By Fareeha Qayoom
ear 2005 was also the year that put WTO in effect in the world. Emerging economies that have not yet arrived like Pakistan were hoping for break through, instead, they lost business to major textile players like China, India and Bangladesh.
A few of the exporters (Home Textiles industry) even started considering moving their businesses over to Bangladesh due to anti-dumping duty imposed by EU. Category 338 (US men’s knitted apparel) didn’t do as well as expected, category 339 (US women’s knitted apparel) went way down and category 347 (US category for knitted and woven cotton pants) started rising. We started losing fleece sweatshirts’ business to other low-end supply regions of the world. The trend for large-scale downsizing and bankruptcies continued in 2005. Many factories decided to diversify in other business categories to take advantage of the WTO free trade agreement in effect.
The government kept on reiterating that Pakistan’s economy was doing well, but the price hike continued to dog most people, forcing Pakistan’s middle class into lower income levels. The price of Petrol reached over PKR 57 by the year end. Our major competitor for textiles’ after China turned out to be India.
Indian economy is in great shape compared to Pakistan, according to a study conducted by LUMS Professor Burki, Mushtaq A. Khan and SM Turab.
SIZE AND STRUCTURE OF THE ECONOMIES OF INDIA AND PAKISTAN
“Large and a buoyant Indian economy offers huge market potential for its trading partners. Since the economic reforms of 1992-93, India has successfully maintained an average GDP growth rate of more than 6 percent per annum, which is remarkable if compared with its pre-reform growth experience. Pakistan, on the contrary, has experienced a period of slack in GDP growth in the 1990s before embarking on a high growth route during the past three years. Along with high GDP growth, India has experienced a significant decline in absolute poverty from 51.3 percent in 1977-78 to less than 25 percent in 2004-05 while poverty levels in Pakistan, after experiencing an initial fall from more than 45 percent in 1960s to less than 20 percent in late 1980s, has significantly gone up to about 35 percent in late 1990s. After a long period of dreary performance, Pakistan’s foreign exchange reserves rose to
US$13 billion in 2004-05, which are still lower than its total external debt of about US$35 billion; by contrast, India’s foreign exchange reserves at US$129 billion in February 2005 were in excess of India’s
total external debt of US$114 billion at end-September 2004.
Even though the share of trade in Pakistan’s GDP has improved to 30 percent, it warrants further improvements by broadening its trade horizon. Pakistan’s merchandise trade is heavily dependent on the performance of the textile and clothing sector. Trade deficit has surged to US$4.3 billion in 2004-05, which is the largest trade deficit in Pakistan’s history. A comparison with India shows that during the past three years, growth in merchandise exports in India has surpassed 20 percent per annum with the manufacturing sector taking the center stage. High export growth in India was driven by five sectors of economy: engineering goods, gems and jewelry, textiles, chemicals and related products, and petroleum products. India’s major trading partners are ASEAN + 3 (China, Japan and Korea) accounting for 19.9 percent of merchandise trade, EU and North America with 19 percent and 12.9 percent shares, respectively indicating broadened trade horizon of a buoyant Indian economy.
SHARE OF AGRICULTURE SECTOR IN THE TWO ECONOMIES:
Agriculture sector is a major contributor to the economies of Pakistan and India, accounting for nearly 23 percent and more than 24 percent share in GDP, respectively. It provides employment to 42 percent of the labor force in Pakistan and 60 percent in India. Wheat and cotton occupy a dominant position in agricultural production in Pakistan, accounting for 37.2 percent and 28.2 percent share, followed by shares of rice and sugarcane at 15.4 percent and 9.7 percent, respectively. These major crops also account for 34 percent of total value added in the agriculture sector in 2004-05.
Even though the volume of agricultural exports from India at US$6.7 billion is about seven times larger than Pakistan’s export of US$0.99 billion, the two countries are equally dependent on their agriculture sectors for export earnings, as indicated by the share of agricultural exports in total exports accounting for 13 percent in India and 10 percent in Pakistan. By contrast, the share of agricultural imports in Pakistan at 14 percent is much larger than only 5 percent share in agricultural imports of India. While rice has the largest share (46 percent) in Pakistan’s agricultural sector exports followed by wheat and wheat flour (13 percent), and molasses (7 percent), major agricultural sector exports of India consist of marine products (22 percent), rice (19 percent), sugar and molasses (6 percent) and wheat (5 percent). Edible oil, cotton lint, tea and rapeseed are major agricultural import items in Pakistan while wheat imports are 3 percent of the total. In India, edible oil and pulses are major import items consuming 87 percent of agricultural import bill.”
Bottom line, our economy didn’t do as well as expected in post quota global free trade environment. Talk centered on the Kala Bagh Dam, to build or not to build was the question. At the tail end, Pakistan’s economy suffered another set-back, a natural disaster struck (October 8th, 2005) that destroyed whole towns and villages and set Pakistan back significantly. ■
This article was originally published in the print edition, “The Knit-Xtyle Fashion Review,” Tkfr issue 13, January 2006