Revamped National Economic Strategy of Pakistan

The developing world is striving to achieve high economic growth while the developed world is endeavoring to maintain the established economy. However, the high economic growth remains the major concern for both worlds. Like many other developing states, Pakistan has been aspiring to attain high economic growth. To achieve this goal, Pakistan adopted import substitution strategy which did not work. But, now the present government of Pakistan is executing the policy of export-oriented growth and aggressively working to save the crippling economy of Pakistan. It is important to note that this policy has generated positive results so far, but the objective of high economic growth is still a long way to go.

Export-led economic growth is a strategy that helps to speed up the industrialization process of a country by exporting goods for which the country has a comparative advantage. It is also about opening the domestic markets to foreign competition in exchange for market access in other countries. The adaptation of this strategy by the government of Pakistan is generating positive results. Despite COVID lockdowns, Pakistani exports especially textile and IT exports have witnessed exponential growth in recent months.

The textile sector is the largest contributor to Pakistani exports. The timely opening of industrial sectors by the government during the pandemic and its policies to encourage exports have played a centrally in the dramatic rise in the textile and clothing exports in recent months.  According to the Pakistan Bureau of Statistics (PBS), textile and clothing exports have increased over eight percent to $8.76 billion on a year-on-year basis in the seven months of the current fiscal year.

Moreover, the global textile trade that stands at $837 billion had an average growth rate of 0.1% over the last decade. When it comes to the global market for textile sector exports, it is dominated by China, which accounts for over 32% of textile sector exports, valued at $266 billion. Presently, Pakistan’s share is 1.6% in the world textile trade only, but it has the potential to increase its share by promoting the textile sector. Pakistan is working on a Textile Policy that will increase the country’s textile exports target by 2025 to $25.3 billion and $50 billion by 2030.

The implementation of this Textile Policy is essential and eagerly awaited, as it will lead to the streamlining of recent export growth and allow continued expansion in the textile sector. The proposed package carries special duty-drawback rates, rationalization of duty on the textile value chain, and subsidy on long-term loans and development subsidies. The policy aims to reduce the input cost of the textile and clothing sector and make it competitive with the regional players.

The lockdowns, owing to the global pandemic, were disastrous for the businesses and economies around the world. However, the lockdown associated with the coronavirus outbreak pushed people toward cyberspace to meet their social and economic needs. Consequently, the demand for IT services increased, significantly. Pakistan has also witnessed a significant rise in its IT exports in the previous year. According to Pakistan Software Export Board (PSEB), Pakistan’s IT exports surged 38 percent to $1.1 billion in the first seven months of the current fiscal year of 2020/21.

Although, seafood exports have also increased in recent years the fisheries sector of Pakistan can produce surprising results in three to five years and play a significant role in strengthening the national economy. Exports of fish and fish preparations are amounted to over $451 million. But given vast fishing resources available in the country, current foreign earnings are not at all impressive. Pakistan can take fish and seafood exports to a billion dollars within three to five years provided fishing resources are exploited more systemically, some investment is made in processing, exporters are consulted in decision making at all levels and those running fishing affairs keep a constant check on the result.

Last but not the least, Agriculture sector of Pakistan also of significant importance. The agriculture sector has been a dominating contributor to Pakistan’s economy since independence.  The performance of this sector has witnessed a significant decline due to political, climate, social, and environmental problems. Lack of advancement and technology has further deteriorated the situation. To strengthen Pakistan’s economy, for poverty alleviation and increase exports, the agriculture sector has significant importance for Pakistan.

It is pertinent to mention that the government of Pakistan is working to include agriculture in the CPEC framework. China has approved technical assistance for 13 mega agriculture sector projects under CPEC. It is appreciable that the government of Pakistan understands the importance of the agriculture sector for Pakistan’s GDP and is now taking practical measures to achieve desired growth in this sector.  Moreover, CPEC offers opportunities to export agricultural goods to China. China is the most populous country in the world with a 1.39 billion population.

Even though China is the leading country in producing many major crops but to fulfill the food needs of its gigantic population is a great challenge. To meet this challenge, China imports a high amount of agricultural goods from different countries. China spends more than 100 billion USD on agricultural imports every year and Pakistan’s share in these imports is almost negligible. Through increased connectivity, Pakistan can increase its agricultural exports to China. It’s a win-win situation for both China and Pakistan. Due to low transport costs, China should import agricultural goods from Pakistan.

In the pursuit of this strategy of export-oriented growth, Special Exclusive Economic Zones (SEZs) are also being constructed under CPEC in Pakistan. These economic zones will not only reduce the imports in Pakistan but will also significantly increase Pakistan’s exports. The government of Pakistan has announced incentives for Special Economic Zones which will enhance the Foreign Direct Investment (FDI) in the country. For instance, the SEZs will be exempted from all taxes on income for 5 years for developers and 10 years for enterprises.

In short, the macroeconomic indicators show that Pakistan is moving in the right direction. The strategy of export-oriented economic growth is generating positive results for Pakistan’s economy which has been facing severe crises for over several decades. The government should focus on the exports which are still lacking on Pakistan’s boat. There is also a need for keeping the impetus of the upward trajectory through sustained economic policies, to create fiscal space for investment in human capital and improved human security. Moreover, the success of this export-led strategy will help Pakistan to get rid of the chains of external/internal debts and foreign aids which often have devastating impact on Pakistan’s foreign policy.