Majyd Aziz
Pakistan’s exporters, as well as the Commerce and Foreign Ministries,
went through an anxiety mode in the first week of December 2013 and erupted in
a sense of euphoria when the European Parliament announced that Pakistan would
also be a beneficiary of the GSP Plus status from January 01, 2014 subject to
governing regulations as stipulated under Regulation 978/2012 of October 2012.
Pakistan has met the eligibility criteria of vulnerability (less than 2%
market share), low diversification (less than seven products constituting more
than 75% of its exports to the EU), and sustainable development and good
governance commitments (ratification and promised implementation of 16 human
rights and labor rights conventions, plus 11 conventions covering environment, anti-terrorism,
anti-narcotics etc). The status also boosts the position and image of Pakistan
not only in Europe, but more importantly, it sends a positive message to the
global marketplace.
Pakistan’s exporters and policymakers must understand that complacency
would no more be a cop-out and that strict adherence to the regulations must be
the key objective. The initial benefit is only for three years, extendable to
ten depending on Pakistan’s performance within the prescribed framework. These
could be withdrawn if Pakistan is unsuccessful in pragmatically implementing
any of the 27 conventions. It is important to note that the scheme also defines
a specific role for third party umpiring to ascertain strict compliance.
Pakistani exporters must also keep in focus the fact that unfair trade
practices could trigger negative evaluation. Moreover, global requirements of
Sanitary and Phyto-Sanitary and Technical Barriers to Trade would weigh heavily
in future decisions. All in all, Pakistan must develop the mindset of benefiting
from GSP Plus and must ensure that this is not vitiated due to incautious,
intentional or inadvertent actions by the stakeholders. The dice is loaded
against Pakistan, and to even out the odds, the country must be seriously ready
to pluck the ripe fruit.
The ecstatic phase is now over. Everyone who needs to be patted on the
back has been given the bear hug and the usual sycophantic plaudits. The media
hype, the applause from Stock Exchanges, the self-congratulatory statements of
Ministers and party faithful, and the usual bragging and boasting of extra
billions to be earned have all been highlighted and projected. This is the time
to indulge in introspection and get into the real time mood. Does Pakistan have
the critical mass to achieve the national objectives of maximum benefits from
GSP Plus?
This is the time to take stock of the ingredients that make the
foundation for achieving these formidable benefits. This is the time to spotlight
the crucial physical infrastructure. In the textile sector, for example, Pakistan
has ample spinning, weaving and stitching capacity but needs to develop the
dyeing and printing sector. The deficiencies in textile processing are more a result
of shortages of electricity, gas, and in some areas, water. This here, then,
hangs the proverbial Damocles Sword on the textile industry. The braggadocio
emanating from the portals of the Commerce Ministry or from the offices of some
business leaders, who crave every opportunity to make a statement, belies the
ground reality. The oft-touted figure of increased exports of $2 billion is,
for some years, a pie-in-the-sky projection. Conventional wisdom puts the number
within the $500-$550 million range, atleast for 2014, and a promising increase
by $750-$800 million in 2015.
There would be many who would term this as pessimism oozing out of the
honey pot, but facts are facts. Power is the prime ingredient. According to a
report compiled by the Swiss Consulate General in Karachi, “Due to a fast growing demand, high system losses, fuel supply
limitations and seasonal reduction in the availability of hydropower, the gap
between the demand and supply of electricity is resulting in routine load
shedding. Inadequate power generation capacity is just one of the factors
affecting power supply. The present average short fall in the supply demand gap
is between 4,500-6,000 MW.” The installed capacity is around
22,000 MW although generation is less than 60%. Moreover, corruption, theft,
and mismanagement are debilitating causes. Heavy reliance on fossil fuels and sluggishness
in developing alternate renewable energy further compound the situation. 175
billion tonnes of Thar coal reserves are still years away while Kalabagh Dam continues
to be a staple source of war of words among vested provincial interests. New
initiatives are announced and umpteen MOUs signed. Net-net, Pakistanis bear loadshedding,
more so in the rural areas.
Pakistan
also faces the natural gas crisis. Liberal use of gas, without an eye to the
future, is depleting the strategic reserves. Where industry should have been
accorded priority, the policymakers allowed CNG filling stations to be set up
all over the country. Fortunately, better sense has prevailed and there is now
a managed closure of these stations on designated days. Even today, captive
power plants installed in various industrial units have to suffer one to two
days of closure. Per capita gas consumption has increased from 150 cubic meters
per person to 230 cmpp during the last ten years. The proven gas reserves have
registered a dip in the last year by about 100 billion cubic meters. Meantime,
the Iran-Pakistan Gas Pipeline is still nothing but a pipedream. And, import of
LNG has become a political shuttlecock instead of an imperative alternative.
Karachi’s
industrial areas suffer from water shortages. This, of course, is manna for the tanker mafia who extract
their pound of flesh from the hapless industrialists. Although skilled labor is
available, there is a pressing need to impart training to new workers and to
re-train the existing workforce to operate the latest machinery and equipment.
Another factor that has made life miserable is the law and order situation that
just does not allow a peaceful environment. The depreciating Rupee, escalating inflation,
pathetic roads network, high-handedness of government bureaucracy, fear of
rising discount rate, and ever-changing government policies are other disconcerting
factors that ensue into an unbridled upsurge in the cost of doing business.
Growth in exports depends on a favorable domestic environment. Exports must
have national ownership as is the case in Bangladesh and China. All
stakeholders need to be on the same page, especially if the GSP Plus benefits
are to be reaped for a decade. Dennis Hastert, former Speaker of US House of
Representatives, very correctly stated that “Trade
creates jobs and lifts people out of poverty. And when that happens, societies
stabilize and grow. And there is nothing like a stable society to fight
terrorism and strengthen democracy, freedom and the rule of law.”
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