Year 2020: A topsy-turvy year

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For many, the year 2020 was not good as the entire year was mainly affected by the pandemic Coronavirus (COVID-19), which started in Wuhan city of China at the end of 2019 but spread over the entire world at the start of the New Year. In the initial months, Iran and Italy were the two major countries, which were worst hit by the pandemic COVID-19 after China. These affected countries, however, were controlled soon with the imposition of strict lockdowns.  

Soon, the virus spread over to the USA, Australia, New Zealand and Africa as a forest fire. Pakistan received the virus through Pakistani pilgrims who returned from Iran and Saudi Arabia. The first patient who tested COVID-19 positive had come from Iran.

Pakistan has to impose a lockdown in March, which continued till August, but it was not so strict as people did not completely observe the Standard Operating Procedures (SOPs). The working class especially daily wage earners were the worst-hit section. Although the federal government had announced a one-time cash grant of PKR 12,000 to support the poor from the economic shocks of lockdown, this support could not reach to the majority of the population as the Prime Minister himself admitted that the government did not have data of 80 per cent workers.

The government also failed to impose SOPs due to a lack of cooperation from the masses. Media reported skirmishes between people and police, especially when police restricted people from going to mosques to offer Friday prayers.  

The virus’ intensity declined in July, but it suddenly increased again by the end of October and more people tested positive and the average number of deaths due to the virus increased manifold. This intensity of the disease still prevails on the last day of the year 2020. New norms of working from home, wearing masks most of the time and social distancing have now become part of our daily lives. We also worked from home till August when the government lifted the lockdown.

The year made a big impact on my personal life as I lost my mother on June 26. She suffered a stroke attack on 24^th June but could not survive and breathed her last within two days in the hospital. It was a big setback for my entire family. My father had already left the world in 2006.

Our family also witnessed some happy moments as well on the occasion of the wedding ceremony of my nephew Mairajuddin who got married on 12^th December.

The year 2020 would always remain in our memory with a lot of changes in the world’s politics. It was also the US elections year, in which Joe Biden won the election and in February he would become President of the world’s only superpower.

Politically, in Pakistan the opposition parties formed the Pakistan Democratic Movement (PDM), a grand alliance to topple PM Imran Khan’s government, which according to them has failed to deliver as the economy is in shambles and prices of essential items have skyrocketed. A series of public rallies were held across the country despite strict COVID warnings by the government.

The government stuck to its anti-opposition stance and many politicians were put behind the bars by National Accountability Bureau, which it has never proven. Nawaz Sharif had to leave the country to get his medical treatment in the UK, but he refused to return due to the government’s policies. He was already convicted of his corruption and was behind the bars.

Pakistani economy continued to suffer amid COVID-19-related lockdowns when common people suffered a lot. People witnessed a steep rise in prices of all essential goods when sugar and wheat prices went higher due to scandals in these two commodities, involving powerful personalities of the ruling political party. The government failed to provide any relief to the people and it continued its anti-public decisions like increases in petroleum, gas and electricity prices. It seemed the government machinery was not concerned with the common people’s problems.

With the dawn of the sun of the New Year 2021, it is hoped that situation would be improved in Pakistan and in the entire world.

Happy New Year!

Happy New Year!

The export challenge

Shujauddin Qureshi

Although the Pakistan Tehreek-e-Insaf (PTI) government has succeeded in containing the trade deficit by about 13.2 per cent, exports of key products have not increased significantly and it is now clear that the government would not be able to meet the 27 billion dollar export target for the current fiscal year.

The rupee devaluation last year has not played a significant role in increasing exports. Economic experts believe the impact of currency devaluation would be reflected in the coming months. As buyers in the international market are already aware of the currency devaluation in Pakistan, they have demanded reductions in prices as well.

The decline in trade deficit during the eight months of the current fiscal year is mainly attributed to the discouragement of imports as the government had imposed regulatory duties on many non-essential import items, which caused a drop in the import bill by 7.96 per cent during the 9 months of the current fiscal year.

Pakistan’s imports were over $ 40.75 billion dollars till February 2019 against 44.28 billion in the corresponding period of the last fiscal year.

“It is a silver lining for the economy that imports-led trade deficit has been controlled,” says Majyd Aziz, former President Karachi Chamber of Commerce and Industry (KCCI). However, the trade deficit would further decline when exports are increased due to the impact of the rupee devaluation by June.

Aziz believes the government is encouraging exporters to increase their production volume in light of a number of incentives recently announced. Pakistan traditionally exports textiles and its allied products like garments, hosiery and towels, but other export products like rice, surgical equipment and sports goods are also in high demand.

“There is a lot of potentials to increase exports of non-traditional items like Information Technology services and software,” he adds.

Pakistan also enjoys a duty-free Generalised Scheme of Preference (GSP) Plus facility under which Pakistani businessmen can send their products to the European markets without paying any duty. This facility is available since 2014. Traditionally, the US, UK and European Union are the main markets for Pakistani textile and leather products.

According to Aziz, Pakistan has the potential for substitute imports. “For example, import bill for edible oils has significantly reduced in recent years as the local industry is extracting soybean oil from the imported seeds.” Earlier, Pakistan used to import soybean oil for refining and packing, but now soybean seeds are imported from the US and local oil mills are extracting oil and processing it, which has not only reduced the import bill but also created a new market for export of soybean meal from Pakistan.

Soybean meal is a substance left after extracting oil, which is used in the production of chicken feed and there is also a demand for the product abroad, especially in China. Pakistan is using soybean meal in producing chicken feed as the poultry sector has increased.

Exporters have been facing various problems like lack of finances, duty drawbacks and high rates of utility tariffs for many years now, but those problems were further aggravated during the current fiscal year as the export-oriented large-scale manufacturing sector’s production is subdued due to an increase in input costs.

“The cost of production is still much higher in Pakistan than in our competitor countries like Bangladesh and India,” says Javed Bilwani an exporter of fashion apparel and Central Chairman of the Pakistan Hosiery Manufacturers & Exporters Association (PHMA). Utility charges, for instance, are much higher in Pakistan as compared to Bangladesh and India where exporters receive subsidies.

“Closure of an export-oriented factory for one day in Karachi due to load shedding may cause 7 per cent loss in the production of exportable products,” he says. The government must ensure an uninterrupted power supply to the industries in order to meet the export target.

According to Bilwani, recently the federal government has announced cutting power tariffs for five export-oriented industries to provide incentives to the export sector of Pakistan. These are textile, leather, sports, surgical and carpet. These sectors are also zero-rated in duties.

The federal government has offered some incentives to the export industries, including exemption from the recent hike in natural gas prices and reducing the price of imported liquefied natural gas (LNG) to Rs600 per one million British Thermal Units (MMBTU), from Rs1500 per MMBTU. Moreover, import duty on some raw materials used in the processing of export products has also been slashed.

Delay in the implementation of the above incentives is a cause of concern for the exporters as they complained that due to bureaucratic snags these incentives have still not been materialised.

The textile sector is the worst hit. Many industries in Faisalabad, the textile hub, are either closed down or running at losses.

According to the State Bank of Pakistan’s Second Quarterly Report, the performance of the textile sector, which is the largest exporting sector of Pakistan, remained subdued as its production came down by 0.2 per cent in the first quarter of the fiscal year 2018-19 as against the growth of 0.7 per cent during the corresponding period of the last fiscal year. That growth was also not much even though it was supported by the relaxation of duties and other incentives on exports.

Pakistan’s overall exports have increased just by 0.11 per cent to 17.08 billion dollars during the period from July 2018 to March 2019 against the exports worth 17.06 billion dollars in the corresponding period of the last financial year, according to the Federal Bureau of Statistics.

Even though textile and garments exporters are optimistic about growth in exports in the coming months, they are also sceptical of the bureaucratic delays in the implementation of policies and incentives. They also fear that the incentives may be curtailed keeping in view conditionalities under the IMF loan, which Pakistan is currently negotiating to meet its fiscal deficit.

This appeared in The News on Sunday on April 14, 2019 

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Pakistan Exports, Economy