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A curious case of Pakistan’s export portfolio

The economic growth in Pakistan has remained historically volatile, lacking a steady growth thereby enunciating an uncertainty about the country’s economic wellbeing. The meager export portfolio remains one of the major factors that restrain Pakistan from attaining a sustainable economic growth. According to the World Bank data, exports of goods and services as percentage of the GDP growth in Pakistan continued to exhibit a roller-coaster trend between 1967 (9.17 percent) and 2017 (8.24 percent], whilst attaining the highest growth of 17.34 percent in 1992. A similar non-steady pattern in the GDP growth could therefore be accrued mainly to our history of a small export portfolio.

The Observatory of Economic Complexity (OEC) is a tool that allows users to quickly compose a visual narrative about countries and the products they exchange. The OECmaintains that according to the 2017 statistics, house linens and non-knit suits comprise the largest share of Pakistan’s exports, respectively accounting for 13.4 percent and 11.85 percent of the total exports in 2017. Other textile and garment products further increase the portion of textiles in Pakistan’s exports’ outlay.

According to the World’s Top Exports, Pakistan’s top ten exports, which account for 75 percent of the 2017 portfolio, mainly include miscellaneoustextiles and clothing (US$ 4 billion dollars; 18.1 percent of total exports); cotton (US$3.5 billion;16 percent); knit or crochet clothing and accessories (US$2.5 billion;11.5 percent); clothing and accessories, not knit or crochet (US$2.5 billion; 11.3 percent); cereals (US$1.8 billion; 8 percent) and leather/animal gut articles (US$ 632 million; 2.9 percent). According to the OEC website, Pakistan is ranked as 68th largest exporter in the world on the basis of 2017 export returns ofUS$ 24.8 billion, with an annualised decreasing trend of -0.2 percent since 2012.

Exports may continue to face serious challenges due to debilitated compliance with the national labour laws

The European Union remains one of Pakistan’s most important trading partners accounting for 18.4 percent of the total trade (12.8 billion euros with EU and 69.7 billion euros with other countries] by absorbing 35 percent of Pakistan’s total exports (6.7 billion euros with EU and 19.0 billion euros with other countries] in 2017. The total exports of 6,690 million euros from Pakistan to the EU countries in 2017 included 78.6 percent (5,257 million euros) share of textiles and textile articles. However, Pakistan’s exports to the EU countries also continued to follow an unsteady pattern between 2007 and 2017. Pakistan’s exports to the EU countries fluctuated between 3,474 million euros in 2007 to 6,690 million euros in 2017 whilst depicting an unsteady growth pattern within these years.

Pakistan’s trade with the EU is administered by the Cooperation Agreement 2004, which is further supplemented by EU-Pakistan Five-Year Engagement Plan 2012, for enhancing bilateral trade and investment. Pakistan is also one of the beneficiary countries of the EU’s Generalised Scheme of Preferences (GSP). Since 2014, Pakistan had also been availing benefits from generous tariff preferences-mostly zero duties on two-thirds of all product categories under GSP+ arrangement.

Additionally, the European Commission has been providing several grants to international organisations and development partners for two-year pilot-projects in GSP, GSP+ and EBA beneficiary countries, which also included projects in Pakistan. Such projects endeavoured to help Pakistan, and other countries, improve national abilities that are instrumental in maintaining GSP+ eligibility criteria especially the status against 27 GSP+ relevant international conventions on human and labour rights, environmental protection and good governance. However, Pakistan remains a subject of EU’s regular biennial review indicating that the country is required to make satisfactory progress toattain the International Labour Standards.

In the recent past, the US-based Disney Corporation decided on the basis of its policy of ethical sourcing to revoke purchasing from Pakistan based firms. The primary reason that Disney gave was Pakistan’s low score on the Worldwide Governance Index, which among other things also includes country’s achievement of the international labour standards.

Exports may continue to face serious challenges due to debilitated compliance with the national labour laws. An enfeebled compliance with the national labour laws not only precludes achievement of the international labour standards but also restricts high labour productivity. Therefore, Pakistan’s unsteady economic growth pattern that is crucially dependent on textile exports mainly to the EU countries should be viewed from a compliance perspective. Only a greater compliance with the national labour laws could help Pakistan achieve international labour standards vis-à-vis improved productivity of labour. Labour inspection, as a statuary apparatus to ensure compliance with the national labour laws, is the panacea thereof.

According to the Labour Force Survey, Pakistan is the sixth most populous country in the world with an estimated labour force of 61 million, out of which 57.42 million are employed. However, this big bulge of labour is employed in an enormously large sized industrial and economic sector yet remains vulnerable to infringements pertaining but not limited to the fundamental principles and rights at work and working conditions.

The magnitude and severity of fatal accidents in Pakistan is also appalling. Provision of meager occupational safety and health (OSH) standards to labourers is also an issue. All of these are factors that hamper well-being of workers, further restrictinglabour productivity, and ultimately dissuading Pakistan from becoming a competitive exporter in the international market.

We could draw three simple conclusions for the case under consideration. Firstly, Pakistan has to recognise that it carries the most significant potential of growth in the textile and apparel sector. Secondly, the EU is the most valuable market for Pakistan, which we wouldn’t be able to properlyutilise unless we improve our labour standards. Last but not the least, an enfeebled labour force that has low productivity negatively impactourexports and national growth.

The writer is a development professional

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