Pakistan ranked 160th in latest Trade Outcome Index: Ishrat

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Pakistan ranked 160th in latest Trade Outcome Index: Ishrat

LAHORE (June 30 2010): Pakistan laggard behind far behind the regional countries as far as the latest Trade Outcome Index is concerned. Bangladesh has been ranked 31 and India 89 while Pakistan is among the bottom of the rung with a rank of 160 for the 2006-08 period.

Former governor State Bank of Pakistan Dr Ishrat Hussain said this while addressing the launching ceremony of the report on "Human Development in South Asia 2009: Trade and Human Development" prepared by Mahbub-Ul-Haq Human Development Centre on Tuesday.

Former finance minister Sartaj Aziz and President Mahbub-Ul-Haq Human Development Khadija Haq spoke on the occasion.

President Lahore Chamber of Commerce and Industry Zafar Iqbal Chaudhry, prominent industrialists Qaiser Ahmed Shaikh, Iftikhar Ali Malik, Chairman PIAF Irfan Qaiser Shaikh was also present on the occasion. Ishrat said that this is the major reason for Pakistan's weaker economic health. "If the domestic demand is suppressed, Pakistani exporters should have diverted their surpluses to the world markets and help ease external payments difficulties. But this has not happened despite a favourably depreciated exchange rate," he added.

While highlighting some shortcomings of the report he said that report does not incorporate the analysis of the main trend data in its conclusions, while it uses a lot of anecdotal evidence, focuses too much on peripheral issues, deploys selected studies that buttress its line of argument that is at variance with the mainstream thinking and its tone runs contrary to the large body of received wisdom on trade liberalisation, trade policy reforms, link between trade and growth.

"There is an argument made in the report that trade liberalisation is inimical to the interest of female workers. In South Asia trade liberalisation in services sectors such as tourism, IT, medical and educational services have brought significant benefits for women workers. In Pakistan, the proportion of female students in professional and higher education institutions is expanding more rapidly than that of males. Women working in IT sector particularly in data processing and Call Centres in India account for 40-70 percent of total employment," he added.

In agriculture, contract farming by the Corporate employs a high percentage of females on the farms. There is a shift from casual female labour force to the more stable organised labour force. It is also not factually correct that most South Asian countries are net food importers. Both India and Pakistan are exporters of rice and at times of wheat. Only small quantities of wheat are imported by Bangladesh. Therefore, increase in world food prices would not hurt them but act as an incentive for higher domestic production - a positive supply response.

Ishrat said that in any liberalisation process, it is inevitable that the poor and the vulnerable groups would be affected by changes. The right strategy for the Government is that these groups are protected through social safety nets such as cash transfer schemes, food coupons, subsidies, etc, under carefully designed targeting. The leakage should be kept to the minimum and administrative costs kept to only a small fraction of the total delivery cost.

Ishrat said that agenda for further trade liberalisation that has to be pursued by both WTO and the national governments should consist of Doha Round of Trade negotiation, be successfully completed and all agriculture trade distortions be removed. As most developing countries are low cost producers of agricultural goods they would benefit from a more open and less distorted global agricultural trade regime.

In developing countries a very high proportion of subsidies go to the top 25 percent of farmers and are not targeted towards the poor and are thus inequitable. Therefore, there is a strong case for reduction in these subsidies from both efficiency and welfare viewpoints. He said that there is a fear that in the guise of environmental and labour standards the developed countries may take some anti competitive measures to protect their Textile and Clothing industry.

In manufacturing sector, the tariff rates in South Asia have been reduced drastically from above 100 percent to as low as 10-20 percent range. Despite this reduction, overall tariff rates in South Asia still remain higher than the developing world's average.

The Report rightly points out that Trade Liberalisation reforms contributed to a significant extent in enabling these countries to develop their manufacturing sectors by exposing them to larger markets and improved production techniques. It is time for further trade policy reforms including, reduction in tariff rates and non-tariff barriers. He further said that intra-regional trade within the South Asian region should be promoted and all non-tariff barriers dismantled, trade facilitation measures put in place and, logistics and infrastructure should be strengthened.

Former finance minister Sartaj Aziz said that present government came into power in difficult times and inherited problems. He accused the government of making appointment on key posts on political grounds especially in the Corporations' like PIA and State Life and these Corporations were facing a deficit of Rs 250 billion.

While appreciating the report he said that during the last two years the centre has prepared and released reports on the unique issues such as 2008 report was on the role of technology in Human Development and 2009 report was on the role of trade in human development.

President Mahbub-Ul-Haq Development Centre Khadija Haq said that 2009 Report analyses the nature of international and regional trade in South Asia, impact of trade on the economy and the potential for gains by putting in place better policies, institutions and regional co-operation. All these are discussed within the broader objective of positive impacts on people in terms of employment, poverty reduction and empowerment

While highlighting the points of the report she said that according to the report the intra-regional trade is in a deplorable situation. South Asia is the least integrated area of the world and over 55 percent of its potential for intra-regional trade remains untapped. High export similarity, the failure to incorporate services trade into the South Asia Free Trade Agreement (SAFTA), a large negative/sensitive list, and perhaps most importantly, Indo-Pak hostility act as key obstacles.

Pakistan has refused to grant the Most Favoured Nation (MFN) status to India, while India persists on maintaining high tariff rates and non-tariff barriers on goods of particular interest to Pakistan. Consequently, Pakistan accounts for less than one percent of India's trade, while India accounts for about 5 percent of Pakistan's trade.

According to the report, she said, in services trade we find both a ray of hope and cause of concern. For example, Pakistan's finance and telecom sectors have attracted considerable investment in the last few years. However, the services sector is still plagued by unfair global trading practices.

While developed countries have used the General Agreement on Trade in Services (GATS) to push for services liberalisation through the free movement of capital, they have failed to allow services liberalisation through an equally free movement of people. Given our large supply of unskilled and seem-skilled labour and dependence on foreign remittances, this is an area of tremendous concern to Pakistan and other South Asian countries.

While concluding she said, "Doha Round of trade negotiations was supposed to help realise these benefits by explicitly factoring in the developmental needs of developing countries. Today, even though we find that the Doha Round has largely been a story of unfulfilled promises for South Asia, particularly for Pakistan, I leave you with the hopeful message that there is much that we can do to improve the situation. If we negotiate as a block at international trading forums, enhance intra-regional trade, and most importantly, work hard to address our myriad domestic failings, we can begin to reap the benefits of trade and succeed in today's increasingly competitive world."

Business Recorder [Pakistan's First Financial Daily]