How to meet the export target or reduce imports to achieve the target of foreign exchange reserves? In addressing the import requirements for USD 60 billion exports, let me add my two-bit to the vast amounts of suggestions existing in the literature.
The PC needs to reorient the domestic supply chain towards competitively priced domestic inputs needed for manufactured exports, e.g., energy, raw cotton and massive increase in oil seeds output, the last two again face embedded constraints of group B).
Secondly, to repeat the already well-known, is the role of ‘improved productivity’ in getting the most from per unit of imports. This needs innovation, training of labour and hand holding by the MOI and Ministry of Labour (another constraint! The second one falls under the provincial jurisdiction).
Critics citing Japan, China, BD, and Vietnam may say that we should be less worried about raising cotton output domestically and more about skilled labour, female labour force participation, technology, and innovation to raise productivity, of the textile sector.
At a macro level, a significant reduction in wasteful federal and provincial government expenditure is essential to dilute its impact on BOT.
Moving on to the second pillar of the Triple-S approach, ‘Strategic Intervention’ within exports, we have a host of areas to choose from: Manufacturing, Minerals, Agriculture, Information Technology and Manpower Export. Again, PC will be spreading itself too thin if it intervenes in all the above and ends up achieving none of the targets. Since minerals is G2G prerogative, it makes sense not to regard it as a candidate for PC’s strategic intervention except putting its symbolic signature on PC-1.
Manpower export is demand driven and given skill shortage in the country, a conscientious effort to intervene in it is a dilemma. The benefit of increasing remittances has to be weighed by cost of losing semi-skilled and skilled/experienced manpower and its impact on overall productivity, which is on a stagnant/downward trend since last many years. Promoting IT exports should be left to the private sector rather than to the ‘strategic intervention’ by PC. Moreover, manpower and IT exports do not fall within the USD 60 billion merchandise export target.
We are left with agriculture and manufacturing-based exports. Among the two whose exports are selected for ‘strategic intervention’ depends on much needed re-designed Industrial policy, and ‘corporate farming’ dream. Increasing agriculture exports means exporting surpluses, which are usually short-lived (recent example, maize) and are constrained by unpredictable weather, climate change, population growth, archaic farming practices, rising domestic demand from remittances and erratic foreign demand.
However, one cannot ignore the complementarity between the two sectors, if domestic supply chain is to be strengthened as a basis for meeting the export target. This is where the industrial policy/manufacturing structure comes into play. Should PC intervene in agri-processing (excluding cotton) versus non-agriculture.
What about intervening in large-scale versus SMEs? Anti-planning lobby is against any interventions, leave alone any ‘strategic intervention’ and propagates leaving the market forces to choose from these two types of the manufacturing structure. India is a classic example of deregulation, but let’s not forget the quality of human capital stock built in the years prior to the 90s and large population (similar to China) ready to reap the benefits of scale for foreign investors.
Moreover, a segment of intellectuals is against intervention in LS-manufacturing as it leads to concentration of wealth, already considered a failed experiment. Unfortunately, PC has to justify ‘indicative planning’ for its survival, at least for the next 5 years!
Suppose the sub-strategic intervention is SMEs within manufacturing, to diversify exports and reach the target. The main challenge is how to identify ‘strategic intervention/s’ Should they be product or sector/industry based? At 2-digit level we already have ‘National Priority Sectors export strategy (NPSES)’.
Unfortunately, we need a paradigm shift in our approach and concentrate ‘sub-strategic interventions’ at 6-8 digits product level to increase exports through SMEs as they cannot reap scale economies. How to select from thousands of 6–8 digits level export products?
PC should adopt a coordinating role and provide an enabling environment, either through its own technical staff and/or coordination with other relevant agencies and ministries.
The mechanism should be based on the model and working of NCOC to reflect urgency, coordination, and monitoring to achieve the export target. The following two methodologies to identify interventions at the product level are highly data intensive in real time. The first one is a ‘diagnostic’ search tool. It classifies the existing export products at 6-8 digits level into 3 groups, i) Threatened ii) Emerging and iii) Competitive, on a real time basis. Leaving out the competitive, the PC can prioritize threatened and then emerging products for intervention.
The NCOC established for this purpose can hold weekly meetings with stakeholders including the large/small private exporters and/or delegate the responsibility to respective product organizations to come up with the recommendations except the requests for explicit and hidden subsidies.
Since the strategic intervention is SMEs, we cannot rely on scale economy to reap cost advantage, as China, India, BD, and Vietnam are well entrenched in international markets at least for low-priced, high consumption textile garments. Thus, searching and establishing a niche for quality added products (commanding a higher price because of distinct qualities) whether resource based or import-based manufactures as opposed to value-added products, will ensure above average returns to the investors, even if the market is limited or segmented. Goods produced under economies of scale that incorporate unique innovation, (I call it innov-added products) tailored to specific markets or specific segment of population can also command higher prices and create their own niche (until they are copied) in the world market.
Investment and support policy to diversify exports through SMEs be based on the precise identification of 3 types of ‘niches’ at the 8-digit level.
The first among is ‘endowment niche’. By this I mean niches based on livestock, dairy products, fruits, fisheries, forestry, and horticulture and for downstream SMEs based on processed minerals. These are broad groups within which niches have to be developed and specialisation be encouraged.
The second is ‘location niche’. The demand pattern of markets proximate to Pakistan has to be studied in order to identify exportable commodities that can compete favourably in terms of lower transportation costs.
Lastly is a category of ‘dynamic niche’. These are a group of commodities that have the potential to be exported in the near future as the cost of producing them rises in the countries exporting them now. For these dynamic niches, human and physical resources and infrastructure have to be developed now to take advantage of what economists’ call ‘shifting value chains’ in production. It is to be reiterated that above search for ‘niches’ among products and countries call for in-depth data search and analysis.
Once SME manufacturing is chosen for strategic intervention, how to allocate limited public investment funds strategically to maximize the bang for the buck? Since last two decades, a long list that includes the absence of trained manpower, quality control in the SMEs, absence of a coherent marketing strategy in the foreign countries and FDI continues to be identified as impediments to the growth of this sub-sector.
Strategic allocation then calls for allocating limited funds to one or at most two of them to propel the SMEs into a growth node and a dependable export earner. PC as enabling, involved and monitoring partner in SME development is a credible signal and may encourage a chain reaction within the private sector to set up cluster of SMEs across the country for increasing exports.
Unlike previous attempts, Uraan Pakistan has a fair chance of success, if it moves from ‘indicative planning’ to an organisation that ‘walks the talk’ with regard to exports, SMEs, and diversification of exports of quality and innovative products.
(Concluded)
Copyright Business Recorder, 2025
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