Export Diversification (Feb 10, 2010)

Diversification has been the buzzword of the country’s export managers for over 30 years. Usually buzzwords have a very short life as they get out of vogue. But diversification of export markets and export items has remained fresh because in spite of desire of the export managers of Pakistan the progress has been very slow.

Let’s first examine what we have achieved so far. There has been some improvement in diversifying the exports direction and items if we look at the figures of the last decade. Share of exports of textile has dropped from almost 60 per cent in 2001-02 to 53 pert cent in 2008-09; leather and leather goods from 7 to 5.6 percent; synthetic textiles from 4.5 to 1.7 per cent sports goods from 3.3 to 1.6 per cent. On the other hand exports of rice increased from 5 to 11 percent. The rise in rice exports share is also attributed to the surge in international prices. If we look at the category-wise diversification in the last 15 years (1994-95 to 2008-09) the primary products share in exports has risen from 11 to 18 percent, semi-manufacturing has dropped from 25 to 9 per cent, but the good sign is the exports of value added manufacturing sector in exports over this period increased from 64 to 73 per cent. This is a good trend but showing very slow progress.

Similarly Pakistan’s heavy reliance on exports to the traditional markets has changed in the last seven years that is 2002-03 to 2008-09: Share of exports to USA has dropped from 23.5 to almost 19 per cent; Germany 5 to 4 percent; UK 7 to about 5 percent; Hong Kong 4.6 to 3 percent and Saudi Arabia from 4.3 to 2.2 percent. Here the non-traditional markets have share has shot up from 45 to 67 per cent.

The emphasis on exploring new markets for our exports has to continue. “Pakistan should also try to get into the Balkan states market, they may be small but they have potential,” Awais Manzur Sumra, who is our Commercial Counsellor in Greece told me last week when I visited his office in Athens. He said that while overall imports by Greece have dropped by 40 percent, imports from Pakistan to this market has gone down from US$ 100 in 2008 to $80 million in 2009. The reason for decline, he says is the economic crunch being faced by Greece and some supply-side issues at the  Pakistan end. Pakistan had established its commercial office in Greece in 2007 and has nobody promoting our exports to countries that have emerged in East Europe as a result of Balkanisation of Yugoslavia. When I inquired, why he does not try to reach out to these smaller Balkan states, Sumra said: “I can as most of them are within driving distance, but it is not a part of my jurisdiction.”

Moving on to my annual yatra to ISPO, the world’s largest sports goods trade fair held in Munich, I posed the question of diversification to most of the Pakistani exporters at the fair. Almost 100 percent exhibitors are from the unbeatable exporters city of Sialkot. Former Sialkot Chamber of Commerce and Industry President Abdul Waheed Sandal told me that exporters from his city had started diversifying their products a few years ago. “We realized long ago that football exports, which the was mainstay of Sialkot industry, is going down. So we entered into sportswear, martial arts products and  sports teams uniforms business and now Sialkot has a sizeable exports of these items,” he added.

Meeting enterprising Sialkot exporters is always redeeming for me, as they are always very focused on increasing their business. But this time most of them complained that they are finding it hard to meet the increased exports order because of almost 18 hours load-shedding of electricity and low supply of Gas. “The situation is so bad that now before taking the job the workers ask the employers whether they have their own electricity generators or not,” one young man said laughingly. This made me ask Waheed Sandal that when Sialkot businessmen can make an airport and a dry port on self help basis what stops them from generating their own electricity? He disclosed that proposal was made by the Small Industrial Estate businessmen that they would put up the generation plant provided WAPDA agrees to allow transmission through its network at a cost. “The WAPDA wanted to buy the electricity from the small industrial estate but was not allowing them to bill the end-users directly,” he explained. Actually WAPDA’s track record for paying IPPs has not been very enviable and thus could not be trusted by Sialkot businessmen. There is severe shortage of electricity in the country but all proposals made by the captive power industries that the transmission and distribution system of WAPDA should be made available to them against a fee for transportation have been shot down so far.

Infrastructure handicap is making it hard for Pakistani exporters to compete in the sluggish international trade market. Now the world knows about our serious infrastructure handicap and poor security situation. The buyers abroad ask our exporters, which the workers do back home, do you have your own electricity backup. Ironic isn’t it? (ayazbabar@gmail.com)

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