Trade pattern
(This is the FIRST of THREE articles on the SUBJECT)
he major factors influencing Balance of Payments (BoP) are the Export Receipts and the Import Expenditures. A review of the figures since 1972-73 shows that imports gradually pulling away from Export Surpluses, in 1972-73 we had a modest PLUS account of Rs 153 million (Rs 8551 million exported Rs 8398 imported), thereafter the reverse started happening with a vengeance. In 1973-74, imports exceeded exports by Rs 3.32 billion (Rs 13479 million imports Rs 10,161 million exports), in 1974-75 it jumped to Rs 10.64 billion. In 1975-76 and 1976-77 the gap was maintained at Rs 9.21 billion and Rs 11.72 billion without much change in quantum of imports and exports, thereafter the figures went berserk to Pakistan’s disadvantage. In 1977-78, the deficit became Rs 14.84 billion, 1978-79 (Rs 19.46 billion), 1979-80 (Rs 23.52 billion), 1980-81 (Rs 24.26 billion), 1981-82 (Rs 33.21 billion), 1982-83 (Rs 33.71 billion), 1983-84 (Rs 39.37 billion), 1984-85 (Rs 51.80 billion), 1985-86 (Rs 41.35 billion), 1986-87 (Rs 29.08 billion), 1987-88 (Rs 34.10 billion), 1988-89 (Rs 45.66 billion). In 1972-73, exports were pegged at Rs 8.5 billion, whereas in 1988-89 they were pegged at Rs 90.18 billion, a ten-time increase in 18 years whereas in 1972-73, imports were pegged at Rs 8.44 billion whereas in 1988-89 they were pegged at Rs 135.84 billion, increasing 16 times over the same period.
One sees a definite pattern in the statistics, during the democratic years of 1972-77 there is a definite check on the imbalance. In fact for three years there is virtually no increase or decrease. From 1978 to 1985, the import figures grows by leaps and bounds as there is no accountability and the bureaucrats without any check (operating under the laughable facade of military rule) have a field day running berserk, opting for vested economic policies suiting their own interests. The first democratic transition 1985-86 saw a marked decline in imports over exports from Rs 51.79 billion in 1984-85 down to Rs 41.35 billion, almost Rs 10 billion, not a small figure, to the credit of Mr Junejo’s administration. This further declined in 1986-87 to Rs 29.08 billion, rising to Rs 34.11 billion. Soon as the Junejo Government was removed by late Gen Zia in May 1988, deficit figures jumped to Rs 45.65 billion. Though the PPP Government came to power since early December 1988, essentially they followed the inherited trade policy annunciated by the original whiz-kid himself, Dr Mahbubul Haq in June 1988. In the financial year 1989-90, the PPP Government has been somewhat able to arrest the declining trade balance from further erosion.
The trade imbalance deteriorates sharply whenever an authoritarian regime comes to power and is held in check whenever a democratic regime holds sway, rising in marked manner twice, once in 1978 continuing upto 1985, then again in 1988. While it is fashionable to blame the Martial Law Regimes, how many Defence Services officers graced the Ministries of Finance or Commerce in any capacity from Minister downwards to Section Officer during the last three Martial Laws. The same coterie of bureaucrats is still holding sway, may have played musical chairs a bit and retired now and then, they have essentially never allowed any strangers to darken the doorsteps of the nation’s economic empire. Largesse in the form of public money and various permissions and exemptions are dispensed at the caprice of the bureaucrats. The politicians and the military may have taken turns at formally ruling the country but the real power has always been in the hands of the bureaucrats. The politicians performed much better than the military who should be taken to task for rank stupidity of the highest order for abrogating their fiscal responsibilities to these corrupt gnomes in crucial Federal Ministries, an essentially buoyant economy has been converted almost into an international basket case. The PPP would do well to ensure that the control of these sacred institutions remains firmly in their democratic hands because the faceless bureaucrat has hardly changed, he lurks in the background ready to play economic games designed to suit vested (and his) interests.
While the moral of the aforegoing is that we must bring our trade into a more balanced position, we should establish our traditional and non-traditional trading partners and analyse country-wise, region and grouping-wise where we seem to have gone wrong. In deficit areas we should plan to expand our sales effort, in areas of surplus to further augment them.
Within the Organisation of Islamic Countries (OIC) the Arab League comprises of 21 nations (including Egypt), with 15 of whom we have a nett deficit of Rs 12.30 billion in 1988-89, almost 25% of the total trade imbalance. With ECO (originally RCD) countries, Iran and Turkey the deficit is approximately Rs 3 billion, 6% of the total trade. With the other Muslim countries of Asia and Africa except for Thailand and Indonesia, we have a modest surplus of Rs 0.95 billion. With the Consortium Countries, our nett deficit is Rs 29.20 billion or 64% of the total trade imbalance. With Non-consortium countries and Austria, New Zealand, the negative trade imbalance is Rs 1.7 billion or about 3% of the total trade deficit. With the Council of Mutual Economic Association (COMECON) our deficit is Rs 0.378 billion, whereas we have export surpluses in SAARC amounting to Rs 1.25 billion. With ASEAN countries, our nett deficit is Rs 3.60 billion. We have virtually no trade with South and Central America but nevertheless a surplus of Rs 1.40 billion, the same pattern continues with other European countries (Malta and Yugoslavia), a surplus of Rs 0.70 billion. With the other Asian countries such as China, Hong Kong, etc we have a nett surplus of Rs 1.70 billion, with African countries we have a nett deficit of Rs 1.40 billion primarily because of Kenya (Rs 0.90 billion).
A trade mosaic is created which leads us to some conclusions. Our primary effort must be directed towards reducing deficit of (a) Rs 29.20 billion with the Consortium countries and (b) Rs 12.28 billion with Arab League countries. There are two ways of reducing the deficit (1) increasing exports and (2) decreasing imports. While the increasing of exports depends upon (1) availability of export surpluses and (2) acceptability of our commodities and products, we must curb the liberal imports in some luxury categories but this is easier said than done. Our secondary effort should be towards increasing exports to those areas where there has no great effort e.g (1) South and Latin America (2) Eastern Europe and (3) Third World countries.
Frankly speaking we have been victims of indifferent, convoluted trade policies which has at best given lip-service recognition to reciprocity in trade. For example our greatest single trade deficits are at the present with USA (Rs 11 billion), Kuwait (Rs 10.5 billion), and Japan (Rs 8.33 billion), between them they constitute almost 60% of the total trade deficit. From Kuwait, virtually our only import is crude and refined oil, despite our best efforts it would be impossible to increase our exports to Kuwait. As regards USA, our imports have jumped up sharply 56.8% in one year from US$ 402.7 million, to US$ 1,111.3 million, USA is a vast commercial market capable of absorbing quite a bit of our exports particularly in cotton derivatives. The deficit of Rs 11 billion amounts to about US$ 500 million, an increase of US$ 1.5 billion in the cotton derivatives quota will hardly be felt by the US of A, for us it will mean a salutary difference in a life and death economic struggle. Countries like S.Korea, Taiwan, Hong Kong, etc which do not grow cotton have inordinate cotton export quotas to USA, an enhancement of US$ 1.5 billion would not even cause USA a bare ripple. We must strive to convince the Japanese to allow more of our exports into Japan, to increase from the present Rs 10.47 billion ceiling to at least Rs 15 billion while bringing our imports down from the present Rs 18.80 billion, the present gap of Rs 8.33 billion is too much.
The second priority in balancing our trade position is with countries like Saudi Arabia with which trade deficit is Rs 3.42 billion, United Kingdom Rs 2.4 billion, West Germany Rs 4.19 billion, France Rs 1.2 billion, Holland Rs 1.1 billion, Malaysia Rs 4.5 billion, China Rs 2.3 billion and Kenya Rs 0.90 million constituting about 40% of the deficit. In the case of Saudi Arabia, we could increase our exports while reducing our requirement for oil, in other cases we have to break through against latent protectionism of the EEC countries. They give us quite a bit of aid, they should be encouraged to divert this aid to Eastern Europe while opening up their own markets to our cotton products so that we are able to finance our purchases through our own exports to these countries. As far as Kenya is concerned there seems to be something wrong with the figures which shows that we import about US$ 40 million (approx Rs 1 billion) worth of tea, in actual fact the figure is closer to US$ 120 million, probably buried in some Barter statistics.
The statistics do show an alarming trend towards stagnation in our exports, to fight this we have to increase productivity and target diverse export/regions. It is only when (1) we have sufficient exportable surpluses and (2) by getting protection barriers lowered that we will have an equitable Balance of Payments position.
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