Pakistan also faces barriers to international trade such as high import tariffs which make exports less profitable. Exports largely depend on the agricultural sector which has not been able to exploit its true potential due to unfavorable climatic conditions, water scarcity and lack of skilled labor. Moreover, Pakistan’s trade is such that exports largely comprise raw materials while finished products constitute a large part of imports. Since finished products have higher prices than raw materials, this created a gap between the amount spent on imports and that received on exports.
Vietnam’s journey towards a sustainable economic recovery from a situation similar to Pakistan’s is a lesson to be learned. Following the failure of these five-year plans, the Vietnamese introduced the first reforms led by Vietnam, known as “Doi Moi”, as part of the Fourth Five-Year Plan (1986-1990). Doi Moi is basically a term used for renovation. The objective of these reforms was to transform the Vietnamese economy into a market economy with a socialist orientation. Under Doi Moi, the political state would be hybrid-socialist, including the military committee and CPV. Moreover, Doi Moi halted all political reforms in the country in an attempt to transition the economy to a state-controlled market economy. The Ministry of Planning, headed by the army, was responsible for leading the reforms. The provinces were to be transformed in such a way that they shifted from a state-controlled market economy to a city / district-led market economy. Economic activity between businesses and government agencies had to be regulated by market forces. Small businesses were allowed to be privately owned. In addition, a stock exchange was created for public 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 were encouraged. In addition, efforts have been made to improve international relations and achieve greater international recognition. To this end, Vietnam has successfully joined both regional and international institutions, including the Association of Southeast Asian Nations (ASEAN), the United Nations (UN), the World Organization (WTO) and the Asia-Pacific Economic Cooperation Forum. . There have been investments in human and social capital that have led to sustainable growth through the creation of a skilled workforce that has overall improved productivity and increased competitiveness.
Following in the footsteps of Vietnam, Pakistan can also move towards its goal of sustainable economic growth. To this end, Pakistan needs to focus on growth-oriented reforms and effective policy making. All policies and reforms must be geared towards the ultimate goal of economic growth. Developing countries like Pakistan must make unremitting efforts to improve the balance of payments in order 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 protecting the rights of foreign and domestic investors. In addition, free trade agreements should be signed with different countries to eliminate existing barriers.
Under Doi Moi, Vietnam follows an export-led growth model, integrating trade liberalization and the promotion of foreign direct investment. These trade policy reforms led to an increase in the country’s exports and pushed the economy towards an upward trend. Likewise, for Pakistan, there is a need to focus on export-led growth, which in turn would generate the much needed profits for businesses to thrive and prosper. Trade must be liberalized and free trade agreements must be signed with potential trading partners. Efforts must be made to stabilize the general social, economic and political environment of the country and thus attract the necessary foreign direct investments. In addition, improvements need to be made in the export sector by increasing the output as well as the productivity of domestic industries. There is a need to invest in human capital to make the workforce more productive. The quality of exports must be improved to increase their competitiveness in the international market. Efforts should be made to equip domestic industry to produce goods and products which are currently imported; this would initially reduce imports and ultimately lead to the export of these goods. Foreign income, essential for servicing debt, financing imports and balancing the trade deficit, can be achieved through increased exports from the country. Unfortunately, Pakistan has an inadequate energy environment with inadequate energy resources hampering the country’s productive capacity. There is the import of energy resources which weigh more heavily on the balance of payments. Vietnam has been able to overcome its energy shortage problem through the implementation of renewable energy sources. Pakistan needs to reorient its energy production towards domestic energy resources such as coal-fired power stations and hydroelectric dams, in order to reduce its dependence on imported energy resources. In addition, the country has high energy costs which makes the goods produced more expensive compared to similar goods produced in countries facing low energy costs. It is necessary to identify relevant potential export markets for different goods and commodities. Pakistan needs to focus on its strengths and given that around 66% of all Pakistan’s exports go to textiles, the first order of business must be a comprehensive and stable textile policy for Pakistan, ensuring energy supply to competitively priced regionally.
Copyright Business Recorder, 2021