Experts have urged the planners to improve the economic competitiveness, which is an ability to export more value-added products than import, but without subsidising exports or erecting tariff and nontariff barriers against imports.
“You cannot increase competitiveness through subsidies, concessions and grants,” Naveed Anwar, senior economist, said. He said a country needs strong institution and prudent policies to increase competitiveness. True competitiveness comes when a level playing field is provided to all citizens, he said, calling for equal opportunity to all entrepreneurs and innovators that are most efficient producers of goods and services.
“Even global experts are confused about the actual definition of competitiveness,” he said, adding that the European Commission, for instance, in its European competitiveness report did not elaborate what competitiveness is. Michael Porter of Harvard states that productivity is the barometer of competitiveness of an economy. Some others consider competitiveness as a set of institutions and policies that determine the level of productivity.
Anwar said this confusion should be addressed as competitiveness is not the same as productivity. You can increase productivity through subsidies or through better technology, quality human resource and higher efficiencies.
The economist said competitiveness relates only to the economic health of a traded sector, in which a firm sells a significant share of its output outside a particular nation. He said Pakistan could have high productivity in its locally operated hardware stores but still have unhealthy traded sectors.
Economist Faisal Qamar said if we look around our region, China and India are able to export more in textiles because they provide huge subsidies to cotton producers and direct subsidies to its exporters. Likewise, Bangladesh enjoys duty concessions from developed economies over major textile exporting nations; it also provides direct subsidy to its exporters.
These three economies are not competitive in true sense as they have also erected trade barriers on import of textiles, he said. Textile sector in Pakistan operates without government support or subsidies and is more competitive than the above three nations.Qamar said the distortions created by other regional countries are undermining the ability of Pakistan to exploit its true export potential.
Weak institutions and flawed government policies are compounding the woes of this sector. Despite these drawbacks, textiles, he added, is the most growth-oriented sector of Pakistan’s economy as it operates without government subsidies and concessions.
The economist said most planners focus on trade deficits alone but ignore the fact that a nation might run a trade surplus by providing discounts to its exporters. This, he added, could be in the shape of undervalued currency as is the case in China, or due to suppressed export sector wages, which are in Bangladesh. He said subsidies or import barriers as in India could increase exports and have the potential to create trade surplus.
A certified public accountant Asif Ali Shahid CPA if the trade surplus of a nation is due to large discounts provided to the exporters, it will not be truly competiveness.If the trade surplus is accumulated by erecting sizable import barriers, the competitiveness of the economy would be in doubt.
Source:- thenews.com.pk
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