Social Versus Private Profitability in Pakistan’s Export of Manufactures

A recurrent theme in much of the writing on development is that the prospects for the export of agricultural products from underdeveloped countries are bleak, and that these countries should, therefore, concentrate on expanding their exports of manufactures. Pakistan, too, has not been immune to such thinking, and over the years the authorities have attempted to stimulate industrial exports through a wide array of incentive schemes. On the one hand these” took the form of discouraging agricultural exports by the imposition of export taxes and by compelling the sale of these products at the official—and overvalued —exchange rate. On the other hand, the manufacturing sector was given a much more favorable exchange rate by way of the Export Bonus Scheme, was permitted to purchase its imported component at an artificially low rate through the Export Performance Licensing Scheme, and was exempted from taxation on exports. In addition, businessmen were permitted foreign exchange at the official rate in order to travel abroad to make contacts and conduct market surveys, export credit guarantee schemes were drawn up for manufactured products, while government-financed participation in foreign trade exhibitions was chiefly designed to provide a shop window for the products of industry.