How Pakistan Can Increase Its Export?

[Bilal Khan (Quwa)]

They keep saying we should focus on exports but not explaining what to export which is not needed for Pakistan first.

That's the fauji style of thinking about it. Very brute-forced, and no trust in the domestic market.

In the video, for example, Gonzalo Varela is saying that Pakistan should stop putting tariffs on imported goods. That protects the domestic producer and incentivizes them to focus on only the domestic market. They're not facing any competition (because imported goods have tariffs) for the local market, nor do they need to export because they're making enough at home. Moreover, they have no real interest in advancing the quality or designs of their goods; that's why we see Pakistani products stay the same forever.

So, the solution here could be to remove the tariffs. It sounds weird, but by doing so, the domestic producer will now compete with foreign goods. Now, foreign goods will (today) cost more due to the weaker Pakistani currency. If the local producer can leverage local labor in a way where they lower overall production cost, they'll have a good that's cheaper than the import. Now, the local producer can both win in the domestic market and export that good (because their product is cheaper versus the competition).

The problem in Pakistan isn't one of, "what should we export" but structural inefficiencies caused by bad government policies (across all governments, not just one or two parties). Once you institute the structural changes (e.g., free-floating currency, removing tariffs), the market will naturally gravitate towards optimal exports. This can, for example, be labor-oriented like Business Process Outsourcing (BPO), or various types of manufacturing, like producing furniture, auto parts, surgical equipment, garments, etc.

The other way to encourage exports is by tying market access to transfer-of-technology and local sourcing. So, if you're a car manufacturer, you can't sell a car in Pakistan unless you're sourcing 60-70% of its value from within Pakistan. That can brute-force ToT into the country OR (if the outside manufacturers refuse) encourage domestic investment in car R&D, and in turn, push the country to manufacture and export cars. If the outside car manufacturers refuse to play ball, you create a gap in the market that incentivizes locals to invest in car R&D to service the domestic consumer base. This is one way to divert money from real estate and land into technology, for example.

Ultimately, it's not about what 'Pakistan can export' but rather, what 'Pakistani firms can export.' To create exporters, you need to create the right regulatory, law-enforcement (e.g., enforcing contracts), and market conditions to encourage local investment and growth. Unfortunately, the conditions in Pakistan encourage people to sink money into land or save up to eventually leave the country.

@JamD @kursed

 

[JamD]

That's the fauji style of thinking about it. Very brute-forced, and no trust in the domestic market.

In the video, for example, Gonzalo Varela is saying that Pakistan should stop putting tariffs on imported goods. That protects the domestic producer and incentivizes them to focus on only the domestic market. They're not facing any competition (because imported goods have tariffs) for the local market, nor do they need to export because they're making enough at home. Moreover, they have no real interest in advancing the quality or designs of their goods; that's why we see Pakistani products stay the same forever.

So, the solution here could be to remove the tariffs. It sounds weird, but by doing so, the domestic producer will now compete with foreign goods. Now, foreign goods will (today) cost more due to the weaker Pakistani currency. If the local producer can leverage local labor in a way where they lower overall production cost, they'll have a good that's cheaper than the import. Now, the local producer can both win in the domestic market and export that good (because their product is cheaper versus the competition).

Disclaimer: Not remotely an economist.

I don't think I agree with that solution. You need to have some capacity to compete to fight it out with international competition. If you remove all tariffs, I suspect Pakistani industry will collapse, huge imports will start, and our economy will see a short spurt of consumption driven growth. This is my opinion because that has happened every time import tariffs have been relaxed, albeit to induce consumption-driven growth and not for any of the reasons that you list.

In my opinion Pakistan requires a much more gradual approach where we carefully identify sectors (and even specific products) where we have some potential to be internationally competitive. Then we reduce tariffs just to the level where we are not destroying the local industry but also making it barely competitive if they don't innovate and export. So I guess I am agreeing with the eventual goal and the method but not with the suggested speed. This needs to be well metered to avoid the mistakes of the past. An economy is just like any system and requires careful "feedback control".

The problem in Pakistan isn't one of, "what should we export" but structural inefficiencies caused by bad government policies (across all governments, not just one or two parties). Once you institute the structural changes (e.g., free-floating currency, removing tariffs), the market will naturally gravitate towards optimal exports. This can, for example, be labor-oriented like Business Process Outsourcing (BPO), or various types of manufacturing, like producing furniture, auto parts, surgical equipment, garments, etc.

I think what to export is also a problem. We really need to rethink our export mix which is extremely nondiversified. And again I might agree with the eventual targets but I don't think Pakistan's economy can handle something like removing tariffs. Like a drug addict you need to carefully wean off the industry from all kinds of protections - tariffs, subsidies, etc. Pakistan's economy is a like a weird mix of communist and capitalist ideas picking on the worst of both worlds.

The other way to encourage exports is by tying market access to transfer-of-technology and local sourcing. So, if you're a car manufacturer, you can't sell a car in Pakistan unless you're sourcing 60-70% of its value from within Pakistan. That can brute-force ToT into the country OR (if the outside manufacturers refuse) encourage domestic investment in car R&D, and in turn, push the country to manufacture and export cars. If the outside car manufacturers refuse to play ball, you create a gap in the market that incentivizes locals to invest in car R&D to service the domestic consumer base. This is one way to divert money from real estate and land into technology, for example.

Agreed. And this is something well suited to Pakistan with its huge market. Pakistan is famous for market seeking investments - look at how much money Unilevel P&G make in Pakistan. We need to leverage that to have productive investments.

Ultimately, it's not about what 'Pakistan can export' but rather, what 'Pakistani firms can export.' To create exporters, you need to create the right regulatory, law-enforcement (e.g., enforcing contracts), and market conditions to encourage local investment and growth. Unfortunately, the conditions in Pakistan encourage people to sink money into land or save up to eventually leave the country.

@JamD @kursed

Honestly, even a barely decent policy that is consistently followed over decades can yield amazing results. We just need to stop going from crisis to crisis without a long term plan.

 

[Bilal Khan (Quwa)]

Disclaimer: Not remotely an economist.

I don't think I agree with that solution. You need to have some capacity to compete to fight it out with international competition. If you remove all tariffs, I suspect Pakistani industry will collapse, huge imports will start, and our economy will see a short spurt of consumption driven growth. This is my opinion because that has happened every time import tariffs have been relaxed, albeit to induce consumption-driven growth and not for any of the reasons that you list.

In my opinion Pakistan requires a much more gradual approach where we carefully identify sectors (and even specific products) where we have some potential to be internationally competitive. Then we reduce tariffs just to the level where we are not destroying the local industry but also making it barely competitive if they don't innovate and export. So I guess I am agreeing with the eventual goal and the method but not with the suggested speed. This needs to be well metered to avoid the mistakes of the past. An economy is just like any system and requires careful "feedback control".



I think what to export is also a problem. We really need to rethink our export mix which is extremely nondiversified. And again I might agree with the eventual targets but I don't think Pakistan's economy can handle something like removing tariffs. Like a drug addict you need to carefully wean off the industry from all kinds of protections - tariffs, subsidies, etc. Pakistan's economy is a like a weird mix of communist and capitalist ideas picking on the worst of both worlds.


Agreed. And this is something well suited to Pakistan with its huge market. Pakistan is famous for market seeking investments - look at how much money Unilevel P&G make in Pakistan. We need to leverage that to have productive investments.






Honestly, even a barely decent policy that is consistently followed over decades can yield amazing results. We just need to stop going from crisis to crisis without a long term plan.

You're right. We do have to remember that the World Bank and IMF (especially the IMF) generally recommend shock therapy-type solutions. They generally don't care about the human side of policy, but everything you raised is correct.

That said, IMO, the 'low-hanging fruit' is market access policy. Our leverage stems from (1) a huge market of 200 million people and (2) massive remittance inflows. So, those two factors alone will keep outside vendors engaged with us, even with strict local sourcing requirements. Their only alternative is to not sell anything in our market, and that will leave a void that is ripe for new domestic producers to rise. But that will only happen if we tune the regulatory environment to heavily encourage (and award) domestic investors -- e.g., contract-enforcement, property protection, grants, easy loans, etc.

However, new industry vendors shouldn't have tariffs and protections. I get we can't quickly unwean existing situations, but the new ones should start off on the right foot. Instead of protective tariffs, maybe provide these businesses with grants, tax breaks and loans to encourage their advancement and growth.

Ideally, the 'new' industries will take on the bulk of employment and revenue generation, and in turn, make it easier to wean off the old industries from tariffs and other protections.

 

[Indos]

I don't think you Chinese understand how Pakistan has become trapped in a primitive mindset dressed as Islam with mullahs acting as the guardians of this cave man like thinking. As long as this primitive mindset manifests most of Pakistan - this even extends to diaspora Pakistani's living in the west who make good chunk of PDF there is little chance of real progress.

The problem is this mindset locks in policies and visions to rigid idealogies. Most of the population becomes sedated in religion then open outlook that prizes hard work, global ambitions etc.

With regards to your suggestion of using Indonesia as a example you are badly mistaken - Pakistan is more in the Afghanistan league then Indonesia. Indeed you could choose Turkey as better example.

But the problem is countries need to be agile. Bend, flex according to market forces not religious forces. I give you a clue to ponder over. Find three Muslim countries that have done well [one of which you alluded to] and then look at their script please. Do this simple test and you will learn about Muslim countries that are prepared to be open as opposed to being trapped in the past.

@MH.Yang @GeraltofRivia @Indos

Well I cannot comment about Pakistan society mindset, but I see better education with more free discussion and analitical test ( rather than remembering), can solve many of things that you see as main problem.

Education is important and Indonesia for example has law to put minimum 20 % in our budget for education.

More budget to education, more quality teachers we have. Our local gov ( Province) also put money to public shools whithin their areas as Jakarta for instant has minimum payment for teacher which is similar like the salarie taken by specialist Medical Doctor in state hospitals.

Next IMO is to have strong SOE managed by professionals. Or use Korean system by making Chaebols within your private sector since you need capable local business to compete with products made by other nation. Those Pakistani businesses should create conglomeration where industry should be one of their business division. India is even subsidizing their private owned business in shipping industry.

Geographical wise, our finance minister, Sri Mulyani has said Pakistan has strategic location when she become WB Managing Director. It can be a hub between West Asia and East Asia. Pakistan is also closer to European market than SEA and EA countries.

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In term of attracting FDI, I believe we all know that security, efficient birocracy, and supportive law is the key

 

[Indos]

electronic assembly plants with the cheap labor its win win. Make it happen.

I see rather service sector like in IT can be another potential for Pakistan. We can see how huge India IT export and both India and Pakistan are colonized by British and has many English speakers.

English will still be language of business and technology even if Western world power reduce quite a lot in the future. Chinese Mandarin is so difficult to study so I dont think Mandarin will replace English despite China will be bigger than USA in nominal GDP.

All of countries with British and American as previous colonizer like India, Philippine, and even Pakistan and Bangladesh have good IT export already.

Many countries like Japan, South Korea, Indonesia will be difficult politically to use English in their education system as these countries use their national language as a unity, pride, nation identity, and political tools. They will not sacrifice it for the sake of getting economic gain. Even until Today few Japanese and Korean understand English, you just can see in many defense forums as example.

India in the other hand has problematic issue in using Hindi within their country and this is why English is being used by them to unite the country further, this is somehow has positive effect on technology and business development in India ( IT outsource for US and other Western nations). I also see Pakistan has issue in using Urdu or Punjabi, so using English in education system will solve some of the problem.

Take a look on Philippine, they cannot compete in manufacturing with other SEA countries like Singapore, Indonesia, Thailand, Vietnam, and Malaysia but they use their English proficiency among their population ( US colony and use English in their education system) to penetrate service sector market. Philippine after 2010 can grow about 6 % and the growth is basically lead by their service sector.

IT sectors will ofcourse dominated by well educated middle class Pakistani group, so we also have to think on other group with less fortunate. This is where agricultural sectors and textile industry can do their job, both also have potential for export.

 

[luciferdd]

Bangladesh is a good learning object for Pakistan

 

[Abid123]

Parody? @ziaulislam @farok84 @Patriot forever

Well we can start with exporting all corrupt politicians that you vote and support View attachment 791095

Funny how PLMN/PPP supporters mention that PTI and Imran Khan cant do anything right. The funny thing is that these idiots never mention that Imran Khan is the guy that is trying to clean up all the mess PMLN and PPP left behind for decades. Imagine if Zardari and Nawaz Sharif actually cared about Pakistan and wanted the best for it. Imagine if those 28 years (1990-2018) were spent under good non-corrupt leaders. Imagine how better Pakistan would be in 2021.....

So called "democracy" destroyed this country. I mean Pakistan has only gone downwards since the 1990s. Pakistan must become a "authoritarian regime" to prosper. We have already seen the result of "democracy". A total failure. Pakistan's golden days were under dictatorship. I would take a military dictator like Musharraf anyday over democratically elected leader like Zardari, Gilani or Nawaz Sharif.

Have a look at the list of the richest Pakistanis:

List of Pakistanis by net worth - Wikipedia

en.wikipedia.org

Shahid Khan the richest Pakistani left Pakistan at a young. He does not have any assets in Pakistan as far as I am aware.

Shahid Khan - Wikipedia

en.wikipedia.org

Asif Zardari net worth- 1.8 billion USD
Nawaz Sharif net worth- 1.4 billion USD

Then most other billionaires (e.g. Malik Riaz, Mian Mansha) on this list are close friends/associates of the Bhuttos, Sharifs and other prominent ruling parties (families) of Pakistan. Together they run this country as their privately owned enterprise profiting for themselves. Almost every single state-owned enterprise is incurring losses today (PIA, PTV, Railways, WAPDA, Steel Mills you name it) while private corporations such as Ramzan Sugar Mills (owned by Sharif family) have been profitable for decades.

Sugar Sharks: How does the most powerful lobby in Pakistan get its way?

Scores of sugarcane-laden lorries are parked on the main road in front of an abandoned car-making plant in Sujawal district, about 130 kilometres from Karachi. The signboard on the deserted factory s

profit.pakistantoday.com.pk

Not that there is not a single Pakistani military general on the list of richest Pakistani's. A slap on the face for the people claiming that the military ruins Pakistans economy.

Take a look at Pakistan's external debt history from 1970 to 2021. Before Zardari became president the debt was at 37 billion USD. At the end of his term in 2013 the debt had climbed to 58 billion USD. Very impressive... 21 billion USD added in debt in only 5 years... Now our dear leader Nawaz Sharif comes. During his term from 2013 to 2018 the debt increases to 93 billion USD. Impressive... He did a better job than Zardari.

To make things simple:
Pakistan total debt history from 1947-2006- 36 billion USD.
Pakistan total debt 2008-2018 during the terms of Zardari and Nawaz Sharif- 57 billion USD

59 years the debt was only 36 billion USD. These shitheads manage to add 57 billion USD in only 10 years.

Zardari and Nawaz Sharif destroyed Pakistan more than India could ever do. Not to mention the 5-year PPP rule was the worst period in Pakistan's history. Full Stop. Economic growth was at less than 2% for the first time in decades.

 

[Zibago]

It is most worrisome situation. The country has to back to IMF every now and than.

I fear that exports aren't genuinely rising. Businesses are replenishing their depleted stocks disrupted by covid. Once things return back to their baseline only than we would know the what the fact is. Like, BD exports for the month of October grew by 60%.

The thing is with western world moving away from China due to politics some low level industries like textiles will be relocated permanently unless we mess up everything like in days of Dar this isnt going anywhere

Demand for cheap textile products will never die and if we keep our industries competitive I think we can hold our own

 

[Pakistan Space Agency]

... the solution here could be to remove the tariffs. It sounds weird, but by doing so, the domestic producer will now compete with foreign goods. Now, foreign goods will (today) cost more due to the weaker Pakistani currency. If the local producer can leverage local labor in a way where they lower overall production cost, they'll have a good that's cheaper than the import. Now, the local producer can both win in the domestic market and export that good (because their product is cheaper versus the competition). ...

... If you remove all tariffs, I suspect Pakistani industry will collapse, huge imports will start, and our economy will see a short spurt of consumption driven growth. This is my opinion because that has happened every time import tariffs have been relaxed, albeit to induce consumption-driven growth and not for any of the reasons that you list. ...

In 2020, both China and the US imported over $2 trillion of goods each. That's a flight of over $2 trillion from their respected capitals. They needed those imports so they imported.

Those huge imports sustain their large economies which in turn churns out their huge exportable goods. Had they focused too much attention on saving forex, their economies and exports wouldn't be going anywhere.

Why can't Pakistan do the same for prolonged period of time? Why is there this stiff resistance to imports which are desperately needed for 220 million people? How is a bookhi goat supposed to produce any milk?

Yes, there'll be huge balance of payment initially but at the same time GDP will continue to grow and eventually an equilibrium will be reached where growth itself will overcome or at least sustain any balance of payment.

I mean, you'll be going to the IMF every five-years anyway, so might as well focus more on broadening and developing the internal economy rather than blocking it's growth.

 

[JamD]

In 2020, both China and the US imported over $2 trillion of goods each. That's a flight of over $2 trillion from their respected capitals. They needed those imports so they imported.

Those huge imports sustain their large economies which in turn churns out their huge exportable goods. Had they focused too much attention on saving forex, their economies and exports wouldn't be going anywhere.

Why can't Pakistan do the same for prolonged period of time? Why is there this stiff resistance to imports which are desperately needed for 220 million people? How is a bookhi goat supposed to produce any milk?

Again, I don't disagree that that's what's eventually supposed to happen. But I am against shock therapy.

An analogy is the refeeding syndrome:

Yes, there'll be huge balance of payment initially but at the same time GDP will continue to grow and eventually an equilibrium will be reached where growth itself will overcome or at least sustain any balance of payment.

I fear it won't be there just initially but it would trigger a collapse across many industries since our industry has been shielded from international pressures for so long. That is why I am for a gradual approach.

I mean, you'll be going to the IMF every five-years anyway, so might as well focus more on broadening and developing the internal economy rather than blocking it's growth.

A. Ideally, we don't want to go to IMF every five-years.
B. The worse your economy is, the harsher the IMF program is, and it becomes increasingly difficult to do reforms at your pace and style.
C. Broadening the economic base is good but we don't want an economical refeeding syndrome.

 

[Zibago]

In 2020, both China and the US imported over $2 trillion of goods each. That's a flight of over $2 trillion from their respected capitals. They needed those imports so they imported.

China has a positive trade surplus with almost all of its main trading partner and US can just extend its debt ceiling without any major issue
Our situation is similar to that of Lebanon and Turkey who both have been through hell due to idiotic import led consumption driven economies

Those huge imports sustain their large economies which in turn churns out their huge exportable goods. Had they focused too much attention on saving forex, their economies and exports wouldn't be going anywhere.

The thing is from 13-18 exports declined at the expense of public spending

Why can't Pakistan do the same for prolonged period of time? Why is there this stiff resistance to imports which are desperately needed for 220 million people? How is a bookhi goat supposed to produce any milk?

Yes, there'll be huge balance of payment initially but at the same time GDP will continue to grow and eventually an equilibrium will be reached where growth itself will overcome or at least sustain any balance of payment.

Punjab college sey inter to nahi ki?

I mean, you'll be going to the IMF every five-years anyway, so might as well focus more on broadening and developing the internal economy rather than blocking it's growth.

Because unlike other developing economies the focus has always been on public spending and making consumption cheap without focusing on export driven industries which have been the engine of growth for all economies that transitioned from low income to mid income

 

[Menace2Society]

Textiles is the biggest export from a country that produces leading engineers around the world. It doesn't add up. 210 millon exporting under $30 billion is pathetic. Comon guys what have you been doing all these years. Just lazy, if China can do it anyone can.

 

[CatSultan]

We should focus on argiculture and modernizing the argiculture industry so we can become an Agriculture powerhouse.

 

[Norwegian]

Why can't Pakistan do the same for prolonged period of time?

Because Pakistani rupee is not world reserve currency like US dollar nor does it have trillion dollars reserves like China. Again we are debating with an empty brick here. @Patriot forever @ziaulislam

I mean, you'll be going to the IMF every five-years anyway

So this is the true mentality of Pmln. And they are hypocrites enough to call PM Imran Khan beggar