Pakistan’s lack of diversity, inadequate infrastructure, and low productivity are just a few of the issues that make it less competitive in the export market. Pakistan’s exports are heavily concentrated on a few industries, such textiles, which make up a sizable share of the nation’s exports. Because to this concentration, Pakistan is more susceptible to external shocks because any disruption in these industries might have a significant negative impact on export revenues. Also, the nation’s infrastructure, including its ports and roadways, is insufficient and out-of-date, which drives up transportation costs and delays. Last but not least, Pakistani businesses are less competitive in global marketplaces since they are unable to produce items at a competitive price. The performance of Pakistan’s exports has been poor, with exports as a share of GDP falling from 13.5% in 2011 to 7.4% in 2020. This is a problem because exports are essential for earning foreign currency and generating employment. Moreover, Pakistan’s exports are concentrated in a small number of goods, with textiles and apparel making up more than 60% of all exports.
Export competitiveness is a key element in fostering long-term economic prosperity. It allows a nation to increase its market share, produce foreign currency, and create job opportunities. Hence, in order to spur economic growth, governments must support export competitiveness. Although, Pakistan has been working hard to improve exports and achieve sustained economic growth, both of which are essential for earning foreign currency and producing job opportunities. It is crucial to increase export competitiveness through focused policy interventions to solve this issue. This policy brief offers a detailed framework for boosting export competitiveness and also aims to explore the challenges and opportunities in Pakistan’s export sector and suggest policy recommendations to enhance its export competitiveness for sustainable economic growth.
CHALLENGES IN PAKISTAN’S EXPORT SECTOR
1. Infrastructure: Inadequate roads, railroads, and ports make it difficult for commodities to be transported to and from ports efficiently, increasing transportation costs and delays.
2. Trade Policies: Pakistan’s trade strategies do not adequately support the country’s export goals. High tariffs, out-of-date regulations, and non-tariff barriers obstruct exports and drive up the cost of doing business.
3. Access to Finance: Due to strict collateral requirements and high interest rates, exporters in Pakistan, especially small and medium-sized firms (SMEs), have difficulty obtaining financing.
4. Skill Development: Pakistani exporters’ capacity to compete on a global scale is hampered by a dearth of skilled workers and a lack of emphasis on skill development initiatives, particularly in high-value industries like IT, engineering, and manufacturing.
Pakistan has a number of options that it can take use of to increase its export competitiveness. For instance, Pakistani exporters benefit from the nation’s advantageous position, which gives them access to important markets like China, India, and the Middle East. Furthermore, the populace of the nation is youthful and expanding, which may provide export-oriented firms with access to low-cost labor. Furthermore, Pakistan has a robust agricultural industry that can be used to boost exports of agricultural goods with value added, like processed foods and textiles.
1. Regional Integration: Pakistan’s location at the intersection of South Asia, Central Asia, and the Middle East presents prospects for trade and economic integration across the area. The Belt and Road Initiative (BRI) and the China-led China-Pakistan Economic Corridor (CPEC) offer the chance to build connectivity and infrastructure, which can improve Pakistan’s export competitiveness.
2. Developing Markets: Pakistan has access to developing countries like Central Asia, China, and India, which can open up new export prospects for Pakistani businesses. By looking into untapped markets in Latin America, the Middle East, and Africa, Pakistan can also diversify its export base.
3. Policy Reforms: To increase its export competitiveness, Pakistan has implemented policy reforms like the Strategic Trade Policy Framework (STPF) and the Trade Enhancement Initiative (TEI). These changes are intended to encourage exports, draw in foreign capital, and improve the business climate.
4. Human Capital: Pakistan’s populace is youthful and expanding, making it a valuable source of human capital for the export sector. To create a qualified workforce and encourage entrepreneurship and innovation, the government can fund educational and training initiatives.
The suggested policy initiatives will cost a lot of money. The government will have to set aside funds for building infrastructure, negotiating trade agreements, offering financing, and making investments in skill development. Yet, in the long run, the advantages of these interventions are probably going to outweigh the disadvantages.
Infrastructure improvements will lower transaction costs and boost logistics, which will help exports be more competitive. More export earnings can result from this, which will bring in more money and open up job chances. By lowering trade barriers and opening up more markets, trade policy liberalization can boost exports. Access to financing can give businesses the money they need to invest in their operations and increase their exports. Developing skills can increase production and competitiveness, which can lead to an increase in exports.
Another than these Pakistan really needs to study the international markets and their demand. Recalling China-Pakistan free trade agreement, where Pakistan was supposed to export its product to china and vice versa but what eventually happen was china studied the markets of Pakistan and started producing those goods that had demand in the country while Pakistan continued to exports goods that had no demand in the china. By the end, Pakistan had become dependent on imports and china remained unaffected by any of its imports by Pakistan. To enhance its export competitiveness Pakistan will have to study the world markets and their demands.
There is substantial room for expansion in Pakistan’s export industry, but there are a number of obstacles to be addressed. Adopting a thorough and well-coordinated policy strategy with an emphasis on improving export competitiveness can aid Pakistan in achieving long-term economic growth. The adoption of the above-mentioned policy proposals can assist Pakistan in realizing its export potential and strengthening its position as a player in the international market. Improving export competitiveness is essential for fostering long-term economic expansion. Yet, in order to assess the viability of measures intended to boost export competitiveness, policymakers must do a thorough cost-benefit analysis. Such measures’ costs must be carefully considered, especially those associated with increased competition, resource allocation, and environmental effect. The potential advantages of higher foreign exchange revenues, job creation, and economic growth should also be taken into account. In the end, policymakers need to make sure that export competitiveness rules are fair and long-lasting.