Trade for a more inclusive Pakistan

As I begin my first official visit to Pakistan as Executive Director of the International Trade Centre, the country is emerging as a relatively bright spot in a global economy clouded by volatility and uncertainty. On the back of macroeconomic reforms, reduced electricity shortages, and an improved security situation, the country is poised to register growth above five per cent for the first time in nearly a decade.

Yet these advances are not sufficient for Pakistan to meet its ambitious development goals of becoming the next ‘Asian tiger’ economy, exploiting its demographic dividend of educated and English-speaking youth, and reaching upper-middle-income status by 2025. As the Planning Commission has observed, this will require substantial productivity increases, greater diversification and improved competitiveness.

Trade could help Pakistan advance on all three fronts, while driving job creation and poverty reduction. Pakistan’s exports of goods and services total just over 10 per cent of GDP. The average for countries at its income level is over 20 per cent, suggesting considerable room to improve. Indeed, Vision 2025 targets a six-fold increase in exports, from $25 billion in 2014 to $150 billion by 2025. There remains large scope to trade with traditional markets such as the European Union, whose GSP+ offers important untapped potential, as well as newer markets such as Korea or the United Arab Emirates.

The emphasis on trade is deliberate. First, increased exports would take pressure off Pakistan’s balance of payments. More fundamentally, trade could help accelerate the country’s shift towards greater value addition. In developing economies, because tradable activities tend to be more sophisticated than the rest of the economy, getting people and resources out of subsistence work and into firms dealing in goods and services for the larger global marketplace tends to make for a more productive economy overall.

Ramping up Pakistan’s integration into the global economy will require investments in hard and soft infrastructure, as well as, crucially, in tying the two together. In the world of 2017, while better roads, ports, electricity, and broadband internet access remain a prerequisite for international competitiveness, the gains are far greater if they work in tandem with a more supportive policy environment, a deeper regional integration, lower trading costs, and institutional support for businesses to overcome obstacles keeping them from accessing digital and physical markets.

Swiftly implementing the World Trade Organisation’s Trade Facilitation Agreement would simplify border procedures and reduce customs clearance times and costs. This would enable Pakistani traders — especially the smaller enterprises that are disproportionately weighed down by expensive trading costs — to reap the full gains of the country’s investments in ports and highways. Upgrading the country’s truck fleet, expediting transit procedures and improving the efficiency of logistics services would enable Pakistan to capitalise on its role as a transit country for goods from Central Asia en route to Arabian Sea ports, using in particular the China-Pakistan Economic Corridor.

But improved trade performance is only a means to a higher end. That end is inclusive growth. To achieve it, two groups will be critical: small and medium-sized enterprises (SMEs) and women. SMEs account for the vast majority of jobs in Pakistan. When these firms are equipped to become more competitive and connect to overseas markets, it translates into higher incomes spread over larger sections of society. Yet growth cannot be inclusive so long as half the population is relegated to second-class economic status. Discrimination against women diminishes families’ well-being, companies’ competitiveness, and countries’ economic performance. The International Monetary Fund estimates that closing the gender gap in Pakistan could boost GDP by as much as 30 per cent, which would be a massive step towards the country’s aspirations.

Women’s economic empowerment is not a matter for policy, business action or social change alone. All have a role to play. That is why the International Trade Centre has launched “SheTrades”, a global initiative to connect one million women entrepreneurs to global markets by 2020. The initiative spells out seven areas in which governments, the private sector and civil society groups can pledge to remove obstacles holding back women-owned businesses. From repealing discriminatory laws and sourcing more from women-owned businesses to ensuring that they can access credit and connect to foreign buyers, these are just some of the important actions that could be taken.

The SheTrades initiative in Pakistan enjoys enthusiastic support from the government. Pakistani women entrepreneurs can already download the app and sign up at SheTrades.com to share information about their companies, expand their networks, and connect to buyers around the world.

As Pakistan looks beyond its 70^th independence anniversary to a more prosperous future, ITC stands ready to support its quest.

Published in The Express Tribune, February 2^nd, 2017.

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