The government of Pakistan has finally realized that its 3-year Strategic Trade Policy Framework (STPF) implemented in 2016 has failed. It needs to be discarded and re calibrated, according to a recent press report.
Some of us had pointed out that the framework was likely to face the same fate as its predecessor 2012-15 policy when the policy was being implemented in 2015.
Our target date is for achieving $35 billion in June 2018. It is being realized that we never had the right policies in place.
According to our poor export performance, we will continue to be a laggard in the South Asian region. Although our economy is now growing at about 5%, it is still one of the slowest in the region. India is expected to grow by 7.4% in 2017. It should be growing to 7.6% the year after.
In 2017 and 2018, Bangladesh is expected to grow at 6.9%. Through focusing on hydroelectric projects, Bhutan is expected to grow at 8.2% in 2017 and 9.9% in 2018.
Nepal’s growth is devastated due to earth quack at 5.6% in 2017 and 5.4% in 2018. We are forecasted to grow at 5.2% in 2017 and 5.5% in 2018.
As far as our trade policy is concerned our policymakers have to realize is that Pakistan is out of tune with the rest of the world. Unless our exports start growing at 14 to 15%, we will continue to lose our trade share, which has been falling for the last 10 years by 1.45% per year.
The global trading patterns have changed. Almost 70% of global trade is now done through global supply chains. Around 30% of total trade consists of re-exports of intermediate inputs and Pakistan is not a part of these emerging trends because of its high taxes on international trade and complicated and difficult trade procedures.
According to a recent study by the World Bank showed that Pakistan’s tariff are in general twice as high as the world’s average and three times more than South East Asia. There are regulatory duties on a large number of goods, On top of high tariffs. Thus Pakistan is isolated from the global markets.
Although the intention of regulatory duties is to gather and collect more taxes and restrict imports. Unfortunately, none of these objectives are being achieved. No extra revenue is being earned through regulatory duties. In fact, because of smuggling, the net revenue of has diminished.
During the last four years, customs tariff rates have been enhanced through putting a minimum tax on all imports. That includes essential raw materials and restricting the import of “luxury” goods through regulatory duties. Thus, anti-export bias has much increased since the current government came into power.
Govt get Rs2tr to finance budget deficit in 2016-17. Pakistan’s trade facilitation processes have become amongst the most inefficient in the world, besides the tariffs. Pakistan ranks at 169 out of 189 economies in terms of Trading across Borders, according to the Doing Business report issued by the World Bank in 2016. This ranking has worsened over the last decade.
We could cut the cost of exporting our goods by up to 15% if we fully accept the recently concluded WTO Agreement on Trade Facilitation. Pakistan has adopted a very negative attitude so far.
Since Pakistan has not done any domestic reforms as a follow-up to its Free Trade Agreements (FTAs), these agreements are not working in our favor. The lack of reforms means that Pakistan is subsidizing exports of its FTA partner countries through a substantial reduction in customs duties for a particular source.