Export promotion confusion

The incumbent government may toot its horn all it wants for arresting the downward slide in exports but they are as well aware of the truth as any layman - the increase in exports is nowhere near enough to compensate for the increase in imports.

The latest figures for 10MFY18 place exports are at $19.2 billion and this figure is expected to rise to $23 billion by the end of the fiscal year. This is an 8 percent increase from $21.3 billion last year; too low a growth rate to counter the current $49.8 billion imported bill.

Resultantly, phrases such as “export promotion”, “value added exports”, and “non-traditional exports” have become buzz words. But in their zeal to address the big red mark of ballooning current account deficit on their score cord, policy makers have raised more questions and created confusion rather than address the situation.

The previous Rs180 billion export package left a lot to be desired. The textile sector is still facing a liquidity crisis as manufacturers push the government to release the pending tax refund claims. FBR stopped payment of refunds/rebate for the past months to show higher revenue growth while the government is still assuring the textile sector that the refunds will be released before the end of its tenure.

However, this has not deterred the government from announcing another export package, the details of which are expected to be announced next week. With an incentive package value of Rs.100 billion, this one is supposed to focus on non-textile exports such as small engineering, fans, leather gloves and agri products. Given that the stronger, more organised and politically influential textile sector has to fight tooth and claw to benefit from last year’s export package, it remains to be seen how advantageous the new package is for the generally overlooked sectors.

Another area that requires clarity is tariff liberalisation and rationalisation. The budget targeted 104 tariff lines to be withdrawn and 28 tariff lines to be reduced.

These tariffs would consist mostly of industrial raw materials. However, latest news indicates that duty may be cut for 303 tariff lines. This is a welcome move since there is a correlation between tariff liberalisation and export growth (for more information, read “On raising export competitiveness”, published on May 15, 2018).

However, more details need to be formalised and released to evaluate whether the move will create a positive sustainable impact on exports or is just fluff in the days leading up to the election.

The good news is that policy makers appear to have realised the importance of boosting exports by concentrating on non-traditional goods and of the need to rationalise tariffs. However, the proof is in the pudding. Till clear and consistent policies are revealed and implemented, there will be confusion regarding effectives of export promotion efforts.