For Pakistan to come out of its frequent balance of payment crises, it has no choice but to increase exports, apart from bringing the fiscal house in order. In the new export domain, in addition to the product itself, the way products are made has become as important as the physical product itself.
While exporters need to think not only about attaining and retaining competitiveness in the conventional sense, but now increasingly market players have to compete on compliance score as well across the entire value chain-from procurement of raw materials through manufacturing to shipping as mandated by the importing countries.
60 percent of goods exports from Pakistan are textile products, exported to developed countries such as the USA and the EU where there is a big potential to grow across all industries. The importers of Pakistan textiles are increasingly demanding multiple types of compliances and adherence to social, environmental and economic conventions and other such requirements.
Compliance, as unfashionable and boring as it may sound, is the new and important dimension to competitiveness. Quality, price, and punctuality will still be important but compliance to all mandates, old and new, actually has the potential to tip the scales in favor of a compliant exporter, company or country, as compared to a non-compliant one.
The good news is that the government of Pakistan, the Ministry of Commerce to be more precise, the GoP, has recently formed National Compliance Center (NCC) to consolidate all such compliance requirements under one roof. Since the textile sector is the largest export sector it has the most to gain from this compliance initiative.
Leading textile exporters are cheerleading this initiative and are reportedly in contact with the government to get NCC operational. However, this commitment to compliance should not be limited to textiles and not to any one form of compliance.
Different buyers from different geographies demand compliance proofs through various audits with different standards, etc. Then there are different organizations in the world which offer certain forms of compliance tests, audits and such services. For instance, some may specialize in building safety, others in testing and others on labor rights as applicable to businesses. This plethora of auditors and audit regimes does not solve the exporter’s dilemma as he must deal with a battalion of auditors and a host of audit standards in his efforts to comply.
It’s good to ensure compliance via audits through auditors of international repute and credit. The buck, however, would not stop here. There are and would be different and still more compliance regimes and still more specialist auditors answerable to shareholders. The hapless exporter just wants to comply with what his customer wants. This process of meeting and greeting too many compliance vigilantes, too many standards and too many auditors roaming around just adds unnecessary cost of doing business and may result in losing competitiveness, compliance fatigue even.
That is why it’s prudent to have one national umbrella organization, repository of all standards and registry of all auditors which takes care of all types of compliances – such as building safety, human rights, gender inclusivity, environmental commitments, all via one-window set up for all the exporting regions for all exports and exporters out of Pakistan. Then again, compliance will be required across the entire value chain – for example in textiles, from cotton fields to a pair of jeans. That will take time.
Across the board, in all export sub-sectors, compliance will help protect our market share, open doors to more markets for a deeper and wider export product portfolio. With currency adjustments and slowdown in the domestic market, increasingly manufacturers in various value chains are trying to open exporting avenues. These may include larges cale manufacturers and SMEs. For example, cement exports are picking, and there are examples from various other sectors as well. It’s about the right time to provide them with guidance and tough love in the form of standards, a platform, audit and remediation mechanisms whereby their products can become eligible to land in increasingly compliance-heavy markets.
The question is how can the government deliver such an important service given its general weak capacity? The government has no choice but to partner with the private sector through their trade associations with the skin in the game to ensure delivery of what the exporters and their buyers want and expect. Sadly, these cannot be left to the business bodies alone, as there might be cases of more than one organization in a given sector with friction among them – for example, in textile there are multiple associations and their communications with one another leaves much to be desired.
Then not every compliance is a federal subject- for example environment is provincial subject. It’s the responsibility of the federal government to coordinate with provinces and should for one law across the country for manufacturers companies to cater to local and international markets without any duplication of costs and efforts.
There should be coordinated efforts of provincial and federal bodies and trade groups to learn from other countries and bring best practices home in an efficient manner. Thus, the viable model is that the government take a lead and invite different associations within each sector to come and work on a viable compliance system.
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