Export surge registered outsidethe five supported sectors

LAHORE: Export data for July 2019 on the State Bank of Pakistan website shows that exports increased by 11 percent, but this surge was outside the five exporting sectors – textile exports increased by only 4 percent.

Government of Pakistan provides power and energy at subsidised rates to the textile sector, leather goods, sports and surgical goods and carpets. Besides other export incentive like rebates on additional exports from last year are also provided.

The other exporting sectors buy power at 25 percent tariff and gas (in Punjab only) at 70 percent higher tariff. There are no other incentives to these sectors.

These sectors were able to boost their exports on the strength of weaker rupee that has lost almost 40 percent of its value in last 18 months. These sectors are also bearing the brunt of regular increase in power and gas tariff.

There is nothing to rejoice on the performance of five major exporting sectors that are being facilitated by the state. Most of these sectors have inherent weaknesses relating to technology, efficiency, management and marketing skills.

The inability of these sectors to benefit even nominally from the massive devaluation speaks volumes of the trouble they are in.

Textile accounted for almost 55 percent of the total exports of the country in July 2019. Out of total exports of $2.23 billion the textile exports were $1.226 billion. These exports were 4 percent higher than the exports of $1.189 billion achieved by the sector in July 2018.

Had the textile exports increased even in line with the national export increase, they would have gone up to $1.32 billion and the national exports would have registered an increase of 14 percent to $2.29 billion.

This export figures coincide with Prime Minister’s Advisor on Commerce Razzak Dawood’s announcement in the second week of August that the total exports have surged 14 percent in July.

In reality, the increase was only 11 percent which perhaps is the reason that the Pakistan Bureau of Statistics has not posted the export figure for July on its website.

In case of textiles it is worth noting that the exports of cotton yarn declined from $121 million to $11 million. The export of fabric similarly registered a nominal decrease.

These two sub sectors of textiles are the largest beneficiaries of subsidised gas and power. Power and energy in fact is their costliest input after cotton.

Exports of knitwear increased by little over five percent, while bed-wear exports increased by seven percent, and towel exports increased by three percent. Readymade garment was the only sub-sector of textiles where the exports increased above the national average of 11 percent to over 13 percent.

The performance of other favoured sectors was also largely disappointing. No impact of devaluation was seen in their exports.

There was decline of over 25 percent in the export of tanned leather, leather manufactures’ exports also declined by above 20 percent, while footwear exports registered 20 percent increase; surgical goods went up around seven percent, and sports goods exports increased by nine percent.

Among the non-traditional sectors, the exports of engineering goods went up by more than 200 percent, jewellery 100 percent, Basmati rice 50 percent, meat and meat preparation 50 percent, rice by petroleum group surged by over 20 percent, and general chemicals by 14 percent.

Economic planners should analyse the past one year performance of each exporting sector and find out which sectors benefited from the decline in rupee value. These are the sectors that seem to have attained competitiveness.

Then find out the impact of high power and gas rates on the products exported by these sectors. Moreover, they should also find out as to how many sectors do not claim refund of sales tax they pay at various stages of production.

The surge in their exports despite this drawback demands that they should be properly facilitated to benefit from the competitiveness they have achieved without any government support.

The traditional exports would not go up without technology upgrade. Government would be wasting its resources in trying to keep these sectors afloat.