Islamabad: Pakistan has implemented an ambitious strategy to strengthen industrial strength by mobilizing local talent and providing incentives to achieve export-oriented economic growth with a new emphasis on trade with Central Asian states landlocked but rich in energy, Uzbekistan, Tajikistan, Kazakhstan and Kyrgyzstan.
In 2018, when the current government came to power, the focus was on “stabilizing the economy and now that we have moved on to the start of growth, all efforts are focused on sustainable economic growth,” he said. said Abdul Razak Dawood, advisor to Prime Minister Imran Khan. on trade and investment, in an interview with Gulf News.
With eyes on the 4.8% growth target for fiscal year 2021-2022, Khan’s government aims to unlock manufacturing potential and facilitate industrialization to create new jobs, boost exports and make dynamic and competitive local production as the country seeks to end its dependence. on foreign loans and bailouts.
Exports up to a record $ 31.3 billion
The current government’s biggest accomplishment, Dawood said, is the record $ 31.3 billion in exports of goods ($ 25.3 billion) and services ($ 6 billion) in the fiscal year. 2020-21 despite pandemic challenges that have slowed global economic activity. The Commerce Department has set the export target of $ 35 billion in the next fiscal year, Dawood told Gulf News.
âDoing in Pakistan is our top priority now,â Dawood said. Pakistan’s policy in the past has been to support trade rather than manufacturing, which is changing under Khan’s administration. âManufacturing is the creation of wealth. It helps build industries, create more jobs âwhich Pakistan, a country of 220 million people, desperately needs. The large-scale manufacturing sector saw 9% growth between July and March 2020-2021, indicating a strong post-pandemic recovery. Support programs for industry, incentives such as gas and electricity at competitive prices at the regional level for export-oriented companies, tax exemptions for manufacturers in the efficient sector have contributed to this growth.
The main objective is to improve the share of exports in the economy and to encourage import substitution. Imran Khan “is still pushing to increase exports” to put the country on the path to economic development, he said.
To support exports, Dawood explained that the government has removed three barriers: moving to a fixed parity that artificially overvalued the rupee, refunds to exporters and manufacturers on time, and exemptions from customs duties mainly on raw materials. . Over the past three years, “we have removed high tariffs on 4,000 tariff lines out of a total of 7,300 lines”, which means that 54% of raw materials and intermediate materials for industry now reach the market. Pakistan at zero tariff rate, which makes our industry more competitive. Dawood says a few businessmen have claimed they are now able to produce goods at a lower price than China, which he calls the “real impact” of the new government policy. “The tariff rationalization policy will encourage industrialization” and reduce dependence on imports of foreign manufactured goods. Increased imports of raw materials may initially widen the trade deficit, but the government is prepared to pay this price to help strengthen the industrial base, which will benefit the economy in the long run in the form of increased prices. exports which would improve the trade balance.
But how will Pakistan achieve this ambitious goal? Product diversification, incentives for key industries and access to new foreign markets are the main objectives on which the Ministry of Commerce focuses.
Pakistan has historically relied on exports of limited commodities, including textiles and clothing, leather products, and rice, which account for a larger share of export earnings. This is where the change will come as part of the strategic trade policy that will help “diversify our product line to reach new markets,” the adviser explained. As the country plans to go beyond simple manufacturing, the five key areas will be: pharmaceuticals, engineering, food processing, fisheries, fruits and vegetables. The Pakistani government’s new policies offer incentives and tax breaks to cellphone and vehicle manufacturers to promote local industries, encourage foreign direct investment and joint ventures, and boost exports. The country is also aiming to double its IT exports to $ 6 billion in two years.
The Pakistani port city of Gwadar, described as the growing destination for investment, is expected to become the country’s manufacturing hub, opening up new opportunities for regional trade, Prime Minister Khan said recently when launching development projects in Gwadar. A range of incentives are offered to foreign investors in Gwadar Special Economic Zones and Free Zones – the centerpiece of the China Pakistan Economic Corridor (CPEC) – connecting South and Central Asia and the Middle East.
âImproving regional connectivityâ for establishing trade links, especially with Central Asian states, is a key priority for Pakistan under its new geo-economic strategy. âCurrently, we are focusing on the western borders,â which means expanding trade with Afghanistan, Uzbekistan and beyond. âPakistan aims to forge strong trade ties with Central Asian states as part of its Silk Road reconnection policy to tap into the more than $ 90 billion economy and provide them with access to Pakistani seaports, âhe said. Improving market access to Russia and the European Union is also of vital importance to Pakistan, he said.
New markets and trade links
Pakistan has signed Free Trade Agreements (FTAs) with China, Sri Lanka and Malaysia and has concluded preferential trade agreements with Indonesia, Mauritius, D-8 and OIC countries. The country also benefits from SPG + status, allowing duty-free access to the European Union. Pakistan is currently in negotiations with Turkey for an FTA and preferential trade with Uzbekistan, Afghanistan and the Gulf Cooperation Council (GCC) states to expand market access.
To identify new markets and strengthen trade relations and investment, Pakistan is considering massive participation in Expo 2020 Dubai. âIt offers Pakistan an opportunity to present itself to the world as a progressive, tolerant and diverse country with rich culture, heritage, tourist destinations and business opportunities. Although we are a new country but an old civilization, âDawood said, adding that Pakistan will showcase its unique culture and great tourism and economic potential at the Expo.