Rationalising trade objectives
(This is the SECOND of a SERIES on the SUBJECT).
A cursory inspection of our trade figures does not really unearth the aberrations inherent in the patent and vested falsification of statistics, for that a detailed examination is necessary. Our trade with COMECON countries shows a negative balance of Rs 378 million (Rs 2.24 billion exports, Rs 2.04 billion imports) but this can easily be labelled as hogwash, except for the USSR hardly any on our exports go to or imports under Barter trade emanate from the COMECON countries or Sweden or Finland.
With the Soviet Union our trade this year shows a positive Rs 1.4 billion in exports compared to Rs 0.6 billion in imports, this pattern continuing since 1981-82, the reason being that we export quite a bit of ready-made cotton garments, in lieu our major imports is mostly for Pakistan Steel in the form of Machinery and Spares. At this time, the Soviet Union is in an economic crisis, desperately short of consumer goods, particularly cotton garments, we can increase our present exports ceiling from US$ 63 million to many times that in return for enhanced supplies of crude oil, machinery and spares. While it would not be seemly to gloat over the misery of any nation, USSR’s present economic problems can be converted into economic gain for us. We should aim to supply at least US$ 0.50 billion worth of cotton garments (Rs 11 billion worth), getting in return, mostly crude oil, thereby easing our supplies from Kuwait (trade deficit Rs 10.5 billion) and partly from Saudi Arabia (trade deficit Rs 3.42 billion). We must open commercially viable trade offices in Moscow, Leningrad and in some of the Muslim republics of Central Asia.
Our documented trade with the other COMECON countries is a calculated farce meant to line the pockets of some unscrupulous business elements in connivance with established gnomes within the Ministries of Finance and Commerce. After subtracting the figures of USSR our balance COMECON trade shows a nett surplus in 1971-72 of Rs 9 million (Rs 224 million Exports Rs 215 million imports), marginal deficit of Rs 9 million in 1972-73 Rs 297 million exports, Rs 306 million imports), 1973-74 deficit Rs 269 million, 1974-75 Rs 318 million, 1975-76 Rs 154 million, 1976-77 Rs 223 million, 1977-78 Rs 199 million, 1978-79 Rs 262 million, 1979-80 Rs 360 million, 1980-81 Rs 569 million, 1981-82 Rs 275 million, 1982-83 Rs 358 million, 1983-84 Rs 1097 million, in 1984-85 we had an export surplus of Rs 470 million which remained so in 1985-86 amounting to Rs 706 million, deficit again in 1986-87 of Rs 272 million, Rs 183 million in 1987-88 and Rs 1199 in 1988-89. The problem with the COMECON countries lies with both our exports and imports. Whereas all our Barters are supposed to be sovereign, that is all our goods are supposed to go to our Barter partner countries and vice-versa, in actual fact hardly any of our exports go to the COMECON countries or any of the imports come from them. This must qualify as one of the biggest SCAMS on the face of this commercial earth. Whether it is Czechoslovakia, Hungary, Poland, Romania or Bulgaria, the principle of having a sovereign Barter was that our partners were supposed to provide us with machinery and spares in lieu of our products and commodities, thereby avoiding laying out our hard cash in foreign exchange for imports of badly needed machinery and spares, while paying for the imports in kind from our produce. However out of 19 years of imports, total almost Rs 16 billion or US$ 727 million, less than 10% or about US$ 70 million has been for the purchase of machinery and spares, the rest has been DAP fertiliser from USA, Palm Oil from Malaysia, Wheat from USA and Australia, Sugar from Cuba, etc for all of which we have paid premiums ranging from 12 to 17% (after a sustained media campaign of 2-3 years it has come down to between 7.5 to 10% during the present Government). Taking the lower average figure of 12%, we have paid out about US$ 90 million EXTRA to the COMECON countries for the privilege of purchasing commodities from the international market instead of machinery and spares that we could have bought cheaper on the free market than the contracted Barter price. These COMECON countries have been expounding socialism but practice capitalism at our expense. Our goods and commodities have ended up competing against our own regular exports to our traditional markets, thereby causing a price depression of upto 5-10% in the case of raw cotton, rice, cotton garments, naphtha, molasses, hides and skins, etc, a severe average loss of US$ 75-100 million every year or cumulatively over 18-19 years of almost US$ 2 billion, more than double our total combined so-called exports to the COMECON countries over the past two decades.
The Barters with COMECON countries cannot be called sovereign, they are essentially Countertrade Arrangements like we have with SUKAB AG of Sweden and KEMIRA OY of Finland, even these are called Barters for some odd reason, they operated under the favoured nation status of a sovereign Barter. Most of our products go the same way as for Barter Countries, in some cases to our great detriment to even Third World countries, e.g. direct offer for pig iron and coke from Pakistan Steel to Bangladesh have been invariably undercut by lower indirect offers via Sukab. Under the SUKAB and KEMIRA Barters our raw cotton goes to Manchester, rice, naphtha, molasses hides and skin, etc to various destinations in some of our other traditional markets which have been eroded by our senseless Barter Agreements due to shameless, criminal conniving between unscrupulous elements. While Pakistan was supporting the Afghan Mujahideen in her life and death struggle against the Russians in Afghanistan, our financial gnomes were giving the “Most Favoured Nation” treatment to the COMECON countries, Sweden and Finland. At the same time Mr Mukhtar Masood, then Commerce Secretary, ensured that the Countertrade experiment with FOUR Multi-Nationals (MNCs) Mitsubishi (Japan) Prudential-Bache (USA) Sucres at Denrees (France) and M G Services (Germany) was stillborn simply by the bureaucratic subterfuge of not allowing an IMPORT LIST. When each of the MNCs reached the swing limit of US$ 5 million in their exports, they came to a dead stop, the CTs subsequently died a natural death out of sheer economic frustration.
Lip-service is paid to machinery exports yet our total actual exports upto date amounts to only 2 sugar mills, one to Bangladesh and another to Indonesia. Our official trade delegations almost never go to our traditional markets in the Third World, on the contrary they invariably head west to greener pastures in Europe and the USA. Our prime export house, the Trading Corporation of Pakistan (TCP), which was coming up exceedingly well under Mr Mohammad Yousuf as Chairman (now Secretary Ministry of Religious Affairs) was almost destroyed by the single act of sending a due for retirement bureaucrat as Chairman. Mr Mukhtar Masood for some odd reason decided to gun for Mr Yousuf and chose Mr S.Habib Husain as Chairman (or hitman) to undo Mr Yousuf’s export achievements while trying to ensnare him on charges of corruption. Dr Mahbubal Haq agreed with Mr Mukhtar Masood’s choice for a different reason, Mr S. Habib Hussain’s younger brother, Shahid Husain, is in the No 2 slot in the World Bank and one can never accuse Dr Haq for lack of foresightedness in respect of future potential job opportunities being a consummate international bureaucrat, Dr Haq’s politically-inspired historic jig of joy (what passed for “Luddie”) at the election of Mr Fida Mohammad Khan (short-lived) as PML President (in place of former PM Junejo) notwithstanding. Mr S. Habib Hussain almost retired TCP along with himself. While he is presently facing charges of corruption by FACC in a major scandal involving sugar imports by TCP, the greater indictment should be his merciless destruction of TCP, the point Corporate export unit of Pakistan.
We are very ambiguous about the role of the Export Promotion Bureau (EPB), without making it into a commercial entity how can we expect it to perform a commercial role? In the presence of TCP, EPB becomes an anomaly, one that is a constant drain on the Federal exchequer. Whereas we should have commercially viable offices in all our main export target countries we rely heavily on Commercial Counsellors/Attaches attached to the Pakistan Embassies, a bureaucratic arrangement which is basically non-productive, honourable exceptions being always there. This is not an economically progressive prospect because there is no direct relationship between performance and profit, the essence of commercial existence. The Export Promotion Bureau must become a performance/profit-oriented Corporate unit controlling all the public sector export opportunities.
In order to revitalize Pakistan’s trade we have to (1) Target PRIMARY and SECONDARY countries for exports (2) Assess and list our imports requirements (3) Make (a) aforementioned compatible with (b) i.e our imports to each country or region to be paid out of export proceeds along the aforementioned lines, a direct linkage (4) Revise our trade agreements along these lines, especially (a) Special Trading agreements (STAs) and (b) Countertrade Agreements (CTs) with special emphasis on Offset Trade in the Defence field (5) Reorganise our public sector export institutions with maximum emphasis on commercially viable offices abroad and (6) maximise the potential of our manpower in export oriented ventures. The name of the game is to de-centralize and de-bureaucratize if we have to narrow deficits in our Balance of Payments. To accomplish this in an organized manner we must ensure a well researched and comprehensive plan of action, as our burgeoning trade deficit shows we are running out of time — and options
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