Pakistan Confronts ‘Hard Choices’ For Export Growth, Says Abdul Razaq Dawood

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Pakistan’s government is targeting a trade deficit of $30bn in the current fiscal year, with new export-centric policies focused on reducing the country’s reliance on textiles and providing incentives to other sectors, the country’s top commerce official has said.
Textiles are the South Asian country’s major export, making up more than 60 percent of the country’s $25.3bn in exports last year, according to government data.
In the current fiscal year which ends in June, textile exports have risen by 26 percent, amounting to $9.38bn, according to the data.
Abdul Razaq Dawood, the Pakistani prime minister’s adviser for commerce and investment, said that his ministry is working on policies to wean the economy off its dependence on textile exports, although incentives to the textile sector would also continue.
“We have to diversify our exports. We cannot rely on just textiles,” he said. However, he expects textiles to continue to be the major export “at least for the next five years.” The one sector he expects will eventually surpass textiles is information technology. “If it keeps growing at the same pace, then after five years … IT will start becoming our number one [export],” Dawood said.
Pakistani IT exports in the current fiscal year stand at $1.3bn, according to central bank data, an increase of 36 percent over the same period last year, but still just seven percent of overall exports.
Dawood said his government was targeting the pharmaceutical and engineering sectors as other areas of potential growth.
Pharmaceutical exports have shrunk by 0.66 percent to $137.98m this fiscal year so far, while engineered goods exports have risen by 7.5 percent to $109.23m, according to government data.
Dawood contended that the government needed to make “hard choices” to prioritise export industries, despite the deep budget cuts elsewhere.
For now, commerce adviser Dawood is focused on encouraging export-oriented sectors, particularly to new markets in Africa and Central Asia, in products that are not “traditional” Pakistani exports, including pharmaceuticals, engineered products, and chemicals. To encourage that, the government is currently offering a financial incentive as a percentage of invoice values for firms to export to such markets. The government also plans to trim taxes on finished goods that Pakistan imports. Those taxes were introduced to push the local industry towards manufacturing, but businesses are now unwilling to export as they have an easy domestic market. That will have to change if Islamabad is to meet its export goals.
Some of the sectors where the government will start rolling back taxes include iron and steel products, electric fans, engineering products and certain chemicals, Dawood said.

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