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Economists suggest measures for diversification of exports - Lahore_Real_Estate - 04-22-2010 11:43 AM
* Say cost of doing business should be made favourable
ISLAMABAD: The prominent economic think tank suggested the government for diversification of country’s export through a number of measures including, targeted development, rebates, marketing support framework, import of raw materials from India and capturing China’s export markets.
The Panel of Economists in its report submitted to the government revealed that the failure to achieve export diversification was rooted in the current institutional structure relating to exports and trade balance. This institutional structure, which was manifested in formal laws and their enforcement characteristics; tacit rules of business and procedural mechanisms provides strong disincentives for export growth and export diversification on one hand, while encouraging imports and restricting foreign exchange inflows through outsourced international trading on the other.
The current corpus of rules, regulations and their enforcement mechanisms were associated with high direct costs of doing business and substantial transaction costs stemming from uncertainties flowing from poor information flows on one hand and graft in governmental departments on the other.
According to the report, specifically the current structure of rules was designed for traditional sectors such as textiles and agricultural products and discriminates towards non-traditional sectors such as high value-added manufacturing, agricultural product processing, light engineering and small scale enterprises including both manufactured and cottage industry items. The discrimination occurs in a number of ways including absence of standard concessions such as duty draw backs and meaningful rebates, lengthy and complicated procedures for exports, inadequate working capital support and export documentation regulations which limit the scope of international, outsourced trading, bureaucratic red tape, graft in governmental departments, weak contract enforcement and lack of protection of private property rights (such as protection of export consignments from bandits during road transportation to the port) raises the costs of business across sectors and limits the development of new markets overseas.
The government made inadequate investment in power generation and its distribution facilities. The consequent high electricity tariffs were an important factor in making manufactured exports internationally uncompetitive.
Inadequate investment in port and transportation facilities resulting in a long time lag (typically three weeks) between arrivals of a shipment of imported raw materials at the port and its arrival at the factory. There was a similar long time lag between dispatch of export consignments from the factory gate to dispatch of cargo from the port. These time lags oblige manufacturers in Pakistan to maintain much larger inventories than their competitors, which placed relatively high financial costs and a significant factor in lack of price competitiveness.
Lack of investment in the quality of professional university education, technical and vocational training and institutions for upgrading skills of in-service personnel have adversely affected every aspect of production and sale; from the productivity of machine operators, the ability to conform to statistical quality control procedures, product design, production management, inventory control and marketing. ijaz kakakhel