Commodity Exports, Net Exchange Earnings and Investment Criteria

Pakistan has experienced in the last decade a significant rate of growth of exports, especially of the manufactured exports. The manufactured exports have grown at an annual compound rate of 15 per cent during the period 1960-67. This significant rate of growth of exports has been associated with a large number of export-promotion measures which have ranged from a wide variety of fiscal concessions to such export-incentive schemes as the export bonus and export performance licensing as well as the fixation of compulsory export quotas for the individual manufactured exports. The question has been raised from time to time as to the efficacy of the export-promotion measures in terms of the net foreign-exchange earnings, denned as the actual increase in export earnings from a unit of export minus the direct and indirect requirements of imports necessary for the production of the unit of export. Since one of the important criteria for the determination of the investment priorities in the field of industry in Pakistan has been the foreign-exchange saving or earning capacity of a particular industrial project [9, p.51], it is important to quantify the contributions to the net foreign exchange earnings made by the exports of the different manufactured goods. Moreover, it is possible to judge how the existing structure of the export incentives is related to the net exchange-earning capacity of the different industries.