The World Bank has attributed the low reliance of Pakistani textiles and apparel exporters on imported artificial fibers to exorbitant tariffs and regulatory duties on essential raw materials, which the bank said are four times the average in East Asia, including China and Taiwan. The World Bank Group, in its flagship report on global value chain (GVC), said the country’s tariffs on intermediates average 8 percent — four times the average in East Asia — and its regulatory and additional duties (para-tariffs) “are high”.
“Thus, Pakistani exporters of textiles and apparel — the country’s major export sector — rely mostly on domestic cotton rather than on imported artificial fibres, such as polyester (the leading input to the fast growing global imports of apparel),” the World Bank said in the report, titled ‘Trading for Development: In the age of global value chains’. The World Bank said a very small number of textile exporters in the country are presently availing the duty suspension schemes, such as the duty and tax remission on exports, for their imported intermediates as remission takes much longer time for them.
“In practice, approvals for remission take on average 60 days — twice the time specified by law — and clearing customs after approval takes an extra 5 – 10 days,” the bank said. “For that reason, a mere 3 percent of textile and apparel exporters use the scheme. In Bangladesh, by contrast, obtaining approval for duty suspension on intermediates takes on average 24 hours, and about 90 percent of textile and apparel firms use the scheme.”
The bank enlisted Pakistan among the countries where participation in global value chain paces up slowly in a market environment when the sectoral composition of global value chain flows is increasing globally. Samsung, for example, makes its mobile phones with parts from 2,500 suppliers across the globe, it said.
The World Bank, however, sees strength in the country’s agriculture and livestock sector that could help it improve its participation in the global value chain.
“Pakistan’s ability to overcome an export ban on fish and expand horticultural exports attests to the value of building a strong national standards regime,” it said. “Pakistan’s development of a robust national quality standards regime helped to lift the European Union’s ban on the country’s fish exports and facilitated rapid growth in mango and mandarin exports by ensuring full traceability in the supply chain.”
Although the country would seem most exposed to the threat of robotization-induced reshoring because its exports are heavily concentrated in goods that robots can help produce, it is one of the commodity exporters that “seem somewhat shielded from the threat of robotization-induced reshoring,” the World Bank said in the report.