Soaring Exports of Pakistan's Information Technology and Pharma Industries Amid COVID Pandemic
|Razzak Dawood on IT Exports|
With several major brands moving production to Pakistan amid the COVID19 pandemic, the country's exports have grown at a faster pace than those of Bangladesh and India, according to Bloomberg News. Pakistan's total textile shipments rose 7% in September, compared with India’s 6% and Bangladesh’s 3.5%.
|South Asia Region's Exports. Source: Bloomberg|
|Pakistan's Textiles Growth. Source: Bloomberg|
|IPO Spree in Karachi Stock Market. Source: Bloomberg|
|Covid19 Cases in Pakistan. Source: Our World in Data|
|Pakistan Monthly Quantum Index of Manufacturing. Source: PBS|
Pakistan is once again experiencing a construction boom with new incentives under Naya Pakistan Housing Program. Monthly cement sales rose to near all-time high of almost 5 million tons in July 2020 as construction activity picked up in both housing and CPEC-related projects.
|Pakistan Cement Sales. Source: Bloomberg|
Gasoline sales in June, 2020 hit new record and local car deliveries rose to about 10,000 units as people returned to work after easing of lockdown in May, 2020. Kia Motors Corp.’s local unit is planning to add a second shift at its factory in Karachi from January.
|Pakistan Car Sales Recovery. Source: Bloomberg|
Multiple Sectors Growing:
Sectors including food, beverages & tobacco, coke & petroleum products, pharmaceuticals and non metallic mineral products saw an increase in production in July 2020. Muzzammil Aslam, chief executive officer at Tangent Capital Advisors Pvt., was quoted by Bloomberg as saying, “It has surprised everybody". Aslam expects Pakistan economy at 4%-5% in current fiscal year, higher than the government’s 2.1% target. “The growth is led by an aggregate demand push.”
Pakistanis have defied all foreign and domestic doomsayers, including media, activists and think tanks of all varieties. Pakistan has successfully fought off the deadly COVID19 virus and begun to bounce back economically. Pakistan’s IT exports increased by 44% during the first quarter (July, August and September) of the fiscal year 2020-21, according to a tweet by Razzak Dawood, Special Assistant to Prime Minister Imran Khan. Pharmaceutical exports saw 22.6% increase in the same period over last year. With several major brands moving production to Pakistan, the country's exports are rebounding faster than its peers in South Asia. Moody's rating agency has raised Pakistan's economic outlook from "under review for downgrade" to "stable". Pakistan's Planning Minister Asad Umar is talking of a "V-shaped recovery". Monthly cement sales have rebounded to pre-pandemic level, fuel sales have increased, tax collection is up, exports are rising and the Karachi stock market is booming again. Prime Minister Imran Khan and Army Chief General Javed Bajwa have been on the same page in tackling the health and economic crises faced by Pakistan. Contrary to the critics of Pakistan's civil-military ties, Khan-Bajwa cooperation has been one of the keys to the country's success in dealing with the twin crises.
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Pakistan's domestic and overseas cement dispatches figures for October 2020 are officially yet to be released by the All Pakistan Cement Manufacturer Association (APCMA), but Lucky Cement Ltd's CEO, Mohammad Ali Tabba, has estimated a record growth to 5.7Mt, increasing from 4.4Mt in September 2020. The MoM rise of 29.5 per cent in dispatches in October was possible due to the increase in domestic and export demand as well as the speedy momentum in Pakistan's economy.
During an interview to a local broadcasting channel, Mr Tabba requested the government to announce a long-term policy for the manufacturing sector of the county as it has potential, along with textile sector, to earn US$40bn in next 4-5 years. He expressed that Pakistan's cement industry had sustained the impact of COVID-19 due to the smart lockdown policy of the government and a series of incentives announced by the Central Bank of Pakistan for short- and long-term financial support to industrialists during this period. In addition, government provided a unique package for the growth of the construction sector. Mr Tabba was optimistic that growth potential exists in all sectors as the government’s policies are conducive for their development and progress, besides some challenges on energy and agriculture sectors.
On the same lines, Pakistani business tycoon, stock trader and the founder/chairman of the AKD Group (trading and research house), Aqeel Karim Dhedhi, has confirmed the unprecedented growth in cement dispatches in
China’s State Development and Investment Corp has announced that it has signed procurement contracts with 20 foreign companies during the ongoing third China International Import Expo being held in Shanghai.
The purchase covers more than 20 kinds of commodities including grain, fruit, textiles and chemical products from 15 economies such as Pakistan, Cambodia, Indonesia and South Africa, according to China Daily on Saturday.
“The timely CIIE demonstrated China’s determination to continue to open up to the outside world. At the same time, it reflected confidence from the international community in the prospects of the Chinese market,” said Bai Tao, Party secretary and chairman of SDIC.
China is committed to taking initiative in the mechanism of global sharing and enabling the global cooperation to be more flexible with an open mind and measures, Bai said.
“SDIC will continue to deepen cooperation in important fields and key industries with partners both at home and abroad, so as to share opportunities brought by the CIIE, go hand in hand and contribute to the promotion of global economic development and regional economic and trade exchanges,” he added.
Meanwhile, the first batch of cherries is expected to be exported from Pakistan to China next year, said Li Wei, business representative of Huazhilong International Trading Private Ltd. Pakistan.
“Pakistani cherries are really good, including sweetness and quality. China can provide technical assistance to manage orchards, while Pakistan can provide workers, so that both sides can achieve win-win cooperation,” he said in an interview with the CEN at the third China International Import Expo (CIIE) being held in east China’s Shanghai.
Previously, media reported that export of Pakistani cherries has been hindered by cold chain management, market information system, packaging and processing facilities.
Li Wei said that to tackle the problem of cherry fruit fly, 60-70 degree hot water bath treatment and the following cold storage is a solution. Now as cold chain technology lags behind in Pakistan, we will develop it and strive to solve it next year.
Referring to why he embarked on export business of agricultural products from Pakistan, Li Wei said the general manager of the company visited Pakistan by chance and found that there was a great business opportunity for the export of agricultural products from Pakistan to China.
Therefore, in the second half of 2018, 24 tons of mango were exported from Pakistan to China and sold out in Xinfadi, a large wholesale market of fruits, vegetables, and meat for Beijing. “It was the first to enter Beijing by air cargo transport from Lahore.” This year, the company was officially registered in Pakistan.
According to Li Wei, Pakistani mango is comparable to those from Australia and the Philippines. Although the price is more expensive than domestic mango, Pakistani mango is better in terms of variety, appearance, quality, among others. The sugar content of ripe mango can reach 22.68%. “It tastes best at 75% – 80% maturity,” he added.
There is seasonal difference in the marketing of Pakistani mango in China. “The mango season in Pakistan starts from August 20 to November 20, while there are almost no mangoes in southern China in November. Pakistani mango can extend the mango season by two months compared with Chinese mango. It has a time advantage,” Li Wei explained.
The mango orchard adopts the cooperation mode between China and Pakistan. “Chinese side provides technology and sends technical staff in fields of inorganic fertilizer, bagging, picking, disinfection, transportation, while Pakistani side provides labor. Finally, through cross-border e-commerce air transportation, Chinese customers can eat fresh mango within a week after placing an order,” he added.
Pakistani rupee became the third best-performing currency in Asia after the currency hit almost eight-month high at Rs158.91 against the US dollar in the interbank market on Monday, experts said.
The development may help to tackle high inflation as Pakistan has turned net importer of wheat, sugar and cotton this year to improve supplies. Earlier, a shortfall in the production of agricultural commodities caused a surge in their prices in the country.
With fresh recovery of Rs0.18 on Monday, the rupee has cumulatively regained Rs9.52 or 5.65% over the past 11 weeks since touching all-time low of Rs168.43 on August 26. The rupee was last seen around Monday’s (November 9) closing level of Rs158.91 on March 20.
“Pakistani rupee entered the list of best-performing currencies in Asia, appreciating by 3.1% against the US dollar since October 1, 2020, thereby securing the position of third best-performing currency in Asia after Indonesian rupiah and South Korean won,” Alpha Beta Core CEO Khurram Schehzad said in a commentary.
Indonesian rupiah had regained 4.5% while South Korean won recovered 3.6% since October 1, 2020, he added.
“Improvement in rupee-dollar parity reduces pressure on the external debt as well as imported inflation in the country,” the analyst added.
On the other hand, exports should not be hurt in the short run as the country’s export industries, as per reports, are already operating at 100-120% of their capacity, while the Real Effective Exchange Rate (REER) index (measuring competitiveness through relative currency parity) has also room for further improvement.
“Improving currency parity should result in improved ability of the country to service its external debt as well as tackle imported inflation that affects the masses,” he said.
BMA Capital Executive Director Saad Hashmi said the rupee may maintain the uptrend following Joe Biden’s victory in the US presidential election. “Biden aims to improve US relationship with Iran; the development should push down crude oil prices in the international market as Iran is a major oil producer,” he said.
Hashmi said the policy change would directly or indirectly benefit Pakistan as it was a net importer of crude oil and petroleum products. It meets over 70% of energy requirement through imports and the share of energy in total imports stands at around 25% per annum.
He said the rupee had continued to strengthen with higher inflow of dollars into the national economy. “Dollar inflows have remained high on account of receipt of workers’ remittances and export earnings,” he added.
Market talk about textile exporters suggests they are working at full capacity. Their share in total exports of the country stands at 60% per annum.
Experts, however, are wary of anticipating the rupee’s outlook. The future rupee-dollar parity may be impacted by Pfizer’s announcement of a successful Covid-19 vaccine and international oil prices as the world is experiencing the second wave of Covid-19.
Pfizer vaccine may not be commercially available before December while any increase in international oil prices may be a short-term phenomenon with Iran likely to stage a comeback to the oil export market.
Besides, Pakistan is likely to pay back debt worth $2 billion to Saudi Arabia; $1 billion next week and the remaining $1 billion in January 2021.
The development may stand neutral for the rupee considering Pakistan may arrange $2 billion from China and is all set to launch Eurobond and Sukuk worth $2 billion in February 2021, it has been learnt.
Workers’ remittances amounted to $2.3 billion during October 2020, showing an increase of 14.1 per cent when compared with October 2019.
This is for the fifth consecutive month that workers’ remittances remained above $2 billion, according to latest figures released by the State Bank of Pakistan (SBP) on Thursday.
A large part of the year-on-year (YoY) increase in October this year, 30pc, was sourced from Saudi Arabia, 16pc from the United States of America and 14.6pc from the United Kingdom (UK).
“Improvements in Pakistan’s FX market structure and its dynamics, efforts under the Pakistan Remittances Initiative (PRI) to formalise the flows and limited cross-border travelling contributed to the growth in remittances,” the SBP stated.
Meanwhile, on a cumulative basis, workers’ remittances rose 26.5pc to $9.4bn during the first four months of FY21, when compared with July-Oct FY20.
“These numbers were expected. The whole South Asia region is getting above-average inward remittances due to lockdown and reduction in flights and movement of unofficial funds,” said Muhammad Sohail of Topline Securities.
“In the short-run, this [the increase in remittances] will support local currency,” he added.
Earlier, a World Bank report had projected that remittances to Pakistan to grow at about 9pc in 2020, totalling about $24bn.
The World Bank attributed this increase to the diversion of remittances from informal to formal channels due to the difficulty of carrying money by hand under travel restrictions.
by Khaled Ahmad
Its (Pakistan's)status as a connection between China and the Gulf economies is quite clear but the lateral function of this road — in the east India and the west Afghanistan — is not clear although India trades with Afghanistan and Central Asia and would like to use Pakistan’s territory to make this more viable. China, India’s largest trading partner — $94 billion both ways — has to use the roundabout route through Southeast Asia to transport its goods. Yet, Pakistan is on the verge of changing its identity from a war-fighting nation to a trading one. But if it continues to view India with fear, the new identity of a trading nation with a prosperous population will not be achieved.
In October 2008, a World Bank official in Islamabad said the Bank was ready to lend Pakistan $2.25 billion for a trade and energy corridor. He could have added the Iranian-Pakistan-India (IPI) pipeline to the above “projects of peace” but for the complex tripartite negotiations going on about the IPI. But a much more important thing happened during President Asif Ali Zardari’s meeting with the Indian Prime Minister Manmohan Singh, in New York in 2012. The report said: “The two met on the sidelines of the 63rd United Nations’ General Assembly session and announced mutual agreement on a number of vital business-related issues. On top of everything else came Pakistan’s agreement to allow Indians an overland access to Afghanistan.”
Pakistan and India have missed many opportunities to become “normal” neighbours. Unlike India’s praiseworthy option of trading with China which it considered a rival, Pakistan never traded with India which led to much smuggling that benefited no one in Pakistan. Recently, after the Pulwama incident, it stopped even the border trade with India that caused untold hardship to the Pakistani population in Sindh. Clearly, India and Pakistan — as nuclear powers — must opt for normalisation through trade and trade routes to make South Asia a prosperous region.
He said that despite the challenges posed by Covid-19, Pakistan's industrial sector was thriving as Large scale Manufacturing Industry (LSMI) including textile production and auto-sales were on the rise. "PTI government incurred 48pc less external liabilities in first 9 quarters compared to
PML-N government's last 9 quarters while doing 78pc more debt servicing. Despite the challenges posed by Covid-19, Pakistan's industrial sector is thriving. LSM, textile production & auto-sales are on the rise," the advisor tweeted."
The advisor shared State Bank of Pakistan's data which showed that the net to external debt stood at $24.8 billion during PML-N tenure from March 2016 to June 2018, where as in PTI's tenure from June 2018 to September 2020, the net external debt stood at $18.5 billion.
The overall liabilities impact was recorded at $31.1 billion during the PML-N period under review whereas the overall liabilities impact has been recorded at $16.1 billion in PTI's tenure under review.
The external debt serviced (principal + interest) stood at $16.7 billion in PML's period whereas it stood at $29.7 billion during the PTI's tenure of nine quarters under review.
Meanwhile, quoting Pakistan Bureau of Statistics latest statistics, he said, the Large Scale Manufacturing growth increased 7.65 percent in September 2020, compared to last September whereas it grew by 4.81 percent during the first quarter of the current fiscal year (July-Sept 2020-21).
On year-on-year basis, the non-metallic mineral products grew by 21 percent in September 2020, pharmaceuticals by 20 percent, food by 10pc, autos by 28 percent, textiles by 2.5 percent, fertilizers by 8 percent, paper and board by 12 percent, chemicals by 8 percent and rubber 15 percent.
On the other hand, the car sales have increased from 10,853 units in October 2019 to 14,054 October 2020, showing an increase of 29 percent.
Likewise, the sale of motorcycles also increased by 12 percent, from 156,872 units in last October to 175,294 units in October 2020 whereas the sale of tractors went up from 2,861 to 4,482, showing growth of 57 percent and trucks and buses sale grew from 349 units to 388 units, a growth of 11 percent.
Minister for Science and Technology Fawad Chaudhry has said Pakistan has become self-sufficient in manufacturing Covid-19 related material thanks to the efforts of its scientists, engineers and technicians.
“The country lacked the medical equipment to fight the pandemic when the first phase of Covid-19 appeared in the month of February, but now the situation is different,” the Radio Pakistan quoted the minister as saying.
Separately, in his address at the launching ceremony of a new model of ventilator, the minister said Pakistan is now exporting coronavirus related products worth 100 million dollars.
On June 28, the minister announced that the first batch of ventilators manufactured in Pakistan would be delivered to the National Disaster Management Authority (NDMA). In a video statement, Chaudhary had said Pakistan has joined the ranks of those few countries which are producing their own ventilators.
The minister had expressed hopes that the country would be able to meet its own need for ventilators and would also be able to export the equipment, which, according to him, is a "complicated machine and not a lot of countries in the world have the capacity to make it".
"When the first Covid-19 case was recorded in February 26, we were not producing anything. Within a few months, we have become capable of producing our own equipment," he had said.
The minister had also congratulated the Pakistan Engineering Council (PEC), the National Radio and Telecommunication Corporation (NRTC) and other scientists and technicians for making it possible.
The contagious coronavirus disease has given an unprecedented boost to the use of personal protective equipment (PPEs) that include surgical mask, respirator, surgical gloves and face shield.
There has also been a global spike in the demand for medical equipment needed for treatment of this flu-like infection. The medical equipment comprise Covid-19 testing kit, mechanical ventilation, open-source ventilator and extracorporeal membrane oxygenation.
In April, Alpha Rubber and Plastic Works – a Lahore-based company which manufactures auto parts –developed a splitter through which oxygen could be provided to two to four patients at once by using a single ventilator.
Osama Usman, head of the private firm, had told The Express Tribune that 'Plan 9' of the Punjab IT Board (PITB) had approached them to manufacture the connector using the 3D printer prototype.
The part was initially being manufactured by the PITB using the 3D printer technology which was a time-taking and costly procedure. The firm, however, managed to find an alternative and started manufacturing 1,000 ventilator connectors on a daily basis for government and private hospitals.
Faisalabad is currently experiencing a financial boom with the operationalisation of 50,000 power looms and expecting the opening of another 30,000 units.
Known as the country’s textile hub, Faisalabad, for the first time after 1990, has seen a massive economic growth following a high demand of export items and the government’s recently announced incentive of supplying electricity to the industrial sector at reduced rates.
In this regard, Prime Minister (PM) Imran Khan in a tweet on Thursday shared a television news report about the increased economic activity in Faisalabad and the resultant shortage of 0.2 million labourers required to meet the high demand of orders in the textile sector.
Factories and power looms faced closures owing to a power crisis as emerged due to the apathy of previous governments in the recent past. However, during the coronavirus situation, orders in the textile sector were diverted towards Pakistan from various countries.
The news report mentioned that Faisalabad had 1.3 million workers with one million natives and 0.3 million belonging to other districts.
Bloomberg in its recent report ‘Opening early helped Pakistan boost exports during pandemic’ also mentioned a surge in Pakistan’s textile exports.
“Pakistan has seen orders shifting from multiple nations including China, India and Bangladesh,” All Pakistan Textile Mills Association (APTMA) Secretary General Shahid Sattar said, as quoted by Bloomberg.
“Garment manufacturers are operating near maximum capacity and many can’t take any orders for the next six months,” he added.
Further, Pakistan’s decision to loosen pandemic restrictions early has helped the nation’s exports emerge stronger than its South Asian peers.
Bloomberg said that Pakistan’s outbound shipments grew at a faster pace than Bangladesh and India as textiles, which account for half of the total export.
“Islamabad saw total shipments grow 7pc in September, compared with New Delhi’s 6pc and Dhaka’s 3.5pc,” it said.
In the other private services segment, net ICT
exports jumped by 36.0 percent YoY, to US$
784 million (Table 2.19). Within this, software
consultancy services and computer software
witnessed growth of 23.0 percent and 48.3
percent respectively. Importantly, the jump in
exports was more pronounced in the second
half of FY20.44 Amid the “Great Lockdown”,
the rise in ICT-related services exports
indicated that Pakistani firms were able to
benefit from the rise in global demand for
these services. Social distancing measures
adopted by governments may have further
boosted demand for online services in work-from-home arrangements.
India came second to Pakistan in terms of mean download speed over a mobile phone in the July to September period of 2020.
Pakistan showed nearly 40% faster mobile download speed than India last quarter, according to Internet access analytics firm Ookla.
In terms of mean upload speed, India stood last among the South Asian countries at nearly 4 Mbps. Bangladesh stood third for download speed and second for upload speed.
Both India and Pakistan showed a growth in internet download speeds over the year, with India growing by nearly 12% compared with the same period last year. Pakistan's download speed grew 24% this quarter compared with last year.
In terms of 4G LTE performance, Pakistan outperformed India with its mean download speed over 4G being 51% faster than India's.
India's mobile data speeds is said to be one of the slowest in the world, trailing Pakistan, Nepal, South Korea and Sri Lanka, according to Ookla's Speedtest Global Index. Ookla ranked 138 countries based on internet speeds and India ranked 131st.
India is one of the largest markets in the world for smartphones. It also has access to the one of the cheapest data rates around the globe. The findings also come at a time when operators worldwide compete to roll out the fastest internet service there could be - 5G.
These firms took the lead where revenues were up 39pc YoY as compared to -64pc YoY in 2Q2020 mainly due to increase in volumetric sales given (1) pent-up demand from previous quarter amidst Covid-19 lockdown and (2) low-interest rates, Topline securities stated.
Total Car and Pak Elektron Limited (PAEL’s) appliances sales increased by 8pc YoY & 30pc YoY, respectively in 3Q2020.
The overall gross margins for this segment increased by 1.98ppts YoY to 8.1pc, led by Pak Suzuki Motor Company Limited (PSMC) +6.06ppts and followed by Thal Limited (THALL) +5.39ppts. Margins of all others in this segment were down in the range of 0.2ppts YoY to 3.63ppts YoY.
Sales of Pharmaceuticals’ segment witnessed an improvement of 26pc YoY mainly due to resumption in OPDs and regular health care services, which were halted due to the risk of patients getting infected by Covid-19.
GlaxoSmithKline Consumer Healthcare (GSKCH) +35pc YoY and GlaxoSmithKline Pakistan Limited (GLAXO) +32pc YoY led sales increase.
Topline Securities stated that all our sample companies in the pharmaceuticals segment reported a decline in gross margins, with the exception of Abbott Laboratories (Pakistan) Limited (ABOT), which reported increase of 10.7ppts YoY to 35pc from 25pc mainly due to better sales mix i.e. increase in high margin nutrition segment sales.
A notable decline in gross margins within pharmaceuticals’ was witnessed in (1) GlaxoSmithKline Consumer Healthcare (GSKCH) -4.9ppts YoY due to adverse sales mix and procurement of raw material at higher prices and (2) AGP Limited (AGP) -4.8ppts YoY amid one-off provisioning of Covid-19 testing kits.
The sales for this segment increased by 23pc YoY. All companies within the staples segment reported increase in sales except for Bata Pakistan Limited (BATA) -13% YoY due to lower volumetric sales as educational institutions opened after Sep 15, 2020 in phased manner.
Notable increase in sales was witnessed in Unity Foods Limited (UNITY) +176pc YoY due to addition of new product lines along with capacity expansion.
Gross margins of consumer staple companies were up by 0.86ppts YoY to 27.8pc during 3Q2020.
Overall profitability of consumer companies was up by 41pc QoQ led by Consumer Discretionary firms again which turned in profits of Rs4,105mn in 3Q2020 as compared to losses of Rs1,479mn in 2Q2020.
According to Topline Securities, Overall sales during 3Q2020 increased by 37pc QoQ mainly due to increase in revenues of Consumer Discretionary +144pc QoQ amid higher volumetric sales driven by pent-up demand and low interest rates.
Turnover of Pharmaceuticals’ and Consumer Staples firms were also up by 14pc QoQ and 7pc QoQ, respectively.
The overall gross margins were down by 3.7ppts QoQ to 21.1pc amidst Pak Rupee devaluation by 2pc QoQ which the companies were unable to immediately pass on to the final consumers, the Topline securities said.
Pakistan has secured $800 million in debt relief by completing 36 agreements with 16 G20 countries for May to December 2020.
According to the report 14 countries ratified their agreements with Pakistan during the past seven months, which has provided fiscal space of $800 million to Islamabad for the time being.
Pakistan received $347 million from China, $128.3 million from the United States, $170 million from France and $86.1 million from Germany, 14.4 million from Sweden and $8 million relief from Canada.
Negotiations are underway with 5 countries for another $1 billion relief for Pakistan.
Agreements will be reached with Russia, Japan, the United Kingdom, the United Arab Emirates and Saudi Arabia. Negotiations with the five countries will be completed by December 31, 2020.
Pakistan has completed 9 agreements with USA, 8 with China, 2 each with Belgium, Canada, Spain, Netherlands, 2 with Germany, 1 with Australia, 1 each with Finland, France, Italy, South Korea, 1 with Kuwait, Norway, Switzerland and, one agreement with Sweden.
Pakistan expects 800 to 900 million in debt relief in the second phase. In the second phase, debt relief is expected from January to June 2021.
Sources said that the government had decided to give incentives to the technology zone developers. The developers would be exempt from all customs duties and taxes for a period of 10 years from the date of signing of a development agreement on capital goods, including but not limited to materials, plant, machinery, hardware, equipment and software, imported into Pakistan for consumption within zones by the authority and zone developers.
The government would also give tax exemption to zone enterprises. They will also be exempt from all customs duties and taxes on capital goods for a period of 10 years from the date of issuance of licence by the authority.
The cabinet, in its meeting held on November 24, was informed that a meeting regarding creation of STZA was held at the Prime Minister’s Office on November 5, 2020.
The goal behind the creation of such zones was to provide institutional and legislative support for the technology sector with internationally competitive and export-oriented structures and ecosystem, in addition to developing collaboration between the academia, researchers and technology industry.
This would help create jobs in the technology sector and capitalise on youth dividend. The creation of the authority would also provide an environment, which would attract foreign direct investment, apart from improving the quality of domestic technology products and services, and fostering innovation.
Pakistan’s exports grew for the third consecutive month in November to $2.161 billion, up 7.67 per cent from $2.007bn in the corresponding month last year, data released by the Pakistan Bureau of Statistics showed on Friday.
The increase in exports is mainly driven by double-digit growth in proceeds from textile and non-textile commodities. Meanwhile, during the month under review, imports also increased 7pc leading to a slight increase in trade deficit.
Data showed a significant growth has been seen in the exports of home textiles (20pc), pharmaceutical products (20pc), rice (14pc), surgical goods (11pc), stockings & socks (41pc), jerseys & pullovers (21pc), women’s garments (11pc) and men’s garments (4.3pc), as compared to Nov 2019.
Between July to November, exports slightly increased by 2.11pc to $9.737bn, from $9.536bn over the corresponding months of last year.
ARTICLE CONTINUES AFTER AD
Exports in the new fiscal year started on a positive note but witnessed a steep decline of 19pc in August before rebounding in September, October, and November.
To promote exports of textile products, the Ministry of Commerce on Friday released Rs1.78bn for the textiles sector under Drawback of Local Taxes and Levies (DLTL) scheme. “I hope this will resolve the liquidity issues of our exporters and enable them to enhance exports”, said Adviser to PM on Commerce and Textile Razak Dawood.
He said the DLTL for non-textile sector are also being released shortly. Razak also disclosed that the export of animal casings from Pakistan to Japan has resumed after a ban of four years. “I commend the efforts made by our trade section in Tokyo. I advise our trade missions to actively engage with importers,” he said.
“I urge exporters to take benefit of this opportunity and move full speed ahead”, the adviser added.
In FY20, exports fell by 6.83pc or $1.57bn to $21.4bn, compared to $22.97bn the previous year. Data shows visible improvements in export orders from international buyers, mainly in the textile and clothing sectors since May.
On the other hand, imports also rose by 7.77pc in November to $4.229bn, as against $3.924bn over the corresponding month of last year. During 5MFY20, the overall import bill slightly increased by 1.29pc to $19.422bn, up from $19.175bn over the corresponding months of last year.
The continuous decline in imports has provided some breathing space to the government in managing external accounts despite a downward trend in exports. However, imports are now expected to increase further in the coming months following the abolishment of regulatory duty on imports of raw materials and semi-finished products.
In FY20, the import bill witnessed a steep decline of $10.29bn or 18.78pc to $44.509bn, compared to $54.799bn in the previous year.
The country’s trade deficit also went up by 7.88pc in November, mainly due to a growth in imports proceeds. In absolute terms, the trade gap stood at $2.068bn, as compared to $1.917bn over the corresponding month of last year.
In the first five months, the trade deficit edged up 0.48pc to $9.685bn, as against $9.639bn over the last year. During FY20, it narrowed to $23.099bn, from $31.820bn.
As per the report, the surge in economic activity plus attractive valuations could bring 20 percent growth sending the Pakistan Stock Exchange (PSX) index to 52,000 by December next year.
“Led by strong earnings growth, economic growth, broadly stable external position, and cheap valuations, we expect the KSE-100 Index to generate a lucrative total return of 28pc (USD-based: 23pc) during CY21 taking index level to 52,000 by Dec’21,” the report said.
The report was of the view that it expects the economic activity in Pakistan to continue the robust pace it has shown over the last couple of months.
The GDP growth is expected at 1.8 percent during FY21. Whereas, The Current Account, while swinging into a deficit, is expected to be manageable (-0.9pc of GDP), attributable to consumption-driven, import-dependent GDP, the report stated.
The report expects no significant depreciation of the currency with PKR/USD 168 expected by Dec’21, owing to orderly market conditions, continued robust inflows from remittances and improved exports.
Housing finance, construction package and TERF (subsidized investment scheme for industries which expires on December 2020) are some of the government’s efforts to fuel investment activities in the country, it said.
The G20 debt relief and low-interest rates would allay the stress off debt servicing expenditure, the report pointed out.
Talking about the Sectoral Outlook; the report stated that in the cement sector, aggregate demand revival and government incentives for the construction industry should help propel dispatches growth. Whereas, in the auto sector, the stability in the PKR/USD parity, and strong volumes growth amid demand revival and low-interest rates should stimulate bottom-line of companies.
The Large-Scale Manufacturing (LSM) sector registered a cumulative growth of 5.5% in July-October of current fiscal year, reported the Pakistan Bureau of Statistics (PBS) on Tuesday.
October was the second successive month when the index grew over the previous month, raising hopes that the momentum could continue in the midst of the second wave of Covid-19 in Pakistan.
Out of 15 major industries, nine sectors again recorded a surge in production while output of six industries contracted in the first four months of current fiscal year compared to the same period of previous year, according to the PBS.
The government expects 2.5% contraction in the LSM sector in the current fiscal year, according to the Annual Plan 2020-21 released by the Ministry of Planning and Development on the eve of federal budget. But the Ministry of Finance’s estimates suggest that instead of contraction, the LSM sector may grow 1.4% in the fiscal year.
Because of better-than-expected output in the industrial and agriculture sectors, the Ministry of Finance now expects economic growth to remain in the range of 2.6% to 2.8% in the current fiscal year - better than the official target of 2.1%. The industrial sector, which was earlier projected to grow only 0.1% by the government, may now grow at a rate of 2.1%.
LSM recorded 6.7% year-on-year growth in October but the index was still below pre-coronavirus level of 160.2 points recorded in March this year.
On a yearly basis, the petroleum sector contracted 0.1% in October over the same month of previous year. Provincial bureaus also reported a nominal growth of less than 1% in 11 industries. On a month-on-month basis, the LSM sector showed 3.4% growth in October over September.
Prime Minister Imran Khan won the July 2018 elections on the promise of creating 10 million jobs and constructing five million homes at affordable prices but the promises have remain unfulfilled so far. With the current sluggish economic growth, there will be increase in poverty and unemployment in the remaining tenure of the government.
Pakistan needs 6-7% annual economic growth to reduce poverty and unemployment, according to independent economic experts.
Data collected by the Oil Companies Advisory Committee (OCAC) showed that 11 types of industries registered an average growth of just 0.1% in the first four months of current fiscal year.
The Ministry of Industries, which monitors 15 industries, reported 3.7% growth in the LSM output. Provincial bureaus reported a growth of 1.6% in 11 industries in four months, according to the PBS.
Sectors that posted growth during the July-October period included textile that grew 2.2% and non-metallic mineral products that soared 22.9%.
However, the output of power looms slumped 41.7% in four months, contrary to the media hype generated about utilisation of power looms at full capacity.
The fertiliser sector grew 6% whereas the food, beverages and tobacco group expanded 12.2% in the four-month period under review.
The manufacturing of chemical products increased 9.2%, paper and board 10.4% and rubber products 3.3%. The pharmaceutical sector registered a growth of 13.5% in the July-October period. Output of the coke and petroleum sector increased 1.6%.
Industries that registered a dip in manufacturing included the automobile sector, which saw a contraction of 1.6% but the pace of negative growth slowed down.
Iron and steel production fell 5.4%, electronics 23%, leather products 43%, engineering products 34% and wood products 64% during the July-October period.
Posted 8 hours ago by ProPK Staff
This is encouraging news from the industry for software houses, professionals, and students alike. A university to be set up based on industry and academic coordination could serve the entire IT sector, which is always looking for graduates having skills in advanced fields of IT sector.
Presently, a majority of local universities except a few institutions do not produce graduates that meet the requirement of the local and foreign markets. Hence, a serious shortage of human resources always prevails in the sector.
According to industry estimates, as many as 25,000 graduates graduate from various universities per year in Pakistan. However, merely 5,000 graduates can meet the requirements of the industry regarding the needed skill sets and other practical qualifications.
Ministry of Information Technology and Telecommunication (MoITT) had previously planned to set up an authority on IT education last year under the then minister. However, there is no update on the continuity of the plan under the present minister.
Stakeholders of the IT industry said that professionals of various software houses could impart their knowledge at various institutions to bring reforms in IT education. However, they said that the universities are not willing to pay them competitive salaries.
Therefore, inexperienced teachers continue to teach various subjects of computer science to students through an outdated curriculum and obsolete methodologies.
Some big names in the IT industry usually set up their in-house training departments to meet the demand for human resources. However, this is not a long-term solution as far as the entire industry is concerned.
At present, the demand for the IT industry is exceeding 15,000 professionals every year, with over 5,000 highly-skilled professionals required in the latest technologies.
Companies have no choice but to pick up professionals from competing companies at higher offers of salary packages.
It is hoped that setting up an IT industry by a reputed IT company could make a difference in meeting the demand of the country’s IT companies in the future rather than money-making and degree-printing institutions.
Although the country’s exports have picked up in the past few months, Pakistan still has a long way to go if it is to compete with regional players such as Bangladesh and India. Last month, on the back of double-digit proceeds, a 32-month high of $2.16 billion was recorded in November, driven predominantly by textile exports, followed by pharmaceutical products, rice and surgical goods. Adviser to the Prime Minister on Institutional Reforms and Austerity Ishrat Husain, speaking at a recent event, correctly stated that Pakistan’s exports cannot grow beyond the annual $25 to $30 billion unless there is diversification and a move towards new industries is made. One of the fundamental reasons why Pakistan has been unable to achieve this is the disproportionately high level of incentives and support in the form of tax rebates provided by the government to a handful of sectors that make up to 90 percent of total exports. Unless there is a concentrated effort by the government to attract investment into other industries, the situation will remain the same and exports stagnant. It would be unrealistic to expect investors to set up a business that is unlikely to get support from the government while an industry already exists that receives ample subsidies and protections, enabling it to thrive.
Another issue is the overreliance on the US and EU markets, that are not growing rapidly enough to justify sticking to them only. In comparison, China and other Asian markets are growing at 5 to 6 percent. China is not only the largest exporter but also the largest trading nation in the world. Pakistan should leverage its strong alliance with the country and tap into its supply chains, providing raw materials and components, boosting its own exports. Another significant impediment to diversifying the export sector is the existence of powerful lobbies that are able to secure and preserve a competitive advantage through the government and other relevant power centres, making it near impossible for new entrants to survive, much less grow. Unless these systemic issues are addressed, Pakistan’s exports will struggle to reach the volume required for it to be considered a serious regional player.
In November, export proceeds were up by 9.27pc from a year ago. In October, export proceeds were up by 6.18pc and in September, they grew by 11.03pc while a decline of 15pc was recorded in August.
In the first month of the current fiscal year, exports recorded a robust increase of 14.4pc on a year-on-year basis. The rebound in exports of textile and clothing is the outcome of a series of incentives to support exporters to meet the challenges in the wake of the pandemic and disruption in supplies.
The demand for country’s exports had collapsed in months following March due to the Covid-19 pandemic, while there has been a gradual improvement since June from international buyers.
Adviser to PM on Commerce in a tweet said that in November, the exports of cotton yarn declined by 25pc, raw leather by 21pc, and cotton fabric by 12.2pc. “This is an indication that exports of low value-added products are decreasing and we are moving towards more value-added exports”, he said while adding that “I urge our exporters to keep pursuing this policy.”
The PBS data showed that ready-made garment exports edged up by 4.36pc in value while plunging in quantity by 44.64pc during July to November this year from a year ago. Exports of knitwear increased by 14.34pc in value and 32.35pc in quantity; bedwear exports were up 12.28pc while dipped 7.95pc in quantity.
Towel exports went up 14.24pc in value and 3.79pc in quantity, whereas those of cotton cloth dipped 8.73pc and 31.78pc in quantity.
Among primary commodities, cotton yarn exports plunged by 37.34pc, yarn other than cotton by 16.69pc, made-up articles — excluding towels — was up 15.53pc and tents, canvas and tarpaulin increased by a massive 58.05pc during the months under review.
Textile machinery imports dropped by 6.07pc during the first five months of current fiscal year — a sign that no expansion or modernisation projects were taken up by the industry in the given period.
Petroleum imports declined 22.78pc in the first five months (July-November) to $3.94bn, compared to $5.11bn over the last year, the PBS data showed.
Of these, petroleum product imports were down 16.51pc in value in the first five months’ despite increasing by 54.42pc in quantity. Similarly, import of crude oil dipped 27.01pc in value, but posted a growth of 14.78pc in quantity during the period under review while those of liquefied natural gas fell by 34.73pc in value. On the other hand, liquefied petroleum gas (LPG) imports jumped 52.06pc in value in July-Nov, largely to plug a shortfall in local production.
Machinery imports went down 5.78pc to $3.37bn in the first five months from $3.58bn last year. The decline in imports was recorded in almost all kinds of machinery except power generating machinery, office machinery and mobile phones.
The power generating machinery imports went up 21.73pc in the first five months mainly due to revival of power projects under the China-Pakistan Economic Corridor and office machinery increased by 0.7pc during the months under review.
In the telecommunication sector, imports surged by 31.32pc on the back of mobile handsets arrivals which were up by 45.26pc. This was the result of a crackdown on smuggling and doing away with free imports in baggage schemes. Import of other apparatus fell by 6.39pc.
The overall transport group witnessed a growth of 13.92pc. This growth was mainly driven by an increase in imports of road motor vehicles (build unit, CKD/SKD) and CBU during the months under review.
An increase of 60.36pc was seen in imports of textile group — raw cotton, synthetic and artificial silk yarn.
Prime Minister Imran Khan on Tuesday said the country's foreign reserves have risen to around $13 billion, the highest in three years.
The premier said that despite the Covid-19 pandemic, which brought a global slowdown in economic activity in 2020, there is "great news on the economy" and a "remarkable turnaround".
Pakistan has achieved a current account surplus of $447 million for the month of November, added the prime minister. He further said there is a surplus of $1.6 billion for the fiscal year so far versus a deficit of $1.7 billion during the same period last year.
Earlier this month, the premier attributed the positive trends in the country’s economy – improvement in stock market performance and increase in investors’ confidence – to the business-friendly policies of the PTI led federal government.
The Asian Development Bank (ADB) has said that Pakistan’s economy was on the path of recovery. Some official estimates suggested 2.8% growth rate during the current fiscal year.
“Pakistan’s growth is forecast to recover in fiscal year 2020-21 as economic sentiment improves with the expected subsiding of Covid-19 and the resumption of structural reform,” said the ADB.
The country's remittances have also continued to increase over the past months. Cumulatively, in the first five months (July-November) of current fiscal year, remittances grew 27% to $11.77 billion compared to the same period of last year.
Pakistan had received remittances in the range of $1.78-1.9 billion per month in the prior five months - January-May 2020.
The exports of Pharmaceutical products from the country witnessed an increase of 24.92 percent during the seven months of ongoing financial year (2020-21) as compared to the exports of corresponding period of last year.
The country exported pharmaceutical worth US $161.443 million during July-January (2020-21) as against the export of US $129.242 million during July-January (2019-20), showing growth of 24.92 percent, according to the Pakistan Bureau of Statistics (PBS).
In terms of quantity, the exports of pharmaceutical products also increased by 26.73 percent by going up from 8,903 metric tons to 11,283 metric tons, according to the data.
Meanwhile, year- on- year basis the pharmaceutical goods export increased by 32.60 percent during the month of January 2021 as compared to the same month of last year.
The pharmaceutical exports in January 2021 were recorded at US $22.547 million against the export of $17.004 million in January 2020, the PBS data revealed.
However, month- on- month basis, the exports of pharmaceutical witnessed decrease of 9.25 percent in January 2021 when compared to $24.845 million in December 2020.
According to data released by the State Bank of Pakistan, remittances under IT and IT-enabled services surged to $1.119 billion from July 2020 to January 2021 compared to $812 million recorded in the corresponding period of the last financial year, showing a handsome growth of 37 percent year-on-year
The growth in IT exports was driven by the increasing automation, and digitalized services in different countries after new ways of doing business emerged following the outbreak of COVID-19 worldwide.
Different foreign companies, mainly from the USA and EU markets, prefer placing their orders to Pakistani companies rather than Indian and the Philippines.
Barkan Saeed, Chairman Pakistan Software Houses Association (P@SHA) for IT and ITeS told Propakistani,
The growth in IT exports value was driven by the foreign clients moved from Indian companies to Pakistani companies in a post-COVID-19 scenario.
The government could double the exports from $2 billion per annum to $4 billion per annum by the next two years, with a concrete roadmap for the IT sector, which could not only fetch foreign exchange for the country, but it is a key sector that could provide the skilled job to millions of youngsters, Saeed further said.
Local IT companies and the government should work on a strategy to protect the growth of the IT sector on a sustainable basis for the future, he added.
Saeed demanded that IT should be declared a strategic sector with the same focus and treatment. The PM should resolve the pending issues of the sector immediately to unleash the true potential of the IT sector.
global dollar industry covering a wide spectrum of products from inexpensive, single use items such
as bandages and dressings, to high-cost, state of the art capital equipment, such as magnetic
resonance imaging (MRI) machines.
For years, Sialkot, Pakistan has been a traditional global cluster
for export-oriented contract manufacturing of precision metal instruments used in general surgery.
Success to date has been based on decades of production experience passed down generation to
generation, combined with low-cost labor supply. However, changing dynamics in the global medical
device industry mean that past drivers of competitive advantage are becoming less relevant. Pakistan
has seen its medical devices exports plateau in recent years as new products and competitors have
entered the market. In order to sustain its participation in the industry, Pakistan needs to adopt a
specific growth strategy based on improved efficiencies, entry into new markets and diversification
Since the turn of the century, the global medical devices industry has experienced considerable
growth, reaching US$360B in 2017, as populations have expanded and aged, diseases spread and
health care coverage increased. This growth has created new opportunities but it has also been
accompanied by significant changes in the industry that have important implications for Pakistan’s
sustained participation. First, technological advancements in surgical techniques and production
capabilities have become to shift the demand away from traditional surgical instruments to new,
smaller and smarter tools that reduce patient risk and recovery time. Second, high health care costs
and regulatory requirements have led to the restructuring of the value chain around fewer, larger
and more diversified firms; this has created considerable barriers for entry in established markets.
Third, in response to these pressures, lead firms are consolidating production in select locations
with strong capabilities in a diverse range of products, from surgical instruments to highly regulated
implantable devices. Opportunities for growth still exist in emerging markets, where healthcare
expenditure is increasing, however, this window will be limited as lead firms seek to gain market
share in these growth regions. As a result, as has occurred in multiple globalizing industries, small,
less innovative firms struggle to maintain their positions in key markets and are often pushed down
the chain into low-margin contract manufacturing activities.
While Pakistan’s exports have grown steadily along with global industry trade in the past decade to
reach US$355M in 2016, Pakistan remains a small-scale exporter globally of surgical instruments and
recent years show a notable slowdown as new products and competitors have entered the market
and internal human capital deficiencies and inefficient production practices have stifled the industry.
In order to sustain its position in the industry, Pakistan needs to adopt a specific growth strategy
that engages both public and private sector actors towards common goals. Specifically, Pakistan
should upgrade production processes to increase productivity, diversify its product portfolio and
strengthen ties with emerging markets. The country’s past success in textiles and apparel also offer
an opportunity for the country to become a more significant player in the medical textiles industry.
Policies supporting these upgrading trajectories will need to capitalize on strengths of the industry,
including its reputation as a low-cost supplier and existing geographical concentration of firms while
also addressing human capital, institutionalization, and production challenges.
The Ministry of Commerce has launched the ‘Look Africa campaign’ in search of new unconventional markets and did a lot of work on Central Asian markets, which has resulted in good exports. He said that in addition, new industrial units are being set up to promote product diversification to boost domestic exports in information technology, light engineering including tractors, fisheries and electronics and mobiles.
So far, Country’s exports of non-traditional products, including information technology, have grown by 60 percent in the last four months. Razak Dawood said that the increase in the existing exports was a manifestation of good policy of the present government during Covid -19. He said that like Association of South East Asian Nations (ASEAN), “We also need to strengthen the our regional bloc in South Asian Association fo.r Regional Cooperation (SAARC) and increase bilateral trade activities in the regional countries.”
He said that the government has reduced tariffs and duties on raw materials to zero per cent to increase the country’s exports. These include Textile, Fiber and Jute where tariffs are discounted.
Replying to a question, he said that Pakistan exports to Central Asian Republics (CARs) countries increased to USD $ 145 million in 2020-21 from USD $ 104 million in 2019-20. For six months, from July-December 2021, these exports increased by 173 percent to USD$ 134 million from USD 49 million during the same period last year, he said. The Ministry of Commerce’s ‘Silk Route Reconnect’ initiative is now bearing results, he added.
To increase the trilateral trade Volume with CARs, the Adviser said that the Pakistan-Uzbekistan Transit Trade Agreement was signed in 2021 at Tashkent and both the countries discussed opening banks in each other’s country. “We are negotiating Preferential Trade Agreements (PTAs) with Afghanistan, Azerbaijan and Uzbekistan”, adding, transit trade agreements were also being negotiated.
The advisor said that for truck movement, their negotiations were at an advanced stage. Replying to another question on Information Technology exports, he said that there is a lot of scope to increase exports in Information Technology (IT) from non-traditional sectors at present.
The current annual $ 2.5 billion IT exports are very low, “We now have an annual export target of $ 4 billion this year, he said.
Razak Dawood said that there was a need to promote export culture in the country at present and the government wanted to increase exports on priority basis.
He added that Micro Small and Medium Enterprises (MSMEs), that use e-Commerce platforms, are around five times more likely to export than those in the traditional economy and the policy aims to pave the way for holistic growth of e-Commerce in the country by creating an enabling environment in which enterprises have equal opportunity to grow steadily. He stressed that the way forward for Pakistan on the economic front is to focus on exports, specifically IT related exports.
While informing about the current export situation, he said that because of prudent economic and trade policy of the government, Pakistan export target of USD $15.125 was achieved in the first half of FY 2021-22 from July-December.
From July-December 2021, Pakistan exports were USD$ 15.125 billion and the target for the first half of the current FY, were USD$ 15 billion, said. Razak Dawood said that Pakistan’s exports during December 2021 increased by 16.7 percent to USD$ 2.761 billion as compared to USD$ 2.366 billion in December 2020, showing an increase of almost USD $400 million.