Import policy favours consumers at domestic manufacturers’ expense

LAHORE: The tendency to keep supplies of all products and commodities stable through liberal imports has played havoc with both manufacturing and the agriculture sector. This public appeasing policy has kept check on prices, but discouraged domestic production.

When the demand for car increased, the government did not allow the auto sector to increase capacities, but instead allowed import of used cars at low duties. When there is shortage of tomatoes in the country, the vacuum is filled by duty free imports from India.

The farmers lose the incentive to earn more in shortages to compensate for the losses that they suffer during bumper crops. The consumers are happy, but the industrialists and farmers stop planning for future. We see imported televisions, refrigerators, split air conditioners alongside the locally produced brands.

Why is it so common in Pakistan and not in India or Bangladesh to see all foreign juices, beverages, processed milk in the markets alongside similar Pakistani products? Why over 60 percent of textiles in India and China are marketed locally against only 15 percent in Pakistan?

This is all because of supply side approach of our planners. No one would starve if there is shortage of vegetables in the country. The farmers would be incentivised by this shortage and would strive for better harvest next time.

They will get better rates as well. They would not have to compete with heavily subsidised Indian vegetables. Agricultural growth would go into top gear. Pakistani agriculture has suffered badly ever since Shaukat Aziz liberalised the agricultural commodity trade with India.  If the used car import is made as tough as in India, the local manufacturers would go for expansion. New entrants would eye the Pakistani market. The localisation of parts would speed up. Millions of jobs would be created.

At the same time, the consumers would settle for models available in the country. Pakistan cannot afford to import luxury cars and ban on their imports would bring austerity on large scale.

Tractor industry was allowed to develop through facilitation. Today Pakistan manufactures 90 percent of tractor parts domestically. This year, one of the local tractor manufacturers succeeded in obtaining foreign order for 16,000 tractors. All indications are that this export would increase with time. In the same way, the motorcycle industry in Pakistan has come of age. Today, we are producing two million bikes per year against only 100,000 at the start of century.

The rates of 50cc motorcycles are lower than they were in 2000. All this was possible because of economies of scale. The import of tractors and bikes in Pakistan is nominal, while that of passenger cars is phenomenal when seen in the context of car market size in Pakistan.

No government in the world provides incentive on imports at the cost of its manufacturing sector. The federal government should immediately provide suitable protection against imports of items produced in Pakistan.

Foreign clothing in Pakistan can be found in abundance because the import regime coupled with inability of the customs to check under-invoicing facilitates imports. Moreover, unhindered import of used clothing depresses the demand for new domestically produced clothing. India and other countries have cleverly fixed a minimum duty on import of textile or 10-15 per cent of the value whichever is higher. This checks cheap imports and provides Indian textiles a vast domestic market.  Moreover, import of used clothing is banned in India, Bangladesh and many other countries.

The Chinese and Indian textile industries on the strength of their domestic market easily absorb every global recession, better than Pakistan, while textile industry here crumbles if there is any decline in exports. Not only textiles but other industries in Pakistan would stabilise if they were facilitated in capturing the domestic market.