Third World trading vehicle – The need for a structural change
(This is the FIRST in a series of articles that will attempt to analyse our present system of EXPORT TRADE and recommend suitable alterations).
OVERVIEW – I
Pakistan has a host of problems, most of which stem from enhanced expectations from an un-balanced economy. Though Pakistan’s economic growth has been impressive, the measuring scale has been Third World standards. For a country, burdened by inordinate increase of population, not only by means of birth but by the fact that we are a haven for refugees from adjacent lands, more than three million from Afghanistan alone, comparison by such standards is not good enough. This mushroom growth, especially in our urban areas is neither planned for nor bearable and places a strain on our resources much beyond our present capacity. The net result is that Pakistan’s biggest problem remains the economy. Despite salutary advances in industry, there has been no coherent system of ensuring coordinated progress in achieving national material aspirations.
As the state of the economy deteriorates it acts as a “force multiplier” on the many schisms developing within the body politic. To add to Pakistan’s problems, the external dangers have placed an additional financial burden because of enhanced defence outlays. Political problems can only be solved by political dialogue but when economic problems complicate the issues, strong firm action is necessary to arrest the state of deterioration. The national policy should be to reverse the trend and aspire to ameliorate the economic lot of our masses, for the present and the future.
We could quote statistics back and forth to Kingdom Come but it would be useless. What should concern us is that our cultivated area has declined on a capita basis by almost 25%, from 0.4 hectares per capita in 1971-72 to 0.3 hectares per capita in 1984-85. Coupled with this is the fact that Pakistan’s growth rate in the industrial sector has got to be 20% per annum to absorb the 3% per annum increase in the labour force.
Pakistan, with its rice and raw cotton, has a strong agriculture base and is twice blessed, not only does it produce enough for its own needs but has a substantial export surplus. This export surplus represents a major hard cash foreign exchange cover for Pakistan and is under state control through the Rice Export Corporation of Pakistan (RECP) and the Cotton Export Corporation of Pakistan (CECP). Rice and raw cotton are key resources for Pakistan and despite all the drawbacks associated with state control, one has to accept that it is necessary, as necessary as the Saudis feel about their oil, Sudan about its raw cotton and so on. Third World countries have to have mixed economies and bureaucratic apathies notwithstanding, the national material interests dictate that it be so. This should not be taken to mean that private sector participation is to be excluded. The essence of a mixed economy has to be an amalgam of the public and private sectors interest devoted to the national aim of general “life improvement”.
We usually indulge in a plethora of facts and figures designed to show marked improvement in our GNP but we are fooling nobody but ourselves. The acid test should be the level of “life improvement” for the common man. Is his lot better or worse than what it was ten years ago? 20 years ago? If so, by how much?
Do his children get a better education? Health facilities? And what is the cost of living? Food? Clothing? Housing? Transportation? etc etc. The answer I am afraid, with a few honourable exceptions among the general populace, would be a universal NO.
Not to say that Pakistan has not advanced significantly into the modern age. We are accused of having the capacity to develop nuclear weapons. We manufacture a large part of our own sugar mills, cement mills and other industrial machinery. A large number of consumer items previously imported are now produced domestically. A wide spectrum of progress has been achieved —but not enough and not soon enough.
At the same time, because of our migrant workers in the Middle East and their repatriated hard earned money, life expectations and aspirations have undergone a radical change. A segment of the populace has been blessed with a standard of living which is denied to the larger population. This by itself has created a “keeping up with the Khans” syndrome and siphoned off large funds in foreign exchange for luxury goods that we can ill-afford in our present impoverished economic state.
Export earnings to balance our deficit needs has become a matter of survival, a desperate need if you may, which unfortunately is not balanced by the indolent and routine manner in which it is being dealt with at the moment. One perceives a “laissez faire” attitude, a lack of definite commitment to aims and objectives, priorities far divorced from the basic needs. A momentum had been established and we are going on and on, hobbled cruelly by the insensitive crutch of daily routine, while around us are the portents of economic disaster.
Rice? With competition now emanating from the US, the markets have become scarce, the price margins much lesser.
Raw Cotton? With competition from China, we are finding it increasingly difficult to find better prices — and losing ground in traditional markets.
Carpets? The market has bottomed out, the slump being kept from being terminal because of production dislocation in Iran (and Afghanistan).
Textile Yarn? Quality conscious, the main markets of Japan, Hong Kong, Taiwan are becoming increasingly difficult.
Textiles? Quotas imposed on us, without much resistance from bureaucrats removed from reality, are crippling our industry. Naphtha, Molasses (and for sometime urea fertiliser) gives us some additional hard cash, but the general prognosis is bad. The test and analysis thereof goes on and on. Paper effort has gone into the export of non-traditional items and the results have been far from satisfactory.
Weapons and allied defence equipment? 40% of the world trade is in the Arms Bazaar while our export effort is less than 1% as compared to more than 30% in the form of defence outlay in our foreign exchange budget for imports.
We have a policy but no coherence. We have no national aim in this respect, a clear annunciation of objectives, the coordinated means to accomplish them or the will to implement them. In the days of Field Marshal Ayub Khan a basic platform was established which is still carrying us for the time being. The PPP regime translated some facts into basic realities but went to the other extreme with sweeping nationalisation. Instead of keeping to a basic mix of public and private sector participation which was a sound policy, their efforts scared the industrialists witless — and made traders (and expatriates) out of them. A basically superb policy of a mixed economy became a source of confused signals to potential investors, within and without Pakistan. The very bureaucracy PPP set out to harness, used the harness to hold a tight rein over industries they had not the foggiest idea in running — and blamed the PPP for its ultimate ruin.
The Japanese perfected this policy in the era of General MacArthur’s reign over Japan after the Second World War. The Japanese bureaucracy never rejected any commandment of their American overlords at the time, they simply “reversed them in the belly” ie. did what THEY wanted to do but when they could not be seen. This is true of all bureaucracies, usually peopled by honest and competent men, but prone to routine, lack of innovation and the perfected technique of inordinate delay. All this may be perfect for running an administration in the early 50s. In the 80s, they spell disaster in any language.
The paradox is that we need most of these competent men of the bureaucracy, especially the honest, hardworking ones, to give some method to our general madness of disorganisation in everything. To that extent, some Corporations are necessary, viz the Trading Corporation of Pakistan (TCP), the Cotton Export Corporation of Pakistan (CECP), the Rice Export Corporation of Pakistan (RECP), State Refinery and Petroleum Corporation (PERAC), State Engineering Corporation (SEC), Karachi Shipyard & Engineering Works Ltd (KSEW), etc. These are under the Ministry of Commerce, Production and Communications.
Like the Japanese Ministry of International Trade and Industry (MITI), we have to have a coherent export policy designed to incorporate all the public sector enterprises giving at the same time a practical base to our private sector to export non-traditional items besides textiles, textile yarn, woollen, carpets, fish and shrimps, sports goods, etc.
In this respect, we need to carry out some basic structural changes, bring the entrepreneurship of private sector interests into the present system not only to maintain checks and balances but also to bring in enterprise and innovation.
These structural changes are necessary before we can define attainable targets for an all out effort. Before we undertake these changes, a deep and factual study of the Corporations and their objectives is necessary, with emphasis on both the positive and negative aspects. However, because of the limitations imposed by time and space, we have to confine ourselves to a general outline of our requirements and hope these can form the basis for a full-fledged plan of commercial operations.
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