Page 23 - CMA Journal (Sep-Oct 2025)

Focus Section

This history makes one thing clear: starting reform is not Propping up inefficient sectors diverts scarce resources
enough. Staying the course is what matters. A key from productive areas and undermines competitiveness
concern is the trade deficit. Almost every country that across the economy. It also hurts downstream
opened up saw imports rise first, then exports catch up. businesses—for example, sustaining outdated plants
India is a prime example. In 1992, India’s imports and forces manufacturers to rely on lower-quality inputs.
exports were each about USD 23 billion, with stagnant Protection, where necessary, should be limited, strategic,
growth. After liberalizing, imports outpaced exports and and time-bound, aimed at enabling competitiveness
the deficit widened from USD 300 million to over USD rather than preserving inefficiency.
100 billion. However, India stayed the course, and today it
is one of the fastest-growing economies. Energy costs remain a major hurdle. Heavy reliance on
imported oil, LNG, and coal, combined with transmission
Similarly, when China began its economic liberalization in losses and fixed contracts, drives up costs. This erodes
1980, it quickly moved into a trade deficit. That year, export competitiveness. With the planned increase in
exports and imports were roughly equal at around $18 hydropower’s share from the current 24% to 33%, and
billion. Over the next five years, imports more than the overall renewable energy share exceeding 60%
doubled to USD 42 billion, while exports grew by only within the next five years, Pakistan’s energy mix could
about 50%, reaching USD 27 billion. Now, four decades become significantly more sustainable, reducing reliance
later, China’s total exports have grown to over USD 3,500 on fossil fuels and enhancing long-term energy security.
billion, and total imports have risen to over USD 2,500
If sustained, these reforms could open up enormous
billion, yielding a trade surplus of about USD 1,000 billion.
opportunities. Pakistan could follow the path of Vietnam
Another challenge is tax reliance on trade. Tariffs have and other East Asian countries, growing faster, reducing
become a revenue tool, but at a high cost. They stunt poverty, and becoming more integrated into global
trade and limit growth. Pakistan currently has one of the trade. Access to capital goods would boost productivity
lowest trade-to-GDP ratios globally. Successful econo- and improve export quality. A stronger global economic
mies widened their domestic tax base, allowing trade to role would match Pakistan’s strategic importance.
drive competitiveness. Data shows that open economies
raise more revenue in the long run. Reform takes time but Pakistan is now at a critical juncture. History shows that
countries embracing openness and competition thrive.
pays off.
Those that retreat behind tariff walls fall behind. Pakistan
There is also a mindset issue. For decades, many has tried reform before but failed to sustain it. The
Pakistani policymakers have believed the country is a National Tariff Policy 2025–30 offers a second chance. If
special case that must rely on self-sufficiency. This view the country commits to reform and manages short-term
has not delivered. When local economies lack scale, challenges, this moment could indeed become Pakistan’s
importing efficient inputs is more practical. If East Asia moment.
component exports earn more than finished goods,
policy should adapt. Pragmatic openness is more About the Author: Dr. Manzoor Ahmad is a member of the PM’s
Steering Committee for the Implementation of the National Tariff
effective than rigid protectionism.
Policy 2025-30 and a Member of the Tariff Policy Board (TPB). He
Reforms must also end the practice of shielding industries has previously served as Pakistan’s Ambassador to the WTO and
as Member Customs at the Federal Board of Revenue (FBR).
that cannot survive without permanent protection.

ICMA’s Chartered Management Accountant, Sep-Oct 2025 21