Pakistan’s Export Performance (2017)

The Business Climate Review sums up important developments spanning the entire federal government economic governance over the previous month. It discusses possible consequences of decisions, policies, and regulations announced by the federal cabinet, regulators and Federal Board of Revenue for the business climate of Pakistan. The analysis is based on the idea that economic freedom is good for the business climate and any law that increases arbitrariness, red-tape, and government involvement is counterproductive. Also, we believe that the government should not choose winners and losers by legalizing exemptions or favours.

Last month, the present ‘business-friendly’ government presented, what is most likely, its fifth and final budget. The reaction of business associations to this budget indicates acute dissatisfaction and frustration. In this commentary, I will delve into the issues which were identified by business associations as not having been addressed in the budget. These views were collected by PRIME.

 

The All Pakistan Textile Mills Association (APTMA) has dubbed this budget “non-aligned” with falling exports. It has also criticized the prevalence of high duties on the import of cotton. APTMA represents the sector, which is the mainstay of Pakistan’s exports, and is one of the most powerful business associations of Pakistan. The Pakistan Hosiery Manufacturers and Exporters Association raised similar concerns. However, all fiscal incentives, including the Rs. 180 billion package by the Prime Minister announced specifically for the textile sector last year, has failed to play a role in arresting the decline in textile exports.

Therefore it is high time that both the government and the private sector move away from their incessant focus on fiscal incentives and refocus themselves on global market competitiveness as a whole. On the issue of the import duty on cotton, the Finance Ministry is usually under pressure from competing demands from textile manufacturers and cotton growers. Instead of picking winners and losers, which is what the government does through its fiscal policy, the government should introduce a predictable and low duty on the import of cotton to introduce some certainty to decision making in the sector.

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