Q-7 = What measures should be taken to correct adverse balance of payments
MEASURES FOR CORRECTING BALANCE OF PAYMENTS Following measures should be taken to correct adverse balance of payments of Pakistan
1. Increase in exports
2. Decrease in imports
3. Increase in invisible earnings
4. Search of new markets
5. Improvement in quality and packaging of international standard
6. Revival and restoration of sick industries
7. Foreign joint ventures
8. Promotion of labor intensive industries
1. INCREASE IN EXPORTS BY PROVIDING DIFFERENT INCENTIVESFirst important step for improving balance of payments of Pakistan is to increase its exports. It is suggested that following steps should be adopted in this regard.
1. Decrease cost of production, for which rate of interest for setting up industries should be reduced.
2. Cost of transport particularly railway freight should be minimized.
3. Custom duties on the export-oriented industries should be reduced.
4. Modern techniques of production should be used.
5. Instead of exporting raw material, value added goods should be produced and exported.
6. Those industries should be encouraged and set up which use locally produced raw material.
7. Labor productivity should be enhanced by imparting education, training and providing different types of facilities of life.
8. Goods of different varieties keeping in view the demand and requirement of foreigners should be developed, produced and exported.
2. DECREASE IN IMPORTS BY SETTING UP KEY INDUSTRIESSecond important requirement for improving balance of payments is to decrease imports. It is suggested that after adopting following steps imports will be decreased.
1. Import substitution industries should be set up.
2. For production of edible oils, seeds should be grown locally.
3. Tea consumption should be discouraged.
4. Production of food grains such as wheat should be increased
5. Import of luxurious items should be banned or heavily taxed.
6. Basic and key industries should be developed which can produce machinery and spare parts for manufacturing industries.
3. INCREASE IN INVISIBLE EARNINGSThirdly, for improving balance of payments expenses on invisibles are to be decreased and to increase invisible earnings (exports). After adopting following steps invisibles balance can be improved.
1. National shipping company should be strengthened for assisting the international trade. Freight charges of this company will become a source of saving of foreign exchange.
2. Domestic commercial banks and insurance companies should be strengthened and be given the task for facilitating Pakistan’s international trade.
3. Expenses on our embassies abroad, which involve foreign exchange, should be reduced. VIP culture should put to an end and unnecessary tours and medical expenditure of high government officers and politicians in foreign countries hospital should be disallowed.
4. Foreign countries visits by the general public should be discouraged in order to save the precious foreign exchange of the country.
5. The efficiency of Trade Attaches of Pakistan Embassies should be improved. It is their duty to do their best for developing markets of Pakistani products in the countries they are posted.
4. SEARCH OF NEW MARKETSFourth important requirement for improving the balance of payments is the expansion of trade relations. After adopting the following steps trade relations will be expanded.
1. Govt. officials and business community should participate in trade fairs arranged by foreign countries.
2. Trade Agreements with different countries should be made.
3. Seminars and Trade Exhibition should be arranged within country in which foreign delegates should be invited to participate.
4. Booklets, brochures, pamphlets about Pakistani products and economy of Pakistan should be distributed to foreign business community.
5. Research for marketing should be conducted.
5. QUALITY & PACKAGING OF INTERNATIONAL STANDARDExportable Goods should be of international standard; their packaging should meet the same standard. Good packaging provides safety and security of the product and is not destroyed during handling and shifting process.
6. REVIVAL & RESTORATION OF SICK INDUSTRIES Sick industries should be revived. This will increase output of industrial goods, which will result in the decrease of prices. The cheap goods will become a good market for buyers and they will import more from Pakistan ,thus the export proceeds of the country will increase.
7. FOREIGN JOINT VENTURESPakistan’s exports can be pushed up after collaboration of foreign investors. The foreign partners have more contacts in foreign markets and in order to increase profitability of industry, foreign partners will market the products in their countries hence Pakistan’s exports will increase.
8. PROMOTION OF LABOR INTENSIVE INDUSTRIES Small and cottage industries are labor-intensive. Products utilizing more cheap labor with have a comparative cost advantage which will help in the decrease in cost. Industries such as carpets, leather goods, readymade garments, surgical instruments and sports goods should be developed for export purpose.
MEASURES FOR CORRECTING BALANCE OF PAYMENTS Following measures should be taken to correct adverse balance of payments of Pakistan
1. Increase in exports
2. Decrease in imports
3. Increase in invisible earnings
4. Search of new markets
5. Improvement in quality and packaging of international standard
6. Revival and restoration of sick industries
7. Foreign joint ventures
8. Promotion of labor intensive industries
1. INCREASE IN EXPORTS BY PROVIDING DIFFERENT INCENTIVESFirst important step for improving balance of payments of Pakistan is to increase its exports. It is suggested that following steps should be adopted in this regard.
1. Decrease cost of production, for which rate of interest for setting up industries should be reduced.
2. Cost of transport particularly railway freight should be minimized.
3. Custom duties on the export-oriented industries should be reduced.
4. Modern techniques of production should be used.
5. Instead of exporting raw material, value added goods should be produced and exported.
6. Those industries should be encouraged and set up which use locally produced raw material.
7. Labor productivity should be enhanced by imparting education, training and providing different types of facilities of life.
8. Goods of different varieties keeping in view the demand and requirement of foreigners should be developed, produced and exported.
2. DECREASE IN IMPORTS BY SETTING UP KEY INDUSTRIESSecond important requirement for improving balance of payments is to decrease imports. It is suggested that after adopting following steps imports will be decreased.
1. Import substitution industries should be set up.
2. For production of edible oils, seeds should be grown locally.
3. Tea consumption should be discouraged.
4. Production of food grains such as wheat should be increased
5. Import of luxurious items should be banned or heavily taxed.
6. Basic and key industries should be developed which can produce machinery and spare parts for manufacturing industries.
3. INCREASE IN INVISIBLE EARNINGSThirdly, for improving balance of payments expenses on invisibles are to be decreased and to increase invisible earnings (exports). After adopting following steps invisibles balance can be improved.
1. National shipping company should be strengthened for assisting the international trade. Freight charges of this company will become a source of saving of foreign exchange.
2. Domestic commercial banks and insurance companies should be strengthened and be given the task for facilitating Pakistan’s international trade.
3. Expenses on our embassies abroad, which involve foreign exchange, should be reduced. VIP culture should put to an end and unnecessary tours and medical expenditure of high government officers and politicians in foreign countries hospital should be disallowed.
4. Foreign countries visits by the general public should be discouraged in order to save the precious foreign exchange of the country.
5. The efficiency of Trade Attaches of Pakistan Embassies should be improved. It is their duty to do their best for developing markets of Pakistani products in the countries they are posted.
4. SEARCH OF NEW MARKETSFourth important requirement for improving the balance of payments is the expansion of trade relations. After adopting the following steps trade relations will be expanded.
1. Govt. officials and business community should participate in trade fairs arranged by foreign countries.
2. Trade Agreements with different countries should be made.
3. Seminars and Trade Exhibition should be arranged within country in which foreign delegates should be invited to participate.
4. Booklets, brochures, pamphlets about Pakistani products and economy of Pakistan should be distributed to foreign business community.
5. Research for marketing should be conducted.
5. QUALITY & PACKAGING OF INTERNATIONAL STANDARDExportable Goods should be of international standard; their packaging should meet the same standard. Good packaging provides safety and security of the product and is not destroyed during handling and shifting process.
6. REVIVAL & RESTORATION OF SICK INDUSTRIES Sick industries should be revived. This will increase output of industrial goods, which will result in the decrease of prices. The cheap goods will become a good market for buyers and they will import more from Pakistan ,thus the export proceeds of the country will increase.
7. FOREIGN JOINT VENTURESPakistan’s exports can be pushed up after collaboration of foreign investors. The foreign partners have more contacts in foreign markets and in order to increase profitability of industry, foreign partners will market the products in their countries hence Pakistan’s exports will increase.
8. PROMOTION OF LABOR INTENSIVE INDUSTRIES Small and cottage industries are labor-intensive. Products utilizing more cheap labor with have a comparative cost advantage which will help in the decrease in cost. Industries such as carpets, leather goods, readymade garments, surgical instruments and sports goods should be developed for export purpose.