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The economics of togetherness

Disparate economies have a natural propensity to blend, particularly in this world of hard economic choices. Given good faith and a sympathetic understanding of each other’s dilemmas, bilateral relationships between nations are apt to be increasingly bound by commerce, ties which are far more pragmatic and lasting rather those based on ideological symmetry. Though the approach must be decidedly practical in the place of motivated logic, pursuit of the singular aim of economic betterment through mutual trade tends to be more achievable in the modern world. Mr. Mushahid Hussain has recently been to Bangladesh and the sum total of his observations is that there exists tremendous goodwill for Pakistan among the general mass of the Bangladeshi people, despite the trauma of 1971. This great silent majority exists in Pakistan also, a yearning that the horrible mistakes committed by a motivated minority on each side has not been able to erase. It is time therefore, that in the name of millions of poverty stricken people in both the nations, our leaders proceeded beyond the paper agreements, cut across aimless rhetoric, and translated economic theory into mutually profitable practice.

The tragedy is that a structure for expansion of mutual trade in the form of a Special Trade Agreement between the two nations does exist as signed by their respective official Trading Corporations. There also exists a clear modus operandi to execute this agreement but it has floundered on a combination of bureaucratic apathy, sheer petty-mindedness and deliberate malfeasance. People who had no concept of trade came to the helm of affairs and their motivation was individual greed and/or narrow minded prejudice, the nett result being the virtual destruction of a tremendous concept, one that went beyond normal trade advantage to the realm of economic emancipation as conceived by our forefathers 48 years ago, almost to the day, in 1940.

In practical terms Bangladesh exists as a tremendous market for Pakistan, one that is tailor-made for a wide range of our commodities and products.

Bangladesh imports about US$250-300 million worth of raw cotton annually. Fully 80%, or about US$200 million worth is that particular quality that is grown and exported from Pakistan. Between US$50-100 million is covered by Commodity Aid and/or Grants by First World countries, and various donor organisations, but a substantial amount, between US$80-100 million worth, can be supplied by Pakistan, even in open competition. The prime importer in Bangladesh is the Bangladesh Textile Mills Corporation (BTMC), a fully government owned Corporation which controls the public sector textile mills, and which is a traditional buyer from the Cotton Export Corporation of Pakistan (CECP). If CECP exports between US$40-70 million worth of raw cotton to BTMC annually, this would amount to approximately 10% of all of Pakistan’s exports of raw cotton.

Due to the proliferation of the garment factories in Bangladesh, using cheap labour to produce high quality garments, Pakistan’s finished textiles have become a much needed import/re-export item for Bangladesh. Most of the flannel shirts made in Bangladesh on Designer Labels for the US and European markets are made of Pakistani cotton flannel. Similarly, our grey cloth is in extensive demand to clothe, after the process of finishing, a nation of over 100 million people.

Pakistan Steel produces pig iron and hard coke in abundance as by-products of the manufacture of steel. A sizeable quantity already goes to Bangladesh, courtesy of various Barters, why it fails to be sold direct can only be answered by a combination of Ministry officials and the Commercial Department of Pakistan Steel! If freight rates could be lowered, then exports of slag, cement clinkers, dolomite, gypsum and rock salt are possible. There exists great demand by the Bangladesh Petroleum Corporation (BPC) for lubricating oil of various grades.

Rice from Pakistan to Bangladesh needs no elucidation. A nation, perennially short of foodgrains for its teeming millions, needs the 2-300000 MT of Irri-6 and Sind Joshi parboiled rice that Pakistan, through the Rice Export Corporation of Pakistan (RECP), can easily supply. Bangladesh is a traditional market for our rice, contrary to the contentions of one of the former directors of RECP, who, thank God, has since been promoted and sent elsewhere to spread his innate wisdom. The recent deals for export of rice to Bangladesh are a real feather in the cap of RECP.

Bangladesh has the distinction of importing Pakistan’s first ever integrated machinery export, mainly the Natore Sugar Mills which was supplied by Heavy Mechanical Complex (HMC), Taxila to Bangladesh Sugar and Food Industries Corporation (BSFIC). A second sugar mill could also have been supplied to BSFIC but with the death of Mr KM Faruq, the then honest and dynamic Managing Director of HMC, all export activities of HMC fell victim to greed and nepotism, papered over by bureaucratic rhetoric without vision or commercial instinct. Experienced, brilliant but young, Mr. Faruq’s successor, Mr Zaheer Khan, paid the penalty of youth by being hamstrung by petty jealousies within HMC in taking export plunges. From HMC to its parent organisation, State Engineering Corporation, (SEC) extends a singular lack of expertise in export marketing that cannot be supplanted by foreign qualifications or camouflaged by bland rhetoric. There is a difference in the marketing of manure and machinery, and it is practical raw statistics of actual exports which will fulfil expectations of the public sector engineering units, not a flurry of theoretical mumbo-jumbo. Bangladesh happens to be a traditional market for Pakistani machinery and if you cannot sell low level lift pumps, power looms, sugar machinery, cement plants, machine tools etc, to Bangladesh, one has a hope in hell of selling anything anywhere else.

Bangladesh Shipping Corporation (BSC) needs upto 18 ocean going vessels in the next 3-6 years. Because of the low draught of Bangladeshi ports, Karachi Shipyard & Engineering Works (KSEW) can easily make the BSC requirement of multi-purpose ocean going vessels of between 15000-18000 DWT. At the rate of 3 vessels every 3 years, it adds upto 6 vessels in 6 years and the survival of KSEW without recurring losses each year.

Most of the exports discussed have been in the public sector but an equal amount of vendor industries in the private sector extending from Karachi to Khyber get into the act on their coat-tails as well as independently. The driving force has to be the public sector, now that a US$50 million credit announced to Bangladesh by Dr. Mahbubul Haq in November 1986 is officially available this month, 18 months later. This State-to-State credit is a meaningful instrument, provided that our public sector technocrats can make use of modern sales techniques and do not resort to a condescending attitude of “we’ve given them the credit, it is upto them to use it”. Despite the ever present example of credits available to us and the sight of lobbyists haunting Islamabad’s corridors exhorting us to do so. Our usual attitude is not to use agents or consultants, and if one is forced to use them, to deprive the hapless organisation of its commission on one pretext or the other, unless of course they happens to be a “favourite son”.

Pakistan can export commodities and machinery between US$150 to 200 million to Bangladesh annually, many many times the present figure and certainly much more than the measly US$10 million approximately executed in the TCP-TCB STA over the past 18 months of the STA being effective. The problem arises inasfar as reciprocal trade from Bangladesh is concerned. Because Bangladesh exports are limited as compared to Pakistan’s which are much more varied, ingenuity has to be applied to balance the trade.

Tea is a major import commodity in Pakistan and this realisation, after 16 years of rampant plunder and loot, resulted in an extremely innovative national tea trade policy announced by Dr Mahbubul Haq almost a year ago. Despite the fact that part of the implementation being left to an inefficient ignoramus in the Corporation sector, the policy is now gradually taking hold and one of the first movement has been the US$20 million worth of tea from Bangladesh under the TCP-TCB STA. This can perhaps be expanded to US$30 million now that Jodia Bazar does not feel its independence threatened by the mechanism previously being annunciated in official circles.

Contrary to popular belief, it was not politics but rather economics which led to the separation of Bangladesh from Pakistan. Economic disparity contributed to a psychological schism cleverly exploited by a vocal but motivated minority. The symbol of contention was raw jute, a main foreign exchange earner for Pakistan at that time. Real or imagined, the disparity existed and the schism became very real in the hearts and minds of the people of a single nation. Strangely enough, jute still remains a contention and long after the sad tragic demise of the then leaders of Pakistan, the players of the game remain the same, mainly the same jute industrialists, barring a few demises. Pakistan today owns the fourth largest jute industry in the world after India, Bangladesh and the UK. India and Bangladesh produce raw jute and their industries are necessary. Because the South Asian subcontinent was a slave economy pre-1947, the UK industry is similarly understandable. Why was it necessary to have such a large industry in Pakistan, to divert precious foreign exchange, electricity, water and other resources?

The nett result is that even though there is no duty on raw jute, the cost of a basic jute bag is almost double that of a C&F import from Bangladesh. As a protection to the local industry, the Bangladeshi bag has luxury duties imposed upon it, while that provides a “marker price” for locally produced jute bags to remain at a high price. At an average, the cost to the national exchequer is Rs:6.00/bag, ie, either in lost duties or extra price paid by public sector agencies if the bag is not imported. Since Pakistan’s requirements through PASSCO, DG Supplies, Provincial Food Departments, etc runs into approximately 150-200 million bags, the price Pakistan has to pay for this Golden industry to a handful of industrialists in real profits over and above their normal 15% runs to about Rs:1000 million annually. Precious electricity and water which could otherwise be utilised, has to be diverted to perpetuate this scam. This has to be the ultimate “Golden Fleece”. The tragedy is that even if someone in authority reads about it, no one takes much cognisance, the power of money being enough to still media attention.

Pakistan can safely import approximately US$20-25 million worth of raw jute under the TCP-TCB STA provided a similar simple mechanism is followed as for the import of tea. The reason why the jute industrialists will never agree to this is that the import of raw jute is a scam within a scam and unless their “mechanism” to collect the difference between the invoiced amount and the actual import price is in place they cannot accept it. Dr. Mahbubul Haq is not a great respecter of tradition and one is sure he will find some way to bring jute into the melting pot of the TCP-TCB STA. As much as one could do without the albatross of the jute industry, one must accept that its existence is real and one has to live with it. Approximately 10% of the country’s demand for jute and hessian bags is for the RECP ie about US$15-20 million. Leaving the other public sector agencies requirements to the local industry, RECP’s demands can be met from Bangladesh, at a saving of Rs:150 to 200 million annually.

The last major item is newsprint, of which Pakistan imports 50-60000 MT annually, about US$ 36-40 million at today’s prices. Khulna Newsprint Mills (KNM) supplied the whole of Pakistan with its 52 grams/sq cm quality pre-1971. Now, after Balancing and Modernisation it produces world quality 48.8 gms/sq cm, though the colour is not exactly Swedish or Canadian white. India finds it good enough to purchase approximately 24000MT annually, through the State Trading Corporation (STC), out of its annual requirement of 200000 MT. The price is approximately US$50-60/MT cheaper than the Scandinavian or equivalent quality, a saving to them of over US$ one million annually, no small change for Third World countries. Maybe a little sacrifice, especially on the part of our smaller, regional newspapers would allow us to purchase US$5-6 million worth or approximately 10000MT.

One can add to the pot by including paper from Karnaphuli Paper Mills, hardboard, bamboo pulp, telephone cables, etc. With all the additions, the exports to Pakistan cannot go beyond US$125-150 million, leaving a positive balance of approximately US$50 million in Pakistan’s favour and here is where the innovative Dr. Mahbubul Haq, sitting in the drivers seat as regards various Barters, Countertrades (CTs) and STAs are concerned, can really make the mare go. Where there is a will there is a way, and this is not an original saying.

Both the economies of Pakistan and Bangladesh are beset by innumerable problems and what better way to alleviate all this than by helping each other, by devising innovative mechanism and giving some sacrifice, albeit in the colour of newsprint. Faced by dwindling exports and growing protectionism, Third World countries need to look inwards at each other to ease undue economic pressure. Detailed facts and figures have been deliberately quoted in this article to serve as food for thought to whoever may read it. Perhaps it is time to exhort Dr. Mahbubul Haq to take a week off from his onerous pre-occupations, proceed to Bangladesh and come back with a five to seven year US$ 1 billion trade each way package. To those who think it is theoretical nonsense, one need only remember that the annual trade between the two wings of Pakistan surpassed a US$1 billion pre-1970! The prospect is not only feasible, it is eminently possible, that is if men with goodwill and enterprise exist on both the sides to truly take up the challenge. I believe the time is now ripe, the goodwill is there and the necessity has become acute.

Almost a year ago, I wrote a piece in THE NATION called “ECONOMIC CROSSROADS” wherein it was stated that “a lasting relationship that once existed between the two complementary economies of Pakistan and Bangladesh and then was destroyed is now not a vision or a pipedream any more, it has again become a hard reality, re-built and fostered out of the deep love and affection between the peoples of the two countries. The fabric that binds this relationship deeper must be economic. The political will of the two countries is to further strengthen this economic fabric and the crossroads have been reached from where the relationship will prosper or simply wither away.”

A year down the road, time is now running out all too quickly.

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