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Opening of banking channels: Trade with Iran can go up to $1-2 bn: minister

ISLAMABAD: Federal Commerce Minister Pervaiz Malik is hopeful that with the opening up of formal banking channels in near future, trade with Iran will achieve 1-2 billion dollar mark. “State Bank of Pakistan (SBP) has assured us that formal banking channel will be open soon. And we will have Iran as a good trading partner and market in our neighbourhood,” the minister told The News in an interview.

“We can trade with Iran with the already existing roads, or rail route and even through air cargo. But the major hurdle till this date was a formal banking channel, and with this opening we will have a good market to build our trade relations,” he added.

“Similarly we are negotiating with Afghanistan to resolve bilateral trade issues. We hope with Iran and Afghan trade prospects, we will be able to streamline our trade in the region,” Malik said, giving credence to estimates of some economic experts who eye multi-billion dollar trade potential Pakistan can have with Iran and Afghanistan. “CPEC has the potential to connect both countries in the future if and when hurdles are removes,” he added.

On a broader level, the commerce minister said the country needs to reduce cost of input for industry, adopt fast-track ease of doing business, adding that he has presented his suggestions at the right foras.

An old guard of the ruling PML-N, Malik has been returning to the National Assembly as a legislator since 1996. He holds the key position of party’s Lahore president. Although considered to be in the inner circle of the Sharif family, Malik prefers to keep a low profile in media. A businessman by profession, he was entrusted with the Commerce Ministry last August, but he is confident to leave the ministry “in the right direction and with the sound base” for the caretakers this June, and the next government.

He hopes Pakistani exports would touch a mark of US dollar 23 billion at the end of this fiscal, but still the import/export deficit will remain at a staggering US dollar 34 billion figure.“In all likelihood, the PML-N will be able to stage a return in federal government after the next elections, and we will take the present policies forward,” he hoped, as some political analysts forecast a hung parliament owing to multiple political/administrative reasons.

Asked whether the country has been able to fully exploit potential of European Union’s Generalised system of Preferences (GSP-plus) status for Pakistan in terms of exports, the minister said, “Yes. Only in the last year our exports to EU increased by 47 percent compared to preceding year. God was very kind. Recently, we have been able to get the GSP-plus status renewed for another two years. I term it as a good achievement as there were fears that renewal could hit snags on issues like human rights violations, non-tariff barriers etc.”

He said, “After Britain’s exit from the European Union(EU) we have been assured by the British government that our trade interests won’t hurt as they will make sure an alternative arrangement is in place to facilitate Pakistan’s trade.”

On overreliance on textile and related industry and lack of expansion of country’s export base, Malik said, “We are doing all right in industrial growth and large scale sector, but struggling on small and medium scale enterprises. We will have to facilitate these vital sectors to increase the export base.”

“Pakistani exports suffered due to international recession in years 14-15. So it was a global phenomenon. And then our industry was hit hard by 8-10 hours long power outages. Our economy suffered as a whole in those years. We have picked up on account of fruit and vegetable production,” he said.

“East Asian and other countries devalued/adjusted their currencies against the US dollar at appropriate times in the past. There was a big difference in their cost of production as compared to Pakistan’s. We need to decrease our cost of production and make our goods competitive for international market,” he asserted.

He said, “If we don’t want to toe the devaluation trend, we will have to decrease our input cost for production, like waiving off extra charges on electricity etc. We have abundant human resource, skilled labour, raw material to make abundant exportable goods.”

He pointed out 62 percent of country’s exports were based on textile, and still it had to import cotton. “We will have to increase our cotton production as we didn’t do anything substantial for massive production despite having research stations at our disposal. On the sugarcane front, over production is affecting our growers and factories alike. In the situation at hand, either sugar mills would have to halt production, or the growers would switch to some other crop, or they will have to be given a price that they could sustain and increase productivity. They should be enabled to have competitive selling price and decrease input cost. Similarly, there is over production of wheat in our market. We need to make our wheat competitive for international market.”

He went on to explain the sharp dip in exports country underwent from 2014-16 period. “We went through a crisis time as far as exports are concerned in that period. But now the wheel is turning. In this March, our exports were the highest in 10 year figure for a month. For the last 8-9 months, exports are gradually picking up and registering an increase of 10 to 12 percent every month on an average,” he said.

He said, “All this was achieved primarily due to the incentive package announced by former premier Nawaz Sharif. Premier Shahid Khaqan Abbasi further fine-tuned the whole thing to make it pro-business. We have streamlined electricity supply to industry, adjusted Ruppee-Dollar parity, made sure prompt refunds for better cash flow. Through better marketing and introduction of new products we have started diversifying our export base. I have recommended that we should go for further measures for decrease the cost of production to boost exports,” he said.

Regarding imports, he said, “Imports are important and difficult. We have to curtail imports to decrease our current account deficit. In our case, fuel and machinery imports account for major bill of imports. So we imposed regulatory duties on selective products of imports and it made some difference. Still the fiscal deficit on account of imports/exports is expected to be US dollar 34 billion at the end of the year.”

On reviving industry and exports, he said, “We are improving FTAs. We are making facilitation of products easy on ports, clearance and travel. We have sent business delegations abroad on a massive scale, and a number of foreign delegations have come to Pakistan. We have gained immensely from such exercise in terms of exchange of information and orders. All these measures are increasing our exports.”