Trade and health: planning for mass protection

Surge in exports compared to the earlier Covid-related slump continued into the month of November 2020.

Adviser to Prime Minister on Commerce and Investment Abdul Razak Dawood made a thread of tweets in early December to emphasise not only the export growth but also the evolving export basket of Pakistan.

The tweets include provisional figures that indicate a significant growth in exports of home textile, pharmaceutical products, rice, surgical goods and women garments, all increasing more than 10% year-on-year.

The adviser also announced the release of Rs1.78 billion under the Drawback of Local Taxes and Levies (DLTL) scheme to resolve liquidity issues and enhance exports.

Furthermore, the PM aide reported a decline in exports of cotton yarn, cotton fabric and raw leather, suggesting that there is likely a shift in the export basket from low value added to higher value added products as Pakistan increases exports of finished textile products and clothing articles.

Lastly, exports to Vietnam increased 121% and to China, the UK, Italy, the US and France by more than 20%.

Considering the data of Pakistan Bureau of Statistics (PBS) on imports into Pakistan in October 2020, in dollar terms there was a 790% increase in imports of raw cotton, 67.6% increase in imports of synthetic fibre and 30% increase in imports of other textile items. The overall textile group reported an increase of 76.58% in imports.

Furthermore, there was an increase in imports of textile machinery from $27 million in October 2019 to $46 million in October 2020, a year-on-year rise of 69.24%. The increase in imports of textile machinery is essential to not only expand productive capabilities of textile producers but also to ensure higher productivity levels by upgrading the equipment. This trend must continue.

There was a significant increase in imports of sugar, wheat and pulses in October 2020. Interestingly, there was a sharp contraction in imports of mobile phones in October 2020 as they decreased $125 million from the value reported for September 2020.

Apart from these, there was a 235% year-on-year increase in imports of completely built units (CBUs) of motor cars, suggesting some revival in imports of the transportation group that had been curtailed in response to the rising trade deficit over the past few years.

The surge in imports could be attributed to the reopening of foreign markets and increasing demand after lockdown.

As exports increase and provide the country with much-needed foreign exchange reserves, measures must be taken to ease import restrictions in order to boost pro-competitive forces within the country and ensure more efficient distribution of goods in the market.

Statistics handbook

The United Nations Conference on Trade and Development (Unctad) recently published its Handbook of Statistics 2020, presenting the statistical landscape for 2019 along with forecasts for 2020.

It expects the value of merchandise trade to fall 5.6% in 2020 over the value reported in 2019, which is an optimistic view compared to figures released earlier in the year.

The report released in September 2020 indicated a decrease of 16.2% in trade value and 15% in trade volume quarter-on-quarter in the second quarter of 2020. However, the third quarter was predicted to record a strong recovery as merchandise trade volume and value was likely to increase 13.7% and 8% respectively quarter-on-quarter.

However, the year-on-year decline in exports is expected to be 11.9%. Exports in the third quarter increased 39% quarter-on-quarter in Pakistan while the year-on-year decrease was 0.65%. Pakistan has fared much better than the global average.

The decline in services’ trade, predicted in the Handbook of Statistics 2020, will exceed 15%, which is more than the fall of 9.5% reported in 2009. The plunge in services is mostly due to travel, tourism and transportation restrictions.

With significantly lower levels of exports of services from Pakistan relative to its counterparts, it is unlikely to have a major dent on the country’s economy.

Extracted from the State Bank of Pakistan, total exports of travel and transport services was $68 million in October 2020 compared to $119 million in October 2019.

Covid threat

The biggest challenge Pakistani policymakers face in the near future is to import vaccines and other medicinal products to mass-protect the population from Covid-19.

Defining Covid-related medicinal products according to the World Custom’s Organisation classification, jointly prepared by the World Health Organisation and released in June 2020, Pakistan has a limited basket of exports. It is mostly concentrated in ethy-alcohol used as disinfectants and sterilisation products, medical and surgical instruments and tents for makeshift hospitals.

On the other hand, it imports a wider range of Covid-related medicinal products that include medicaments, irradiation equipment and oxygen plant equipment used in hospitals. Furthermore, Pakistan imported $249 million worth of vaccines for human applications in 2019, according to the ITC’s Trademap.org. The two largest sources of imports for Pakistan are Belgium and France, from which it imported $89 million and $62 million worth of goods respectively.

Although it imported $45 million worth of products from India, this has increased from $8.7 million reported in 2015. Pakistan imported goods valuing at $3.4 million from China.

Belgium was the largest exporter of vaccines at $9.4 billion in 2019, followed by Ireland and France at $5.3 billion and $4.3 billion. India exported $755 million worth of vaccines and China $113 million.

As countries around the world scramble to import vaccines from their major producers, it is likely that pre-existing trading relationships between countries that involve domestic and foreign pharmaceutical companies will play an important role in ensuring that the vaccines are made available.

Challenges may include but not limited to the economies of scale in goods delivery, regulatory harmonisation in terms of quality and standards as well as protection of intellectual property involved in producing the vaccines.

In essence, the government must use the extra cushion it enjoys from rising exports and improving current account balance to effectively deliver the weapon of mass-protection to its population.

The writer is the Assistant Professor of Economics & Research Fellow at CBER, IBA

Published in The Express Tribune, December 14^th, 2020.

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