Pakistan’s trade volume with Africa reached an all-time high of $6 billion in 2021. However, the trade balance has tipped sharply in favor of Africa since 2015. According to ITC’s Trademap, imports have recorded at $4.5 billion in 2021 compared to $2.6 billion. last year, posting robust growth of 70.5%. However, a slow growth in exports can be seen, as they only increased from $1.4 billion to $1.48 billion during the same period.
The compelling needs for export diversification, including market and product diversification, have been extensively discussed in almost all government regimes. Multiple attempts have been made to broaden the export base. Pakistan Ministry of Commerce under SRO 1062(I)/2017 notified an additional 2% duty drawback on exports to non-traditional markets including 58 African countries, 40 Latin American, 10 Independent Commonwealth States , 27 Oceania and 8 non-EU European countries. countries. Africa appears to be one of the most lucrative markets, especially for Pakistan’s non-traditional export products. Government commitments to strengthen trade ties with Africa have witnessed a visible increase in exports of non-traditional export items including electric fans, tractors, rickshaws, ethanol, Himalayan pink salt, etc.
Africa is the second largest continent in terms of population after Asia with the highest population growth rate of 2.7%, according to the World Bank. To reinvigorate trade ties with Africa, then Secretary of Commerce Mohammad Younus Dagha launched the ambitious “Look Africa” policy in 2017 in an attempt to diversify geographically and in export products. Under this policy, the top 10 African countries by economic size – Nigeria, Kenya, South Africa, Morocco, Algeria, Egypt, Sudan, Ethiopia, Tanzania and Angola – have been identified to enhance trade. In addition, Preferential Trade Agreements (PTAs) with three African trading blocs – SACU, ECOWAS and EAC – were among the key aspects of the policy. The Trade Development Authority of Pakistan has been appointed to provide a special 80% grant to Pakistani companies to encourage their participation in trade fairs in Africa. A series of Pakistan-Africa Trade and Development Conferences (PATDC) was also part of the policy for which the first PATDC was held in January 2020 in Nairobi, the second was held in Lagos in November 2021 and a third will stand. in Johannesburg by the end of November 2022.
Although the Look Africa policy is an important step taken domestically, much remains to be done on the foreign trade policy front. Careful analysis can detect several anomalies in the bilateral trade regime. South African authorities have imposed anti-dumping duties of 14% to 77% on major Pakistani cement exporters. As a result, Pakistan lost $67 million in Portland cement exports to Africa between 2015 and 2016. On the other hand, Pakistan has now become a major export destination for South African coal exporters with an annual demand for imported coal worth $1-1.5 billion. billion since 2017. Similarly, Pakistan, being the world’s largest importer of fermented black tea, imports around 87% of Kenya’s tea at an average tariff of 11%. However, non-basmati rice, which is Pakistan’s main export to Kenya, is subject to an average tariff of 35% and most of the time undergoes rigorous examination. ‘Ugali’, a staple food of the indigenous peoples of East Africa, is prepared from non-basmati rice. Similar anomalies can be seen in other African economies such as Nigeria, Egypt and Ethiopia.
Aggressive negotiations must be conducted with African authorities in order to seek a level playing field. In addition to taking steps to minimize anti-export bias, the government should provide credit guarantee schemes similar to those in peer countries such as India and China to cover very high credit risk exposures and exchange rate. Furthermore, besides actually negotiating PTAs with the aforementioned trading blocs, strategic entries need to be made in countries like Ethiopia and Kenya that are currently not signatories to common external tariffs under their respective trading blocs.
Published in The Express Tribune, November 12e2022.
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