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Banks role in promoting exports: global and Pakistan dimensions.

The prosperity of Pakistan lies in boosting exports. This is a lesson which one must learn from NICs which pursued export led growth strategy and now the Pacific Rim has shown to the world the spectacular growth registered by them. Based on 1993 World Development Report just released, the exports for 1991 of NICs were: Singapore ($ 59 billion), Taiwan ($ 76 billion), Korea, Republic ($ 72 billion) and Hong Kong ($ 28 billion). These countries have shown to the world that breakthrough in exports can be made and this is not the exclusive preserve of a few developed countries.

Constituents of Papers

The paper has been divided into the following four parts:

Part A: Bankers Role in Promoting Exports.

Part B: Global Exports Trends.

Part C: Export Performance of Pakistan.

Part D: Our Direction.

PART - A: Bankers Role

Banks have played a tremendous role in promoting exports from Pakistan. They have been financing export bills. They have given credit for boosting in the past. They have provided guidance to exporters. They have encouraged potential exporters to identify areas and countries for exports. They have implemented the directives of the government of Pakistan by giving subsidised credit to exports. They are serving the Export Processing Zone of Karachi.

The big question is: What type of innovative role should be played by banks to accelerate the pace of export led growth. The scenario is supportive as the government is committed to achieving high targets of exports. A liberal economy package has been unfolded. The Export Promotion Bureau has been exhibiting keenness to achieve a major breakthrough. State Bank's role is also of supportive nature. Business community is ever keen to ensure a rising curve of exports. The scene is well set for a positive action for quantum jump in exports. Based on Annual Report of 1991-92 released by State Bank of Pakistan, Scheduled Banks purchased and discounted export bills as per details given in Table I.

TABULAR DATA OMITTED

A sum of Rs. 280 billion represented as outstanding Scheduled Bank's Advances as on June 30, 1992. This also includes advances, which eventually resulted in financing of exports.

Due to contribution of the banks and initiative of the business community and other supportive roles, major achievements in export areas are as under:-

1. During 1991-92, exports increased by 12.1 per cent in dollar terms.

2. Exports financed 75 percent of imports in 1991-92.

3. Share of non-traditional exports moved up to 21 per cent during 1991-92.

4. Within the group of traditional exports, the share of rice and raw cotton increased to 17.1 percent during 1991-92.

5. In terms of economic categories, exports of "manufactured goods" rose by 17.4 per cent, while those of "Primary Commodities" increased by 14.1 per cent during 1991-92.
TABLE - II

Foreign Trade of SAARC Countries

 ($ Million)
Countries 1992 1991 1990 1989

India 17,962 17,593 17,965 15,884
Pakistan 7,430 6,529 5,590 4,705
Sri Lanka 2,264 1,987 1,913 1,540
Bangladesh 1,932 1,691 1,674 1,305
Nepal 337 264 210 158
Bhutan 72 66 74 74
Maldives 35 54 52 45

Sources: Asian Development Bank Annual Report, 1992.


Pakistan's exports have shown a healthy change in their composition. More earnings are expected from the export of cotton manufactures and other nontraditional exports. The most notable change is the diversification of our exports base. The emphasis has been shifting to the exports of higher value added goods.

There is an urgent need for SAARC countries to grow and develop an expanding vista of trade. In the SAARC summit held in 1993 in Dhaka, SAPTA was announced and consequently expanding horizons are developing and banks can play a growing and productive role in this respect. The overall position of foreign trade of SAARC countries is tabulated in Table - II.

Pakistan Exports (FOB) from 1989 to 1992 are tabulated in Table - III.
TABLE-III

Pakistan's Exports (FOB)
Time Series Trends

Year $ Million Index

1992 7,430 158
1991 6,529 139
1990 5,590 119
1989 4,705 100

Source: Asian Development Bank Annual Report, 1992.


PART - B: Global Exports

Based on available information we shall now review growth trends of global exports. Dimensions covered in this respect will include competitive edge, global trends and country focus. A review of world exports leaders and classification of exports together with the structure is now presented

Competitive Edge: Pakistan can get motivated by studying global trends in exports. No country should acquire the negative motivation that the competitive edge is blunt and therefore growth in exports is not possible. Instead we should believe that positive motivation can enable them to have a sharp competitive edge. This is well demonstrated by four NICs (Singapore, Taiwan, Hong Kong and South Korea) as has been stated earlier. With enlarging the base for exportable surpluses, these countries have registered growth in exports in considerable dimensions. Therefore there is a lot that Pakistan can learn from the growth trends in the world of Exports and banks can play a great role in boosting exports. An attempt has been made to study the growth of global Exports. The results of research study are included in this paper.
TABLE - IV

Global Exports: 1991 Classification Based on Income Economies
Regimes

 Amount
 Number (%) (Bin. $) (%)

Low-Income Economies 40 31 162 5
Lower Middle Income Economies 44 35 215 5
Upper Middle Income Economies 22 17 386 11
High Income Economies 22 17 2650 78

 128 100 3,413 100

Source: World Development Report, 1993.


Global Trends: Pareto application also extends to global exports. This is supported by the Table - IV.

A detailed analysis has also been carried out and this is in the Table - V.
TABLE - V

World of Exports: Major Contributors

A: High Income Economics

(N = 22) $ Billion (%)

 2,650 78

 $ Bin.

Germany
(before unification) 402
USA 398
Japan 314
France 213
UK 185
Italy 169
Netherland 134
Canada 125
Belgium 118
 2058

% of Total of A 78%
% of Total 60%
World Exports

B: Lower Middle Income Economics
(N = 35) 215 6

Malaysia 34
Thailand 28
Iran 16
Czechoslovakia 16
Poland 15
Turkey 14
Algeria 12
 135

% of Total of B 63%
% of World
Exports 4%

C: Upper Middle Income Economics

(N = 17) 386 11

Taiwan 76
Korea, South 72
Saudi Arabia 55
Brazil 32
Mexico 27
South Africa 24
 286

% of Total of "C" 74%
% of Total
World Exports 8%

D: Low Income Economics
(N = 40) 162 5

China 73
Indonesia 29
India 18
Nigeria 12
Pakistan 7
 139

% of Total of "D" 86%
% of Total
World Exports 4%
 3,410 100

Source: Compiled from World Development Report 1993


It can be seen from the above that the number of countries and value of exports have inverse relationship. This shows the concentration of exports with a group of few countries located in the high income group area.

Major conclusion can be drawn for developing countries to continue their struggle to increase their exports by considering sky as their limit and the banks must extend financial logistical support.

Country Focus

Within high income economies, there was also concentration of exports in few countries. Six countries namely USA, Federal Republic of Germany, Japan, France UK and Italy represented 49% of total global exports.

World Export Leaders

Our research revealed that there were only 16 countries in the world in 1991 whose exports constituted 73% of the global exports. These included:
 $ in Billion

Federal Republic of
Germany 401
USA 398
Japan 314
France 213
UK 185
Italy 169
Netherland 134
Belgium 118
Taiwan 76
China 73
Korea Rep. 72
Switzerland 61
Spain 60
Singapore 59
Sweden 65


This analysis was based by using US $ 50 and above as cut off point. In terms of value, the total export of the above eleven countries were $ 2513 billion (74%) and for the rest of the world the amount was $ 900 billion (26%). This shows high concentration and domination by only 16 countries in a total population of 128 countries representing 12.5%.

Analysis of above export of above sixteen countries in respect of various continents is tabulated in Table - VI.
TABLE - VI

Continent Wise Analysis

Continent (%)

Europe 41
Asia 18
North America 15

TOTAL: 74


The research results show that share of global exports of sixteen countries listed above was 74%. This shows high concentration.

Classification of Global Exports

Based on our research and using 1991 global exports figures from the World Development Report 1993 classification of global exports has been computed in the Table - VII.
TABLE - VII

Frequency Distribution of Global Exports

B $ B$ Number

401 402 1
301 400 2
201 300 1
101 200 5
 50 100 7
 TOTAL: 16
 1 50 53

Less than one billion 59
TOTAL: 128


Structure of Merchandise Exports

High income economies had large share of their exports consisting of machinery, transport equipment and other manufactures. This trend is growing in middle income economies and upper middle income economies. However, bulk of exports of low income economies constitute fuels, minerals, metals and other primary commodities.

PART - C: Exports Performance of Pakistan

It is interesting to note that, with the exception of three years, exports from Pakistan never exceeded the imports in the history of our country. The first occasion was the year after breakaway of the then West Pakistan, now Bangladesh. In this year i.e. 1972-73 interwing trade was diverted to other parts of the world. It is, therefore, apparent that even the three years in which the exports exceeded the imports, the performance was not in normal circumstances.

The following table- VIII gives an abridged picture of the export trend of Pakistan from her birth to 1992-93.
TABLE - VIII

Exports Trend of Pakistan

 Rs. in
Years Billion

1947-48 0.44
1950-51 0.54
1960-61 0.54
1970-71 2.00
1980-81 29.28
1988-89 90.18
1989-90 106.47
1990-91 138.28
1991-92 171.73
July-March (Provincial):
1992-93 129.51

Source: Extracted from: Economic Survey 1992-93 (Pakistan)


Economic Classification of Exports

Developing countries have greater share from the exports consisting of primary commodities and semi-manufactured items. The struggle to increase their share consisting of manufactured goods is continuing. So far, in the last two decades, Pakistan has succeeded in achieving this goal as is reflected in the Table-IX.
TABLE - IX

Economic Classification of Exports of Pakistan

 Primary Semi Manu-
 Total Commo- Manu- factured
Year (%) dities factured Goods

1970-71 100 32 24 44
1980-81 100 44 11 45
1988-89 100 33 19 48
1989-90 100 20 24 56
1990-91 100 19 24 57
1991-92 100 19 21 60
July-March (Provincial)
1992-93 100 16 20 64

Source: Extracted from: Economic Survey 1992-93 (Pakistan)


Major exports listed in Pakistan Economic Survey 1992-93 included Fish and Fish Preparation, Rice, Hides & Skins, Raw Wool, Raw Cotton, Cotton Waste, Leather, Cotton Yarn, Cotton Thread, Cotton Cloth, Petroleum & Products, Synthetic Textiles, Foot Wear, Animal Casings, Paints and Varnishes, Tobacco (Raw and Manufactured), Ready Made Garments, Drugs & Chemicals, Surgical Instruments, Carpets & Rugs, Sports Goods and other items.

Only 16 items represented 75% of our major exports of Rupee One Billion or above. Position in this respect is tabulated in Table - X.
TABLE - X

One Billion and above Exports Items of Pakistan

 (Rs. in billion %)

Major Exports July-March
(1 Billion and above) 1992-1993

Cotton Yarn 21
Ready Made Garments 20
Cotton Cloth 16
Synthetic Textiles 9
Rice 6
Raw Cotton 6
Leather 4
Carpets & Rugs 3
Fish and Fish Preparations 3
Sports Goods 2
Petroleum & Products 2
Surgical Instruments 2
Guar & Products 1
Cotton Waste 1
Foot Wear 1
Drug and Chemicals 1
TOTAL: 98 75
Other Exports 32 25
TOTAL: 130 100

Source: Extracted from Economic Survey 1992-93 (Pakistan)


From the above table, it is apparent that there is dire need for diversification and quantum jump in the exports.

The following frequency table, prepared through our research effort, further shows heavy concentration of very few items within rupees one billion and above club group in Table-X.I
TABLE - XI

Frequency Table of Rupee One Billion and Above Exports

Group (Pak Rs.
in billion) Frequency

1-2 7
3-5 3
6-10 3
11-15 --
16-21 3
 9
TOTAL 16


A refined analysis revealed that only nine items as per following table constituted 67% of total exports of Pakistan in Table XII.
TABLE - XII

Ranking of Top Nine Export Items

Commodity Rs. billion

Cotton Yarn 21
Ready Made Garments 20
Cotton Cloth 16
Synthetic Textile 9
Raw Cotton 6
Rice 6
Leather 4
Carpets and Rugs 3
Fish and Fish Preparation 3
 87
% of Total Pakistan Exports 67%


Destination of Exports of Pakistan

Despite lip service and propaganda that Muslim countries must have strong cooperation and SAARC countries must emerge like Pacific Rim, the real position is the very opposite. Our analysis reveals that Pakistan Exports to Organisation for Islamic Countries (OIC) constituted only 15%. OIC has a membership of over 50 countries. Their meeting are held to enjoy the luxury of excellent food without producing any productive results. The position is even far more disastrous in the SAARC countries to which total exports from Pakistan constituted only 5%. Despite army of persons working in foreign Embassies of Pakistan in ASEAN countries, Pakistan's total exports constituted only 6% of our total exports. On the basis of our research the position of destination of exports is shown in the Table-XIII

PART - D: Our Direction

The Government of Pakistan has expressed their desire to increase the export target to Ten Billion in the next two years. This is only possible if we succeed in creating exportable surpluses in Pakistan. In this respect, the encouraging policies of deregulation, disinvestment and denationalisation are welcome steps. A tangible improvement in law and order situation can now help improve investment climate in macro framework and sound management at the micro level with excellent labour management relations based on mutual respect and dignity. Productivity orientation and industrial peace can help in achieving the above objective. Every one in the Government, industry, trade associations, employees and employers and all those involved in economic activities must put in their best to achieve the above goal of increasing exportable surplus which will enable Pakistan to take off with export led strategy.

Our share of global exports in 1991 was 0.19%. There is a need to register a rise in this ratio. Let us commit to our noble cause of logistical support to business community and play our result oriented role as bankers to ensure a rising curve of exports from Pakistan.

TABULAR DATA OMITTED

Selected Bibliography

1. Asian Development Bank Annual Report 1992, Manila: ADB, PP 232, March 24, 1993.

2. Economic Survey 1992-93, Islamabad, Government of Pakistan, Finance Division, Economic Adviser's Wing, June 10, 1993, PP 166 and PP 202.

3. Exports Receipts, 1991-92, Karachi: State Bank of Pakistan: Statistics Department, April 24, 1993, PP 203.

4. Annual Report 1991-92: Karachi: State Bank of Pakistan, December 26, 1992, PP 206 and PP 137.

5. Bulletin State Bank of Pakistan, Karachi: State Bank of Pakistan, April 1993, PP 170.

6. World Development Report 1993, Washington DC: The International Bank of Reconstruction and Development, June 1993, PP 329.
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Author:Amjad Saeed, Khawaja
Publication:Economic Review
Date:Sep 1, 1993
Words:2521
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