufacturing in Pakistan is done for foreign brands. Identifying the need to develop local brands is a positive step, but it is a difficult journey to take for a business located in a developing country such as Pakistan. Support has also been offered to anyone looking to import new machinery for processing food-products and agricultural products for export. Having faced major challenges due to restricted market access in European countries due to non-compliance with a number of conventions related to environment, human rights and labour, the Ministry of Commerce has promised to disseminate information on compliance with these conventions. Merely disseminating information is not enough, but any steps to enforce these are welcome ones. The rhetoric of improving regional trade is good, but work is needed to build the infrastructure that can improve regional trade. The CPEC is one key step in this direction, and agreements with Afghanistan, Iran and Tajikistan are already in the pipeline. It is good to hear the government make public specific strategies for improving exports for specific sectors. It suggests there is some serious thinking going on. However, the announcement of the trade policy is a reminder that Pakistan can do so much more.