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RCETs: Indispensable for Export Led Growth

GlobalVillageSpace

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Mar 4, 2017
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Textile exports have reached $11.35 billion in the 9MFY21 from $10.41 billion over the corresponding months of last year, showing a growth of 9.06 percent. This year, record textile exports of $16 billion-plus are expected thanks to the unprecedented Regionally Competitive Energy Tariffs (RCET) policy.

The support through energy support package was just 1.29 percent of total exports but has resulted in a substantial increase in exports and investment. This export momentum can be retained through the provision of RCET and a long-term textile policy.


These policies will put the country on track of export-led growth and Pakistan can explore the untapped export potential under China Pakistan Economic Corridor (CPEC) as China is willing to relocate its labour-intensive manufacturing to Pakistan.

To analyse the impact of RCET on exports, a study “Are Energy Subsidies Boosting Exports,” was carried out by International Growth Centre (IGC) under the directions of Ministry of Petroleum. The Petroleum division had cost concerns and wanted to understand whether RCET policy was boosting exports or not.

The report was factually incorrect and was based on a simple linear regression of the dollar value of exports compared with energy prices, which misled policymakers. Since economic analysis is only as good as the model it is based upon, the model’s focus should have been to regress the multiple variables present in real economic situations.

Any model must cater for other numerous variables impacting exports such as; relative energy price in competing countries, other comparative incentives, cost structure, and long-term stability of policies, etc.

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RCETs: Indispensable for Export Led Growth
 

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