The last Mango
(This is the TWELFTH and CONCLUDING part of a series of weekly articles which has attempted to explore the advantages/disadvantages of Barter/Countertrade as opposed to the liberal policy in vogue in Pakistan).
About 2 years ago, on May 16, 1985, the present democratic government took a decision which was both progressive and dynamic, through the National Economic Council (NEC), to use Countertrade as a new instrument for aggressively exporting Pakistani products and commodities.
Mr. Salim Saifullah, the then Commerce Minister, and Mr. Mahbubul Haq, the then Finance Minister, were the principal proponents of this new trade mechanism, which peripherally ran afoul of GATT and IMF. The Ministry of Commerce, which was given the task of formulating a coherent Countertrade policy, in its meeting as early as May 23, 1985, (such was the urgency then being felt), gave a mandate to the Trading Corporation of Pakistan (TCP) to invite offers of Countertrade (CT) from the Multi-National Companies (MNCs) of the world, and duly submit their recommendations. These offers were not to be formal invitations from the Government of Pakistan and as such TCPs use was just an effective conduit, circumventing probable IMF/GATT repercussions.
Between May and September 1985, more than 50 MNCs of various sizes applied to the TCP for consideration of the CT, while a few went more directly to the Ministry of Commerce. After an elaborate evaluation procedure, orchestrated by the Ministry of Commerce, a short list of ten companies was drawn up which included some of the biggest CT players in the world. However, somewhere between September 1985 and January 1986, the Ministry of Commerce (MoC) lost its former urge and drive to impel CT forward as a worthwhile tool for generating necessary exports.
The main reasons for this surprising loss of enthusiasm seem to stem (1) from a severe personality clash within the bureaucracy and (2) the choice of “favourite sons” for CT partners among the MNCs.
Thereafter benign neglect became the instant name of the game. No bureaucrat has ever been convicted for murder by using benign neglect as a blunt weapon but this happens to be the surest form of killing any project which runs afoul of the bureaucracy’s desire in Pakistan. The present slaughter can be labelled as infanticide because a senior bureaucrat who was most loquacious and insistent about CT’s need in Pakistan between May and December 1985 and whose privilege it was to oversee the furthering of this process, saw his choices of MNCs overturned and thereafter let matters slide into an indulgent straitjacket of inaction.
The period between the Januaries of 1986 and 1987 saw some milestones at intervals for CT, mostly for historical effect and very little economic interest. The stage has now been set for proving that CT was a total failure. Within the parameters of the agreements and the different interest levels of TCP and MoC, the CT experiment in Pakistan will expire around about June 5, 1987, and all the King’s men will only put it together again when and as it suits their individual vested interests.
It is very easy to name names and lay blame at someone’s specific door but beyond causing that particular obdurate gentleman to dig down further in the cause of general obstructionism, no real gain can be expected. It is enough that the media brings it to the attention of the elected representatives and hopes (and prays) for the best.
Countertrade can never be imagined to be a total solution. It cannot begin to effectively and completely substitute exports under hard cash and no attempt must be made to do this. However, on the other hand, liberal imports of luxury goods and commodities should definitely be totally tied to exports as well as such machinery and equipment which could very well be made in Pakistan on an OFFSET programme. In this manner, Indonesia is making components of F-16s in their Nusantara Aircraft Industries, as well as for helicopters of US and French origin.
The aim of writing this series on Countertrade was to evoke some response from the elected representatives and the bureaucracy.
Some home truths are self-evident:-
a. Countertrade is a necessary trade mechanism for boosting exports inasmuch as, nearly all the countries of the world are in various stages of development of this process.
b. Pakistan has the intent to develop Countertrade but is hampered by vested interests deeply entrenched in the bureaucracy especially those favouring Barter.
c. For this trade mechanism to smoothly operate, establishment of a National Countertrade Authority (NCA) is necessary. By merging TCP and EPB together, both presently under the MoC, a new streamlined operation is envisaged incorporating clear aims and objectives under the guidelines of a definite policy.
d. Barter agreements must remain what it is, a sovereign acceptance of bilateral reciprocal trade between Pakistan and the individually concerned non-IMF countries. At present the system is being deliberately misused actually as Countertrade. This not only defeats the purpose of Barter but has encroached upon the effectiveness of Countertrade. Barter must come under the purview of the NCA so that a professional day-to-day control is maintained.
e. The NCA must look towards genuine OFFSET programmes so as to give a strong fillip to the local industry, especially the skilled and semi-skilled manpower.
f. There must be a definite national aim of maximising export productivity in the defence sector, both to defray rising defence foreign exchange expenditure and to purposely exploit an inherent potential derived by our defence expertise present in the Muslim and Third World.
g. Short shrift should be given to machinery and equipment suppliers who do not propose any significant TRANSFER OF TECHNOLOGY backed by OFFSET programmes as a general part of CT.
h. A definite co-relation between expenditure on imports and revenues on exports must be established to cut down on our continuing need of AID and CREDITS by instituting a zero balanced foreign exchange ratio.
j. Commitment to opening up new markets for our finished goods can be enhanced by exploring areas that demand less sophisticated goods e.g. part of the Islamic World and South Asia, Africa and the rest of the Third World. Reciprocity can be enhanced and enlivened by working through selected MNCs who have necessary expertise in these areas, both to sell our goods/commodities and pick up our CT obligations.
k. Great help can be obtained from our two great SUPER-POWER friends in the form of Reciprocity of trade and integration of industries as discussed in earlier articles.
All said and done, the buck stops at the desk of whoever is the Minister for Commerce and who happens to be an elected representative of the people. The nature of Pakistan’s capability to earn foreign exchange will be determined by the positive influence that he can wield on his subordinate, and at times recalcitrant, senior civil servants, some of whom have functioned as willing MOLES of various vested interests whose pocketbooks are being threatened by the advent of Countertrade, i.e until they can learn the business and climb onto the bandwagon. Please look up the Barter Agreements, Mr. Minister, and compile a list of items which have been deleted or tacked on after the signing of the agreements, specifically the origins of phosphatic fertilisers and Palm Oil, which certainly do not originate from Czechoslovakia, Hungary, Finland, Sweden, Bulgaria, etc. If you can stop this highway robbery of switching various items around to those which do not even originate from our Barter partners, while at the same time giving them up a steep MARK-UP to boot, you would go a long way in making Barter really effective — or simply call it CT because that is what it really is, without the dupe of sovereignty thrust on us.
One can write an ode on this subject to the Minister but if the spirit is unwilling or weak, even singing will not save our mangoes from rotting in their trees.
The catchwords for progress in CT are reciprocity and incrementality. The watchwords for avoiding failure are coordination and responsibility. A CT Czar has to be appointed in the form of the MD of the proposed NCA and he must be made totally responsible to ensure coordination of operations without bureaucratic delay between the concerned Ministries, while ensuring that CT not only fulfils its primary purpose of additionality to our present exports but as a secondary purpose targets feasible industrial development linked to OFFSET programmes.
No solution is a complete one and, therefore, all solutions must remain open to change. All solutions are prone to faults and that further necessitates change. The aim of this series was neither to sit on judgement on our bureaucrats nor to deliver pre-conceived syndicate solutions but to point out that our economy is in a sorry state because of misconceived liberal attributes fostered on us by the IMF despite our problems being complicated in the face of growing protectionism by the developed countries. Inaction is the hallmark of poor leaders though they often try to hide it under the guise of reserve and patience. Poor nations cannot afford the luxury of having poor leaders, particularly in the economic field. Dynamism, raw and unfettered, is the need of the hour if our economy is to catch up with our population expansion. Commerce is the lubricant to prosperity and must be nurtured along at a fast, unrestrained pace in the adverse conditions of today, but not necessarily without tying imports to exports.
We have only few options left in the face of growing economic malaise. If we do not act now, we might soon find ourselves down to the last mango.
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