Author: ibraheem123

  • Pakistani rice exports: A booming sector that needs government support

    Pakistani rice exports: A booming sector that needs government support

    Pakistani rice is serving a purpose far greater than tasting good in Biryani: it’s turning into a lifeline for the country’s economy, bringing in nearly $4 billion annually.

    In July and August alone, exporters managed to export a staggering 620,000 metric tons of rice. That’s a huge deal, especially considering they did it without enjoying government perks like minimum support prices or energy subsidies.

    What’s even more impressive is how Pakistani rice is standing out globally. Compared to its counterpart India, Pakistan had 74 alerts, while India had a staggering 264 alerts. The result is that Pakistan is building a reputation for quality rice, especially in Europe.

    And with production ramping up significantly in the past year, Pakistan has been able to beat India in price, too. As such, Pakistan now has a 25 per cent share of Europe’s rice market while India is behind with 17 per cent. However, India isn’t sitting quietly – they’ve come out firing by lifting bans on certain rice varieties to regain their market share.

    Rice exports could be the key to pulling Pakistan out of its economic troubles. At the close of FY 2023, Pakistan’s current account deficit was a worrying $3.275 billion.

    But the Minister of Commerce, Jam Kamal Khan’s new vision might change that.

    He wants to boost rice exports by $3 billion, which could nearly wipe out the deficit and inject much-needed dollars into the economy. Moreover, the minister expressed interest in educating farmers to improve the quality of rice harvests to reduce the chances of getting flagged with a health alert by foreign authorities.

    However, the catch is that to jump from $4 billion in exports to $7 billion, a 75% increase, Pakistan’s rice industry needs help. But what could be the solution here? The solution: Government subsidies to rice exporters.

    While exporters are doing well, they could meet the minister of commerce’s goal with the right support. Access to state-of-the-art rice milling machines and government-improved irrigation systems is necessary. Rice is a water intensive crop, and any disruption in water supply wipes out a year’s worth of yields.

    But even low-cost milling machines can cost small farmers around PKR 3 million – a price many can’t afford on their own.

    If Jam Kamal wants to take rice exports to the next level, the government needs to step in. Supporting farmers and exporters with subsidies could be the difference between a negative and positive balance of trade in the coming years.

    Is rice the new saviour of the economy? Time will tell.

  • PSX Soars to New Heights: A Historic Milestone

    PSX Soars to New Heights: A Historic Milestone

    The trading floor of the PSX (Pakistan Stock Exchange) buzzed with joy as the market shattered its all-time high today. KSE-100, the main benchmark of the stock market, closed at 84910 points, reporting a 1.62% rise in the index since trading began in the morning.

    Each index on the PSX remained in the green, with the OGTI (Oil and Gas Tradable) index posting astronomical gains at an appreciation of 4.81% of the entire index in just one day.

    The All Shares Index, which measures the performance of all the companies listed on the stock exchange, also received a boost of 968 points or 1.79%.

    In addition, Pakistan’s KSE-30, which reflects the stock value of the thirty largest companies operating in the country, stood higher by 487 points and ended the market session with an overall appreciation of the index at 1.79%.

    With growing investor confidence and the market sitting at the cusp of passing the 85,000-point mark, it seems inevitable that the wave of bullish investor sentiments will help to break a new record.

    The rise in investor confidence was a welcome surprise following the disturbances caused by PTI protests and growing terror concerns following the attack against Chinese workers. If the sentiments remain bullish, then investors are expected to record massive gains.

  • Pak-Cheen dosti Zindabad? Billions in investment hang in the balance

    Shockwaves from the blast that claimed the lives of two Chinese engineers, in Karachi last night were felt by political leaders and investors alike in Beijing.

    With just a week remaining for the Chinese Prime minister’s official tour of Pakistan on October 14th, lawmakers in Islamabad scramble to protect economic ties with China to ensure the continuous flow of Yuan into CPEC projects. The initial budget that was allocated towards CPEC-related projects was $62 billion, of which $35 billion in investments remain – A sum Pakistan can’t afford to lose.

    However, the damage has already been done. China strongly condemned the lethal attack on its civilians and urged its citizens to remain cautious, noting that local security measures should be strengthened.

    This has hurt the confidence of already weary Chinese investors looking to invest in Pakistan as they now explore safer destinations for their investments. Somewhere, Chinese workers can safely work.

    China has remained the largest single foreign direct investor in the Pakistani economy, amounting to $568 million in FY 2024 alone. In fact, China is responsible for 30% of all foreign investments in Pakistan. 

    With Pakistan struggling to attract foreign direct investment and with the recent attack, it can be safely said Pakistan is not moving in the right direction.

    It is in the interests of the local business community to see increased collaboration with international investors. Lapses in security need to be remedied to ensure that Pakistan stops biting the metaphorical hand that feeds it.

  • New regulations: A surgical strike on Pakistani exporters

    New regulations: A surgical strike on Pakistani exporters

    Industrialists in Sialkot have been reeling from a regulation set upon them from the world over. Pakistan’s surgical instrument industry, which brings in $400 million annually in exports, is in serious jeopardy. This is in light of the European Union (EU) implementing a Medical Device Regulation (MDR) on the trade of surgical instruments.

    While the EU introduced this law in 2017, its enforcement deadline has only just passed, and exporters are feeling the costs.

    The MDR now demands that manufacturers meet the new quality controls, conduct audits for product safety, and carry out rigorous lab testing for all surgical instruments before they can be sold in the European Union. Moreover, manufacturers will also have to sign mandatory contracts with European notified bodies for external audits.

    To comply, Pakistani exporters must hire a European representative at an annual fee upwards of PKR 1.5 million. Additionally, they must sign an agreement with a notified body, which costs at least PKR 3.1 million for small exporters.

    This only grants companies a three-year window to fully implement a production process that is MDR-compliant. The cost of complying with the stipulations set out by the MDR and acquiring the necessary paperwork is a staggering PKR 30 million.

    Abdul Moize, Marketing Director of Weldon Industries, captured the hardships, stating, “The burden these new regulations have created is unbearable. With interest rates at around 18%, securing loans for MDR compliance is almost impossible. The new laws favour only the big players, pushing smaller manufacturers out of the European market.”

    What’s worse for smaller manufacturers is that Pakistan has one EU MDR-certified notified body, SGS, that can perform the required tests to check for compliance. The lack of local testing facilities causes manufacturers to send their instruments overseas for testing, which increases costs.

    While larger exporters have the financial capital to absorb these expenses, the same can not be said for smaller ones.

    Could the current situation lead to the extinction of smaller manufacturers, giving way to the monopolisation of the surgical instruments sector?

    For these businesses, whose primary clients are located in Europe, the stakes are incredibly high. Failure to meet MDR requirements means losing access to the EU market – a loss of around $110 million.

    If exports fall by such a magnitude, it would cause factory closures and a consequential increase in the local unemployment rate. This might decrease local consumer demand, which means that the economic aftershocks will be felt in other sectors, too. Also, fewer exports will negatively impact the current account, which has stayed, historically, in the red.

    Given the seriousness of the situation, the surgical instruments business community has started urging the government to provide some sort of economic relief. The government could offer subsidies, and if not, it could offer financial relief by providing low-interest loans specifically for MDR implementation, which would help manufacturers get the funding they need to take steps towards complying with the new regulations.

    This will serve the interests of the business community responsible for the export of surgical instruments and political interests in Islamabad, where lawmakers want to portray a positive image of the economy to their constituents.