Uzair Bin Farid

Pakistani entrepreneurs can enhance the export of their products by adopting innovative ways and reducing the cost of production to compete with their rivals in the international market, WealthPK reports. In his recent statements, Minister for Planning, Development and Special Initiatives Ahsan Iqbal stressed the need to increase the exports of Pakistan to strengthen the national economy. He said that Pakistan would not be able to escape the vicious circle of economic stagnation and recurrent bouts of degrowth unless it registered itself as a producer of goods sold at valuable prices in the international market.

However, WealthPK research shows that it is not an easy task to sell goods in the international market and fetch a good price for them. Increased globalisation and the emergence of free trade areas in various regional settings have made it imperative for the countries to move towards specialisation. Specialisation is possible through the metrics of comparative advantage. A country sells a particular item in the international market to the exclusion of possible competitors when it finds that it has a comparative advantage in the production of that good.

Monopolising trade in the international market is, however, not so simple, unless the good under consideration is a vital resource like oil or cutting-edge technological product like semiconductor chips. Otherwise, there is always a fair bit of competition that companies and countries face while selling their products in the international market. Any firm or country cannot consolidate its position in the international market without competing with others. Innovation and low prices are two fundamental characteristics of competition — either the prices are lowered to such an extent that buyers are lured away from the more expensive alternatives or the good is highly innovative that it crowds out the competitors.

Price can only be reduced when the production cost is low and the manufacturer can afford it while innovation is not possible without promoting research and development. Energy and essential raw materials are needed for the manufacturing of different industrial goods. Energy prices have increased manifold in the international markets recently. The government of Pakistan has also abolished fuel subsidies and exporters find it hard to reduce the prices of their products to compete with their rivals in the international market.

The depreciating exchange rate also allows for some uptick in exports but the experience of the past four years shows that even this policy change did not allow the exports to grow exponentially. Allowing the rupee to depreciate freely through the free-floating exchange rate, while there is no significant increase in exports, affects the economy in the short-term. It leads to inflationary pressure and people start to cut back on spending, resulting in a decrease in aggregate demand.

An increase in exports necessitates concrete measures to enhance the competitiveness of the products that are produced for the international market. Short-term policy measures like price reduction and exchange rate fluctuations are of little help in this regard. Only a long-term policy grounded in achieving competitiveness through innovation and embracing the technological jump will enable Pakistan to significantly increase exports in the long-run, according to the research conducted by WealthPK.

Credit: Independent News Pakistan-WealthPak