Door to prosperity: trade and market access for Pakistan

Dr. Hassnain Javed

December 28, 2018

 

 

The current state of Pakistan’s economy seems to be in tethers with the trade deficit rising to approximately 371.6 Billion in November 2018 from 246 Billion in the corresponding month last year. Although the exports have improved to 18.7 % but the effect is marred by a jump in imports to 23.2% from the last fiscal year. Many debates have surfaced, regarding the deteriorating condition of the economy, since the Pakistani rupee has devalued against the US dollar. All of which are pointing towards the fact that the Pakistani economy has been trapped in a vicious cycle. According to World Bank the inflation in Pakistan is expected to remain high till the fiscal year 2020. The currency devaluation and hike in crude oil prices will increase cost of transportation and manufacturing and hence, all commodities produced locally. Due to this fact, many local manufacturing companies are off shoring or outsourcing their manufacturing lines to countries like China, where the cost of manufacturing is substantially low. The mismatch in manufacturing costs is such that a single unit of a flag-badge that is sold for a cost of Rs. 15 in Pakistan corresponds to only Rs. 2 selling price in China.

The situation of Pakistan’s economy is in a financial dooms loop, where most of the key economic indicators are falling and others are stagnant. According to Blomberg, Pakistani rupee has been the worst performing currency amongst all of the Asian economies. Amidst these daunting challenges, the account deficit is expected to remain under a stressed condition as the trade deficit is predicted to stay at an elevated level during fiscal year 2018-19. In view to the fact that the CPEC project is moved from its first phase and entered into the second development phase, more foreign shipments for construction and machinery are expected to increase the import bill of Pakistan. Keeping in view the balance of payments, the issue posits a serious damage to the economy during the current fiscal year, mostly as the deficits are swelling and foreign exchange reserves depleting further down the line. Consequently, the liquidity position may leave the government with be no choice but to lower its non-development and administrative expenditures to reduce fiscal deficit. Further speculation regarding currency devaluations is also expected, coupled with the fact that the foreign currency reserves are also depleting, seeking help from IMF has become inevitable for the Pakistani economy to survive.

However, seeking help from IMF is no solution for Pakistan at the moment as it will be only treating the symptom in the short term whereas the actual problem at surface, Pakistan is not self-sufficient. Currently, Pakistan has put too many of their eggs in one basket. Reliance on support from foreign countries is burdening the already fragile economy of Pakistan. Therefore, the solution for Pakistan’s economy is obvious that Pakistan needs to be integrated with the global economy, in a bilateral trade arrangement.

Approximately, 69000 Pakistani companies are registered in China, almost all of which has their production lines in China. Pakistan should focus, on bringing these factories in Pakistan. In order to do so, Special economic zones will be of utmost importance for facilitating the process. Right now, Pakistan has three key operational SEZ’s at Rashaki, Dhabeji, and Faisalabad; additionally more zones are under construction connected via rail and road. However, despite of the presence of the right infrastructure since 2012,

Pakistan has not been able to market these opportunities to entrepreneurs. Therefore, in order to communicate the advantages of backward integration to these entrepreneurs’ proper marketing efforts need to put in action by capitalizing the right medium.

With the desperate need to develop Pakistan’s industrial sector, Special economic zones will be crucial for the fast development of high quality products, to position Pakistan in the international market. One of the many opportunities that the construction of special economic zones in Pakistan can yield is the capacity building by means of vocational and technical training that will enable the work force here to establish quality skills. The two fold advantages of this would be the improved employment rate, skill formation and, knowledge and technology up gradation. The trading channel is very important in order to transfer the economic distress from Pakistan to developed nations of the world. In order to exploit the full potential of Special economic zones in Pakistan, the government would have to play a more proactive role in terms of capacity utilization and allocation of resources, in order to realize the full potential.

Along with the creation of Special Economic Zones, vocational training and the human development of the labour in Pakistan is also imperative for success. There is a need to establish modern vocational and technology institutes in order to facilitate the supply of technical labor. These centers must be equipped with state of the art training equipment as well as well-versed staff with practical knowledge of the factories to provide in service training programs. These programs, will enable the Pakistani workforce to produce quality products that conforms to international technology and quality standards.

These measures will hence play a pivotal role in order to maximize the utility for the entrepreneurs to base their production back in Pakistan. The gap in value chain can be further filled by capitalizing on the principles of total quality management in production. The goal should be to reduce defects per million opportunities and costs without compromising on the quality standards. An important rationale for quality management is the preoccupation of the idea of quality costs. A common hoax most companies in Pakistan fell victim to is the idea that the primary goal of a business is to minimize costs in order to improve profits. However, on the flip side, quality improvement can be just as effective and sometimes substantial more effective in boasting profits for a business. The concept of Total Quality Management (TQM),can be implemented through technological innovation, with newer quality technologies, price falls, quality rises and average production cost declines.

Conclusively, although the collateral effect of all firms quickly adopting quality technology, will generate equitable returns on investments but the jump in revenues would be enormous. However, firms that would fail to invest in quality related technology will be forced from the market, like most of the previous Pakistani exports.

Guiding global goods into the market

Dr. Hassnain Javed

December 23, 2018

 

 

 

The Internet is unique in how it has impacted the way that the global economy interacts with each other. Throughout history, many circumstances and events influenced international trade and tourism in countries all around the world. Factors ranging from war, law, and government policies to language barriers and modes of transport all affect how easy it is for individuals,companies, and products to gain access to other countries. The emergence of the internet age has impacted both the developing and developed world but on different scales.

The Internet has hugely benefitted global trade and tourism especially with China. The Chinese story of internet adoption is unique in itself by keeping many factors constant. It can be easily adopted by developing economies like Pakistan, which can be used efficiently to transform the fate of the nation. China has not achieved this by changing transport, language, or laws: it has achieved this by being a tool to connect existing systems and processes together. E-commerce websites like Tmall now connect global sellers with shipping experts and free trade zones, providing a way for them to sell their products in China without investing in a China office. This has given a huge number of new sellers access to the massive Chinese market. Meanwhile, travel websites like Fliggy take data gathered about individuals, and connect it with existing immigration procedures to simplify the visa application process for both applicants and embassy staff. This, in turn,connects Chinese tourists to the global tourism industry.Even if you haven’t heard of Tmall Global before, there’s still a good chance you may have heard the name “Alibaba”.

Alibaba group is one of the most successful and well-known e-commerce companies in China Combined, the group’s operations account for 60 percent of the Chinese e-commerce market.Globally, Alibaba Group is best known by the ‘Alibaba’ name itself. Alibaba.com is its global B2B (business-to-business) platform, allowing Chinese sellers to reach business customer around the world. Meanwhile, AliExpress.com connects Chinese sellers with global consumers on the B2C (business-to-consumer) side. And Pakistan is also effectively using this source for B2B (Business-to-Business) transactions generally for bulk buying.

In China, Alibaba Group is best known for its e-commerce smart apps, which include Alipay for payment, and Taobao and Tmall for online retail. These appsare used every day by a huge number of people in China.

I would like to introduce this concept for Pakistan audience to create public awareness for our society and policy makers to design such case study mechanism in Pakistan. I will be primarily focusing on Tmall Global, an offshoot of Tmall. Tmall is a part of the Taobao platform that allows brands and businesses to sell directly to consumers. At the end of 2013, Tmall reached a new milestone when Alibaba launched ‘Tmall Global’as an addition to the platform. For Tmall customers, this meant a dedicated space for purchasing all kinds of high quality goods from around the world-goods which may otherwise be difficult to find in China. Tmall Global’s slogan targets the popularity of foreign goods in China. “100 percent original, authentic foreign goods: 100 percent foreign merchants; 100 percent domestic return.”

For foreign businesses, the appearance of Tmall Global meant a unique new opportunity to sell their goods to the Chinese market.Many international brands are available on the standard Chinese Tmall site, but all of them operate from within the country. Many other companies around the world want to sell their goods in China, but registering and opening an office in the country is simply not achievable for most of them. Tmall Global operates differently from Tmall China. Using Alibaba’s vast e-commerce network, it removes the obstacles facing these companies, allowing them to take advantage of the massive demand for foreign products in China without having to register in the country.

Tmall Global works by using a team of international cross-border drop shipping specialists. They handle all the logistics on behalf of the platform’s sellers. This system allows delivery to Chinese consumers within 5-8 working days. As an alternative solution, orders can be processed from a bonded warehouse based in one of the China free-trade zones. The results have been impressive. As of 2017, Tmall Global offered 14,500 brands of products in 3,700 categories from 63 countries and regions all around the world. For more than 80 percent of these products, it is the first time they have ever been able to enter the Chinese market. With such a wide range of products available within 1-2 weeks of placing an order, Tmall Global really has made the world smaller for Chinese consumers. “The world is as small as the streets around me. Buy globally, and sell globally”

This Chinese study embarks the importance of virtual marketing and platforms to be streamlined to act and enter around the global. Our nation is bestowed with immense talent that such ideas could be easily replicated in our economy. The financial economic model used by China to ease the accessibility and mobility of local is a role model to be followed by nations like Pakistan where millions of unemployed population can actually start-up their ventures from homes.

Role of technical vocational entrepreneurial training in Pakistan

Dr. Hassnain Javed

December 23, 2018

 

 

 

One side of the coin shows the possibilities and the other side the way to build up the possibilities. Therefore, a country is luxuriously enriched with regular crude materials isn’t an assurance for it to be rich particularly when the assets are under used. The capacity to ideally outfit and use accessible and procured assets appears to be the most vital determinant of a country’s financial improvement. For a country to be economically created it is required for it to be imaginative in decoupling its development from its resources. Over reliance of an economy on resources such as in the case of Sudan, generally prompts resources and war as we see today in Nigeria and in many other developing economies. This advancement capacity can best be depicted as the innovative ability of the country. It is no big surprise that countries with high innovative abilities are the best in arranging an energetic economy which they have accomplished through creating high advances to maximally saddle/use accessible and procured assets.

Thus, it is not strange to express that in this day and age, the value of a country is controlled by the dimension of its innovative modernity. The procedure of basic reasoning utilizing innovation and understanding the social effects of advances; are imperative in the present constantly changing universe of complexities. Be that as it may, the guarantee of things to come lies not on innovation alone, but rather additionally in the individuals’ capacity to utilize, oversee and comprehend innovation.

One thing that is regularly overlooked by the general population is the alternative of making ones endeavor and being in charge of the pay that accumulates from it. It is observed that small scale enterprises possessed by people (business visionaries) have played and will keep on assuming a basic job in industrialization, mechanical advancement, and in this way promote national change; as shown in industrialized countries. Nonetheless, for a business person to wander into an endeavor and flourish, they must have significant learning, abilities and skills.

The capacity required by the business visionary to induce and spread industrialization and innovative improvement, which advance national change can be procured through an incorporated Technical Vocational Entrepreneur Training (TVET) and enterprise instruction; and this should be the main framework for developing economies to give boost to their respective industrial growth and getting out of vicious circular debt and financial puzzles.

Mechanical Development and National Transformation Technological improvement can be seen as the headway in mechanical abilities to deliver effectively, meet due dates, update items’ quality, be engaged with inventive structures, stay aware of or even start enhancement in items, process preferences and generation association; and also to exploit new chances and have an edge over contenders. Mechanical advancement emerges from consistent and solid transformative advancement or progressive leap forward in innovation developments through development of mechanical abilities, which further restore the pace of specialized advancement.

Moreover, it is depicted that specialized advancement as nonstop and steady development opens up new business and development directions. Transformative pioneers make inquiries dependent on the impediments of existing arrangements, yet progressive trend-setters make inquiries nobody else has thought of. A statement by George Bernard Shaw stated: “Some people see things as they are and say why? I dream things that never were and say why not”. Developmental advancement streamlines and abuses existing organizations and draws out their directions. Progressive development, thusly, investigates new-to-the-world chances and makes new business potential. The two sorts of development require committed conditions, abilities and attitudes so as to flourish.

In any case, development, transformative or progressive prompts specialized change, and is supported, not inside firms alone, but rather between systems of firms. In addition, specialized change is produced from the complex communications between firms. This might be a direct result of the fundamental idea of adjoining advancements where by one industry makes another in a commonly fortifying procedure. Because of externalities and linkages, there is probably going to be a cooperative energy between individual firm dimension abilities. The expanding linkage limits among businesses repair mechanical advancement.

This is especially valid as specialized improvement, which is piece of an unpredictable framework, and is associated with the extension of the mechanical area, coming about because of the dispersion of innovation and developing of the mechanical structure in the economy. Along these lines, innovative improvement adds to the amassing, direction and advancement of mechanical curios, human capital and specialized endeavors which are firmly inter-linked with manners that make it hard to distinguish different commitments to national change. National change includes change in the individual and aggregate state of life in the general public for the better.

National advancement is the general change and enhancement in the general viewpoint of the earth and the general public as identified by the advancement in the social, political, religious and financial structure of a country. There is no gain saying that mechanical advancement accounts incredibly to accomplish the required enhancement. Mechanical generation (a key marker of innovative improvement) is a proportion of a country’s monetary wellbeing made a decision by its yield from assembling, mining and utility it further clarifies that a country’s mechanical creation affects the accessibility of assembling merchandise and enterprises both locally and universally in light of the fact that it impacts imports. At the point when generations flounder, it has a domino impact and stretches out to different regions of an economy, including joblessness. Enterprise Practices and National Transformation

Entrepreneurship is a term utilized extensively regarding the creative current modern pioneers.
The characterized business as the reasonable utilization of venturesome characteristics, for example, activity, advancement, innovativeness and hazard taking into the workplace either in independent work or work in small startup firm, utilizing the proper aptitudes important for achievement in that condition and culture. Therefore, it alludes to the frame of mind, abilities and activities of individual(s) beginning another venture. It further clarified that a business person is a human bulldozer, who can change a hindrance into a venturing stone. The business visionary is a forceful trailblazer whose dynamic “imaginative reaction” with monetary condition makes him integral to the advancement of material development of creation and modern improvement.

Consequently, this article infers that the business person is one who begins an endeavor, puts new types of industry on their feet, and shoulders the hazard and vulnerability of utilizing monetary assets in another manageable way, with the correct inspiration, vitality, and capacity to fabricate the undertaking by their endeavors. This is the inspiration that is required in the prevalent Pakistani society to accelerate growth. In order to include, technical vocational entrepreneurship training is the dimension least explored, but should be the most viable model available to be adopted by the Pakistan economy in the short and the long run.