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The National Security Policy (NSP) has taken a whole-of-government approach towards national security that places economic security at the centre of this initiative. The heightened focus on the economic well-being of the citizens as part of the draft NSP is being applauded widely.
Economic security has many facets. I will focus on one crucial aspect of the economic vulnerability of the country namely Pakistan’s perennial balance of trade deficit. This requires a strategic initiative to expand the country’s exportable productive capacity to achieve a meaningful and sustainable increase in its exports.
While the country can choose to focus on expanding its exportable capacity in physical goods, international & regional benchmarking suggests that the opportunity for a paradigm shift is in the export of services (in particular, digital exports) where the country is severely under-performing.
Let’s look at the cost first. The raw material for digital exports is human capital, a commodity for which the country has large and under-exploited reserves. In comparison, expanding exportable capacity for many physical products might result in importing raw material, thereby reducing the net impact on the trade balance. Additionally, unlike many physical exports (e.g., manufacturing that consumes electricity or agriculture that consumes water), developing digital exports capacity does not consume other precious resources.
On the other hand, the revenue potential is driven by market growth potential and the projected demand/supply balance driving the probability for the expanded capacity to find market share at commercially attractive prices. In most physical goods, the market growth projections are modest, and the demand/supply balance is competitive. The market fundamentals for physical exports are challenging.
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The National Security Policy (NSP) has taken a whole-of-government approach towards national security that places economic security at the centre of this initiative. The heightened focus on the economic well-being of the citizens as part of the draft NSP is being applauded widely.
Economic security has many facets. I will focus on one crucial aspect of the economic vulnerability of the country namely Pakistan’s perennial balance of trade deficit. This requires a strategic initiative to expand the country’s exportable productive capacity to achieve a meaningful and sustainable increase in its exports.
While the country can choose to focus on expanding its exportable capacity in physical goods, international & regional benchmarking suggests that the opportunity for a paradigm shift is in the export of services (in particular, digital exports) where the country is severely under-performing.
Physical vs. Digital Exports
The essence of strategy is about making choices regarding emphasis – where to primarily focus the deployment of the country’s finite financial, soft power, and time resources to expand the country’s exportable capacity considering the cost & revenue potential of the available options.Let’s look at the cost first. The raw material for digital exports is human capital, a commodity for which the country has large and under-exploited reserves. In comparison, expanding exportable capacity for many physical products might result in importing raw material, thereby reducing the net impact on the trade balance. Additionally, unlike many physical exports (e.g., manufacturing that consumes electricity or agriculture that consumes water), developing digital exports capacity does not consume other precious resources.
On the other hand, the revenue potential is driven by market growth potential and the projected demand/supply balance driving the probability for the expanded capacity to find market share at commercially attractive prices. In most physical goods, the market growth projections are modest, and the demand/supply balance is competitive. The market fundamentals for physical exports are challenging.
Read full story...
