Is market access enough?

Winning over trade concessions from the European Union and the US may not be of much help to Pakistan.

KARACHI:
Winning over trade concessions from the European Union (EU) and the US may not be of much help to Pakistan as energy shortages, security challenges and lack of competitiveness impede the growth of industry.

These issues have plagued manufacturers of different products for years and industries in Pakistan have found it hard to compete with regional rivals like India, China, Sri Lanka and Bangladesh in international markets.

EU finance ministers are discussing lowering tariff barriers for Pakistan this week in the wake of the disastrous floods that have dealt a harsh blow to the local economy.

Hopes are high that the EU may offer some concessions which are expected to give Pakistani textile makers an additional $55 million in exports, reports say.

Businessmen and experts are of the view that besides acquiring market access, a host of other issues need to be tackled to enjoy the fruits of duty concessions, if any, from the EU and the US.

“The government should seek access to markets but this may not significantly benefit industry, which requires uninterrupted power supply and reduced cost of utilities,” economist A B Shahid said while talking to The Express Tribune. “If the power shortfall is not addressed, we will not be able to capture international markets,” he added.

Khurram Shehzad, Research Head at Invest Capital, said that industry can enhance its share in the world market by going for an increase in competitiveness. This includes adopting latest manufacturing technology, controlling wastage of resources – particularly energy, improving labour productivity and aggressive marketing.

Textile has a 24 to 26 per cent share in overall exports to EU countries. However, “energy shortage and law and order issues pose a risk,” he said.


“Pakistan has the potential to compete with China as Pakistani labourers get an average of $80 per month in wages compared with the $300 to $325 received by Chinese workers,” explained Shehzad. This means local manufacturers can produce at a much lower cost than the Chinese.

However, former chairman of the Site Association of Trade and Industry, MA Jabbar, was of the view that in practical terms local products are expensive compared with those from less developed countries like Bangladesh which export at preferential tariffs.

He also stressed the need for diversifying exports in a bid to enhance earnings. “We should think beyond textiles, it is not the only issue and the government should focus on other sectors as well while seeking market access.”

The share of textile in total exports of the country has already dropped from 60 per cent to 53 per cent, he said.

Many countries have also called on Pakistan to adopt international environmental standards, a hot topic of debate in recent years as industrial gases and untreated waste have caused a marked change in world’s climate. “The four effluent treatment plants in Karachi are not working properly and millions of gallons of industrial waste remain untreated,” Jabbar added.

President Lahore Chamber of Commerce and Industry, Zafar Iqbal, said Pakistan has less than one per cent share in total US imports and tariff concessions may give a boost to the industry. “Negotiations on market access are going on and a positive outcome is expected in coming days,” he said.

But it is yet to be seen how much of a boost market access can give the local industry in absence of the basics.

Published in The Express Tribune, September 14th, 2010.
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