Pakistan also experiences barriers to international trade such as high import tariffs which make exports less profitable. Exports are largely dependent on the agriculture sector which has not been able to work on its true potential owing to unfavorable climate conditions, water shortage as well as lack of skilled labor force. Moreover, the trade of Pakistan is such that exports largely comprise raw materials while finished goods make up a large portion of imports. Since finished goods have higher prices as compared to raw materials, this has created a wedge between the amount spent on imports and that received from exports.
Vietnamâs journey towards sustainable economic recovery from a situation similar to that of Pakistanâs current situation is a lesson to learn from. Following the failure of these Five-Year Plans, the Vietnamese introduced the first Vietnam-led reforms known as âDoi Moiâ, under the fourth Five-Year Plan (1986-1990). Doi Moi is basically a term used for renovation. The goal of these reforms was to transition the Vietnamese economy into a Socialist-Oriented Market Economy. Under Doi Moi, the political state would be Hybrid-Socialist, including the Military and CPV committee. Moreover, Doi Moi put an end to all political reforms within the country in an attempt to transition the economy to a State-controlled market economy. The Military-led Planning Ministry was responsible for leading the reforms. Provinces were to be transformed such that they shift from state-controlled towards city/district-led market economies. Economic activity between firms and government agencies was to be regulated by market forces. Small enterprises were allowed to be owned privately. Moreover, a stock exchange was created for both state and non-state enterprises. Self-imposed barriers to growth were removed, the domestic market was liberalized, subsidies to state-owned enterprises were reduced while the private sector and Foreign Direct Investment was encouraged. Moreover, there were efforts to improve international relations and to achieve higher international recognition. For this purpose, Vietnam successfully became a part of institutions both regionally and internationally, including the Association of South East Asian Nations (ASEAN), the United Nations (UN), the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation forum. There was investment in human and social capital which led to sustainable growth by creation of a skilled labor force which overall improved productivity and increased competitiveness.
Setting its path on the footsteps of Vietnam, Pakistan can also move towards its goal of sustainable economic growth. For this purpose, Pakistan needs to focus on growth oriented reforms and effective policymaking. All policies and reforms should be focused towards the ultimate goal of economic growth. Developing countries, like Pakistan, need to make untiring efforts to improve the balance of payments in an attempt to achieve sustainable economic growth. Like Vietnam, Pakistan needs to increase the ease of doing business in the country. This can be ensured by promoting a stable socio-political environment and by safeguarding the rights of both foreign and domestic investors. Furthermore, free trade agreements should be signed with different countries to remove existing barriers.
Under Doi Moi, Vietnam follows an export-led growth model, incorporating trade liberalization and promotion of foreign direct investment. These reforms in the trade policy have resulted in increased exports of the country and have driven the economy towards an upward trend. Similarly for Pakistan, there is a need to focus on export-led growth, which would, in-turn, generate the much-needed profits for businesses to thrive and flourish. Trade should be liberalized and free-trade agreements should be signed with potential trade partners. Efforts should be made to stabilize the overall social, economic and political environment of the country and thereby, attract the much-needed foreign direct investment. Furthermore, improvements need to be made in the export sector by increasing the production as well as productivity of domestic industries. There is a need to invest in human capital to make the labor force more productive. The quality of exports should be improved to increase their competitiveness in the international market. Efforts should be made to equip the domestic industry to produce goods and commodities that are currently being imported; this would initially reduce imports and eventually lead to the export of such goods. Foreign income, essential for debt servicing, import financing and balancing trade deficit can be attained through an increase in the countryâs exports. Unfortunately, Pakistan has an unsuitable energy environment with inadequate energy resources which hinders the production capacity of the country. There is import of energy resources which further puts a burden on the balance of payments. Vietnam was able to overcome its energy shortage problem through the implementation of renewable energy sources. Pakistan needs to shift its energy production towards domestic energy resources such as coal and dam based hydel power plants, so that there is reduced dependence on imported resources of energy. Moreover, the country has high energy costs that make the produced goods more expensive as compared to similar goods produced in countries facing low energy costs. There is a need to identify potential export markets relevant to different goods and commodities. Pakistan needs to focus on its strengths and since approximately 66% of all exports for Pakistan are Textile oriented, the first order of business has to be a comprehensive and stable textile policy for Pakistan, guaranteeing energy supply at regionally competitive prices.
Copyright Business Recorder, 2021