|
The excess of imports over export, or trade deficit, has received
considerable attention from policy makers. Increasing trade deficit
is a natural consequence of fiscal imbalances. As recorded by SBP
trade deficit recorded a sharp 32.3 percent expansion during
July-November FY08 and reached US $7.2 billion. Trade deficit for
the same year during July-February FYO8 recorded a sharp US $3.5
billion increase.
Trade deficit has reached highest ever during the last five years as
compared to 3 billion in the year 2003-04. Stunning increase in
trade deficit during the five-year period will transfer domestic
wealth abroad.
The deficit during the six months of current fiscal year indicates
that it will be further enhanced in the current fiscal year. Soaring
import is the main reason for imbalance in the Pakistan economy and
rapidly increasing trade deficit as well.
Falling export and staggering trade deficit of the country has
reached alarming levels. Even with complicated conditions in
domestic and global fronts, export oriented industries have
succeeded to maintain export target at a growth rate of 4 percent.
However, the rate of growth in import was much higher - 14 percent-
as compared to the four percent growth in exports. If the current
surge in trade deficit is not capped, it may hurt the country's
economic growth. Inadequate electricity supply given to industrial
sector, too, has hampered production, requiring high maintenance
cost, which in turn has eroded product competitiveness.
Although, there exists a surplus labour force in Pakistan, the
quality of such a labour is relatively poor in terms of
productivity. A good quality labour with technological, innovatory
and managerial capabilities and organisational competencies is
considered to be significant in improving the competitiveness of
countries for inward FDI. But there appears to be a lack of such
qualities and skills in labour force in Pakistan.
Low return on capital, low productivity of labour and high rate of
bank interest, increased wastage of inputs are the other factors
which have made Pakistani products more expensive than those from
neighbouring countries. The higher trade deficit leads to outflow of
capital resources from the country on one hand and indicates the
economic dependency on the other hand.
'Import substitutions' and 'export growth' are the two alternative
strategies to curtail the trade deficit. The history of trade
policies in Pakistan shows that both the measures have been
experimented in different political regimes. However, in the era of
globalisation and free trade regime, it is not possible for the
developing countries to adopt 'import substitution policy'. We
cannot stop the import of machinery, high tech instruments,
medicines, and oil and food items not being produced in Pakistan.
To control the budget deficit, we will have improve the
competitiveness of the domestic industry. This strategy will not
only improve the exportability of the industry but also provide
substitution of the imported products, as it was observed that a
large part of imported products belong to the luxury items.
As the current trend indicates, it seems difficult to post a balance
of payment surplus during this fiscal year without borrowing from
abroad. Pakistan's trade deficit can be easily controlled but what
is needed is concrete planning and remedial measures to enhance
exports to control the trade imbalances which are a serious threat
to the economy. Investment should be encouraged in the industrial
sector where there is lot of opportunities to improve our export.
Pakistan is a state with abundance of natural resources, the
northern parts of which are covered with lush green valleys. God has
blessesd the country with natural sceneries, world's second top most
peak which has a natural attraction for visitors.
But it is a matter of great concern that despite the enormous
potential and attractive business opportunities in Pakistan, the
potential investors did not come out with money at the desired level
due to various reasons, especially the unpredictable policies and
law and order situation in the country. As the trade rule says,
"Investment in any business, any area and any country calls for
careful judgement and conducive environment. Recently, the size of
the Foreign Direct Investment (FDI) decreased drastically to 2.1
billion (July to January) as compared to the previous couple of
years.
Sources in business circles are attaching great importance to the
current scenario of economic activity including Chinese investment
in the deep-sea Gwadar port, power generating units at Lakhra and
hopefully Thar coal fields, and political stability in neighbouring
Afghanistan as these two factors have every potential to create
infinite economic activity not only for Pakistan but in the entire
region.
Ref link:
http://www.brecorder.com/index.php?id=738087&currPageNo=1&query=&search=&term=&supDate= |
