Economic studies

Are We Ready For Economic Independence?

We talk about Pakistan as a low-income developing economy and hope for its future stability, but will it ever be stable while still focusing on improving our dependency on other countries rather than strengthening our economic independence?  Does the Pakistani government have enough focus for that? This article analyzes the current situation and willingness to improve it.

We have relied on CPEC and foreign aid since it is the simplest and most practical path to go. It’s like living on credit, with little regard for national pride or self-respect. True, governments have financial difficulties and seek assistance from foreign and national financial organisations. The IMF, World Bank, and national financial organisations were established to help developing nations in similar situations. We did not make use of these groups to help us get out of our monetary bind. Further, we haven’t managed to take full advantage of the rewards of CPEC’s infrastructure improvements, which might have increased production and product quality. Our Chinese friends were hoping that we would make the most of this national effort, therefore we have let them down. We also don’t make sure to make the most of the infrequent aid that comes from our Arab neighbours. Due inefficient use of domestic resources, it is now essential to rely on international commerce and foreign capital inflows to maintain and speed up the rate of economic expansion. Pakistan’s trade balance has always been negative, except from 1950-1951 and 1972-1973.

Domestic industries are only able to produce a small number of capital goods and intermediate goods, imports are required to support industrialization. The import bill is also disproportionately weighted with food grains and other products that may hinder economic growth if the number of imports is reduced. Now the exports have not increased enough to cover the rising import costs. The majority of Pakistan’s exports are either primary or traditional goods, for which global demand hasn’t been increasing quickly enough. Therefore, there is little room for a significant increase in exports unless Pakistan switches its reliance from non-traditional products and from slowly expanding markets to rapidly expanding markets.

If the government takes action to provide exporters with the opportunity to enter new markets, this also requires us to be able to cover the transition costs associated with it. Although the question that arises with it is the same, does the government wants to be economically independent? Pakistan is filled with young skilled people, from Balochistan to KPK, from women to children every person has trained like that because that’s their only way to survive. In FY22 Pakistan’s agricultural trading balance was negative $3.6 billion. Natural disasters, global resource price increases, currency rate depreciation, local rise in inflation expanding population, and stagnant food grain yield have all increased food scarcity.

The women spend hours on embroidery in provinces like Balochistan and KPK but their work has not been lifted enough to add value to them. Why are these talents not being recognized?  When there is enough potential in almost every industry of Pakistan it needs to be competitive through proper use of resources. The mass-market clothing sector in Pakistan has the capacity to create and provide substantial volumes on several worldwide markets.

The textile market is price sensitive, with huge demand determining suppliers’ quality and price terms. Compared to rivals, an exporter’s competitiveness is determined by their capacity to respond swiftly and successfully to these needs. In addition to meeting requirements for “environmentally friendly” and “socially responsible” production, this involves the ability to meet many fashion trends in a single season, mass customization of orders, and short lead times. Pakistan has a competitive edge over other countries since it is the world’s fourth-largest cotton producer and can boost cotton crop yield using various production methods. There is a large and competent labour pool accessible to businesses in Pakistan to operate successfully and long term.

On the other hand, inadequate goods, unreliable supply chains, and a lack of resources to maintain food safety and livestock and crops’ health have made Pakistan’s agriculture-food business less competitive in significant overseas markets. (World Bank 2006, 143). There are three main causes of Pakistan’s “food insecurity”: poor productivity, substandard seed supply, and insufficient access to financing for the agricultural industry. Compared to New Zealand, which generates 10 metric tonnes, and Egypt, China, and Saudi Arabia, which produce 6 metric tonnes per acre, Pakistan now produces just three metric tonnes of wheat per acre. Imagine that Pakistan might produce an annual exportable surplus of $7 billion if it can raise its wheat production to 6 metric tonnes per hectare. That equates to an IMF loan for three years.

Progress in this area has typically been receptive that is when export markets have been threatened with exclusion owing to non-compliance for instance, the Pakistani government banned fish exports to the EU in 2005 after inspections by the European Commission revealed rigid food safety controls in the fish and fisheries product sector. This was done to prevent the Commission from imposing sanctions and to give the country time to implement the necessary reforms. (Kamal, Shad, Khan, Ullah, & Khan, 2020).

Another significant barrier to encouraging exports from Pakistan during the past ten years has been the country’s frequent power disruptions. Even so, power projects included in the China-Pakistan Economic Corridor (CPEC) would aid in easing Pakistan’s energy problems in the years to come and will aid in regaining the nation’s export competitiveness.

According to the World Bank (2016), one of the main factors keeping Pakistan’s growth below potential is the absence of female participation in the textile industry, unlike its other South Asian neighbours. Consider the image of Pakistan’s 51% female population only 1% of women own businesses in the nation, compared to 21% of males who own businesses, many of whom are MSMEs that operate in the informal economy. This makes it one of the least entrepreneurial nations in the world.

Pakistan is also currently concerned about illegal trading which is closely related to a high tariff structure. In certain markets, legitimate trade has become nonexistent, while smuggled illegality rules the home market. for example, cotton products imports are prohibited but they are easily available in Peshawar at considerably lower costs than native manufacturers through trafficking from Russia. (Bashir & Din, 2003).

The World Bank estimated that Pakistan’s growth had to be 4% in 2022, but just 2% in 2023. Large-scale industrial sectors including chemicals and textiles had a 5.5% decline in 2022 compared to 2021. The severe floods of 2022 resulted in a wide range of other issues. The bulk of Pakistan’s exports come from the textile industry. In the cotton sector, about 7 million employees have lost their employment. Industrial development is required for Pakistan to be able to absorb its jobless people and export its goods to international markets.

A limited open economy as Pakistan is unable to handle global cyclical forces, but structural improvements require prompt attention. More importantly, where does Pakistan rank in this worldwide race, and how will the country tend to perform as the majority of other nations surge ahead? Are our leaders aware of these rapidly changing global circumstances or do they exist in their universe while fighting personal conflicts of their own making? Do they understand that a highly divided political system like ours is incapable of producing solutions to the enormous problems the nation is currently experiencing or the speed at which the globe is advancing?

yamna khajjak a student at the National Defence University. As an individual currently pursuing an economics degree,

References

  • Ur Rehman, S. A., Cai, Y., Mirjat, N. H., Walasai, G. D., & Nafees, M. (2019). Energy-environment-economy nexus in Pakistan: Lessons from a PAK-TIMES model. Energy Policy, 126, 200-211. https://doi.org/10.1016/j.enpol.2018.10.031
  • Mahmood, A., & Akhtar, N. (1996). The Export Growth of Pakistan: A Decomposition Analysis. The Pakistan Development Review, 35(4), 693-702. https://doi.org/10.2307/41259992
  • Mahmood, Z. (1981). Changes in Export Shares and Competitive Strength in Pakistan. The Pakistan Development Review, 20(4), 399-415. https://doi.org/10.2307/41258580
  • Kamal, M. A., Shad, S., Khan, S., Ullah, A., & Khan, K. (2022). Pakistan’s trade performance and potential with ASEAN region: Recent trends and future opportunities. Journal of Public Affairs22(1), e2325.
  • Shah, S. H., Kamal, M. A., & Yu, D. L. (2022). Did China-Pakistan free trade agreement promote trade and development in Pakistan? International Journal of Finance & Economics, 27(3), 3459-3474. https://doi.org/10.1002/ijfe.2331
  • Mahmood, A., & Ahmed, W. (2017). Export Performance of Pakistan: Role of Structural Factors. State Bank of Pakistan.

SAKHRI Mohamed

I hold a bachelor's degree in political science and international relations as well as a Master's degree in international security studies, alongside a passion for web development. During my studies, I gained a strong understanding of key political concepts, theories in international relations, security and strategic studies, as well as the tools and research methods used in these fields.

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