Mangoes for F-16s
(This is the SECOND in a series of weekly articles which will attempt to explore the advantages/disadvantages of barter/ Countertrade as opposed to the liberal trade policy in vogue in Pakistan).
We have discussed how Turkey partly paid for its F-16s in the form of tomatoes. Before being reviled and derided for giving simplistic solutions to complex problems further complicated by availability, let me state here that the various circumstances may be different, USA and General Dynamic may not like to exchange our mangoes or anything else that we can sell, for their F-16s, which we do need, irrespective of the fact that we may not be able to sell our mangoes for F-16s.
However, there are items other than F-16s which are among our first of requirements, but the need is not so great that we cannot bargain to offset the purchase with the sale of our products commodities and services. In this respect much richer Muslim countries than ours like Malaysia and Indonesia clearly specify that if you want to obtain a purchase contract from them, you have to accept some items which they may like to sell to you.
In Malaysia, they go one better. Malaysia also provides a list of export agents who, for a fee, take on the responsibility of exporting the goods and commodities for you from Malaysia. This is known in business circles as the Malaysian role model.
If comparatively richer countries like Malaysia and Indonesia insist on Countertrade as a means of any purchase made by them, why should we in Pakistan act as the “wild west” for the various salesmen and traders of the world? And Countertrade may not be confined to the Defence Sector, but the whole of the public sector and even parts of the private sector.
We should prepare a list of commodities, products and services that we import in the public sector — and give out the contracts to these parties only which agree to purchase commodities, products and services in return. The correct solution would be to achieve zero balance, however, we may in the beginning, till the system works, even accept to have a mix of Cash and Countertrade.
This is more easily said than done. The prime among these who will oppose this will be :-
a. Those international companies supplying goods, commodities and services against cash or credit.
b. These countries which have a favourable balance of payments position in their favour.
c. The various barter partners of Pakistan, with the exception of China.
d. The local businessmen (and their nominees in the Government) representing the interests of the above individually and collectively.
e. Supposedly some black sheep from among the many honest bureaucrats in the Ministries and Corporations who are benefiting individually from the above. If not, they will neither oppose this either by word or deed, or the silent time honoured method of delaying tactics.
Take the sale of Turbines to WAPDA for Mangla or Tarbela. At this point of time, what is the agreed route? A straight cash sale to WAPDA, depending upon WAPDA specifications in cash under credits available to Pakistan and WAPDA, from international lending agencies or tied loans offered by the manufacturers themselves. There is no reciprocation and Pakistan pays through its nose for many long years in the form of instalments on the Principal sum and the interest thereof. Maybe the company or the country selling the Turbine could be encouraged to take part payment in goods, commodities and services. A recent protocol has been signed with Czechoslovakia approximately under this same barter arrangements. Even with its many pitfalls under the procedure followed at the present time, Barter is still better than under cash or credit. Perhaps among the export list Czechoslovakia has to purchase from Pakistan, there will be a balance of 70 to 30 weightage in favour of the non-traditional items, so that non-traditionals, have an opportunity to leave the shores of Pakistan for Czechoslovakia.
Barter or Countertrade therefore not only provides zero balance in foreign exchange, it acts as a boost for non-traditional exports. Perhaps Czechoslovakia may be persuaded to take a few mangoes from us or our traditional handicrafts, as part payment for its Turbines.
Similarly we have a number of public sector entities that import quite a large proportion of their requirements in cash foreign exchange available from our Foreign Exchange reserves or credit (tied or otherwise). WAPDA, Pakistan Railways, KESC, Pakistan Steel, OGDC, SUPARCO, PAEC, etc etc. Why cannot their needs be met under barter and/or Countertrade?
We have brilliant and educated men like Mr Mahbubul Haq and Mr. Sartaj Aziz in the Government. How can we be led to believe that such a self-evident National Policy cannot be drafted in the space of a few hours of ONE day. Are we to believe that the Prime Minister is not getting the right advice in this respect and that the deep silence is motivated out of political consideration at an enormous cost to Pakistan?
One can understand to a certain extent, albeit most reluctantly, the present structure as it existed in the past but one cannot accept its existence to continue into the future. In some cases, we have literally gone overboard eg. tea is one of them. At last count, tea worth over US$150 million annually was imported into Pakistan and what did we export in return? Almost nothing!
Let us examine where the tea comes from Kenya, Indonesia, Bangladesh, Sri Lanka, China, Argentina, India, being among the majors. Whereas some sort of a balance of trade does exist with Bangladesh, Sri Lanka, China and India, there are hardly any exports from Pakistan to Kenya which sells to us US$60 million worth of tea. Why should we buy tea from Kenya? Just because the flavour is better than that from the other countries? Are we to believe that Kenya does not import anything from anywhere?
Kenya happens to be the type of market that can absorb Pakistan’s engineering goods among other items. As long as they import something from us we will not insist they purchase our mangoes.
Which brings us back to the subject of F-16s and our mangoes. Could we conceivably purchase some more F-16s asking General Dynamics that they could take our raw cotton, rice, naphtha, molasses, shrimps, cotton textiles (non-quota), engineering goods etc — and some mangoes. If USA and General Dynamics are reluctant to give us some F-16s for reasons other than the purchase of mangoes, there may be other items they are more than keen to sell to us and it behoves us as Pakistanis to try and sell our non-traditional items like mangoes, handicrafts, shrimps etc to them at least in part payment. Mangoes for F-16s may seem very amusing in the lines of this article but it is not. Ours is primarily an agricultural economy and the masses of our population live in the rural areas. God has given us bountiful lands and we have the capacity of producing fruits and vegetables in further abundance. If we can export these to foreign countries, we will have given a boost to the rural economy, provide jobs in the countryside, give an impetus to the agriculture based industry and stop the mass migration from rural areas to the big cities, with all the other mushrooming problems associated with it.
Mangoes for F-16s is a serious subject and gives food for thought to our planners (and that is no pun!).
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