Work hard: Trade a matter of exchange based on competitiveness

Published: February 22, 2015
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An open letter from the Turkish prime minister to textile tycoons.

An open letter from the Turkish prime minister to textile tycoons.

ISLAMABAD: 

Dear textile tycoons of Pakistan,

When I arrived in Islamabad last week, a quarter of newspapers’ front pages was covered with appeals to Turkey to give zero-duty status to Pakistani textiles. I am now responding to these appeals.

I would like to start by narrating history. In 1990, Turkish textile exports were half that of Pakistan at around $1.4 billion, when your country was exporting textiles worth $2.6 billion. By 2000, when Pakistan’s textile exports were $4.5 billion, Turkey was still behind at $3.6 billion.

However, by 2010, our exports touched $9 billion, while Pakistan’s could not cross $8 billion. In 2012, our exports were 25% higher than Pakistan. This has continued. We have taken 25 years to come at this stage. Our total exports now are more than $210 billion, up from $57 billion in 1998. Today, Pakistan’s total exports hover around $25 billion.

When I read your advertised appeal to me to allow duty-free status under the GSP Plus scheme to your products, I was astonished. Turkey did not use such special status to achieve the current level of progress. We worked hard. We designed better products and produced more.

You wrote that the “award of the GSP Plus status to Pakistan will not be a big burden on Turkey but indeed be a boost to Pak-Turkish trade.” This status has been awarded to Pakistan more than a year ago by the European Union, but I understand that this has not tremendously helped its textile exports. Pakistani textile exports have fluctuated around $700-800 million a month in the last six months instead of showing any spike.

Energy shortages

Indeed a major reason is the energy situation. Let me, therefore, comment on the accompanying ad, in which you implored your government to give you continuous gas supplies. I indeed have full sympathies with you here.

However, please note that instead of asking your government to divert gas to textiles, you should ask the government to exit from this business of distribution of power supplies and let the market decide. Let the private sector invest.

Turkey requires an investment in electricity generation, transmission and distribution to the tune of $105 billion by 2020, and most will come from the private sector.

In Turkey, electricity is now distributed through an automated exchange, not like your Central Power Purchase Agency, which is more like a political mechanism. In fact, I am told that your government does not let the private sector IPPs to produce at full capacity due to ever escalating circular debt. The solution is very simple: let customers pay directly and let different prices prevail.

In our case, companies can sell their electricity at much higher prices through the Market Accounting Conciliation Centre (PMUM) set at the Turkish Electricity Trading Company, TETAS. Generation companies submit their price and amount of electricity that they would like to supply to the grid through submitting their bids to PMUM one day before. The following day TETAS buys the electricity by starting with the lowest bid.

Currently, as there is great demand for electricity, wholesale prices are approximately at 8-9 cents per kWh and prices are not expected to decrease for years to come until excess capacity is in the marketplace.

Turkey is fast moving into the liberalisation of the electricity trading market. The Energy Market Regulatory Agency (EMRA) issues licences for power generation or wholesale trading companies, which can sell its electricity generated anywhere in Turkey to any large client in any place in Turkey by paying a certain trading fee.

We can train your country’s power managers to install this system, however, we will charge consultancy fee.

Lastly, I would like to clarify that trade is a matter of exchange, which is based on competitive advantage, and is not a matter of brotherhood, as you have implored in your ads.

Dear brothers, Turkey has become a major regional economic power by adoption of sound economic policies and a hard-working private sector backed up by highly trained civil service and quality higher education.

If you want the same in Pakistan, you have to come out of the habit of begging bowl. The trade is not a matter of brotherhood. This is my utmost brotherly advice to you.

The writer is the executive director of PRIME Institute, an economic policy think tank based in Islamabad

Published in The Express Tribune, February 23rd,  2015.

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Reader Comments (5)

  • Aisha
    Feb 23, 2015 - 12:04AM

    Extremely well written article. Enough to open up the eyes of minds of the ruling bureaucrats. “Trade is no the matter of Brotherhood”, very well said. Yet, the politicians, bureaucrats, military leaders go on trip to China, Turkey, Saudi Arabia, trying to find this illusive brotherhood (shortcut to solving Nation’s problems), and most likely in private conversations the leaders of all the above mentioned countries tell these naive leaders of Pakistan the same reality. Do not rely on this Friendship, Brotherhood, deeper than oceans, cliche, become competitive, thru education and hard work, just like all those countries where leaders love to go to looking for Sweeter than honey friendship and brotherhood. This article is a very strong message, but deaf and blind leadership is not interested in listening to any sincere advice. When they will, that is when Pakistan will begin to take initial steps towards its independence and self reliance thru education and hard work, and not seek short cuts and sell country short for their short term benefits and kickbacks and commissions. Recommend

  • FIrst Time
    Feb 23, 2015 - 2:40AM

    This article encapsulates all that Pakistan business is today.
    It relies on the licence raj mechanism of doing business and so can only achieve productive parity by Government policy. What baffles me after working in different countries around the world that Pakistanis can outperform many countries but inconsistently, if we were more disciplined and systematic we would be much better off in business and quickly become a economic powerhouse.
    We do work very hard to avoid working hard.Recommend

  • woody
    Feb 23, 2015 - 8:40PM

    Interesting article — I should remind the author that India had to register complaint with WTO because Turkey places import restrictions to protect it’s textile businesses …. so I guess Turkey doesn’t rely solely on “competition”.Recommend

  • Hammad Siddiqui
    Mar 2, 2015 - 9:09AM

    Pakistani businesses are spoiled my protectionism, hence dependency on special concessions. They make little efforts to think that after all market forces will chuck them out of business! Recommend

  • Mar 6, 2015 - 12:11PM

    Trade and businesses , surely are not matters of brotherhood. In fact, economic achievements have predefined paths , whereas we defined these as miracles. At present, world is not exploring the ways to grow, but following the models and specific rules. Countries, who have learned this, are now prospering.In my view, instead of appealing to our friends for rescue, we should show them the opportunities, that lie in our country, and most importantly, we should study and understand the patterns they followed. Our current manufacturing methods and manufactured items, specifically in textile industry , cannot take us to an export volume of 100s of billions. Value addition is necessary to boost. Recommend

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