Imports: necessary, and not evil

In a country whose government is as obsessed with the exchange rate, the current account deficit, and thus every single component that goes into the calculation of the current account deficit, imports are a bad word, even though we import nearly twice as much as we export every year. No, in Islamabad, and in macroeconomic conversations in Karachi and beyond, imports are bad thing, a dirty word, and discussion of them takes on a weirdly moral undertone, as though imports represent a national moral failure of some sort.

This is, of course, complete balderdash. In reality, Pakistan imports things that it needs and its main imports are things we cannot do without, such as primary energy inputs (oil and natural gas) as well as heavy machinery and equipment that allows the country to produce things like electricity, manufactured goods, telecommunication services, etc. Why is it a bad thing is Pakistan is importing more fuel and more capital goods? It means the economy is not only growing, but is investing in its own future growth as well.

Yet old ideas about import substituting industries, and some fantastical notions that somehow everything should be manufactured in Pakistan, continue to dominate national policymaking mindsets, ignoring completely the fact that no country – not even the United States and China – can manufacture and produce everything entirely for themselves.

Indeed, our cover story this week explores just how much imports can play a vital role in the economic development of a country by helping multinational corporations understand product-market fit for their products manufactured in other countries. They offer, effectively, a real-life market testing exercise that can often serve as a prelude to domestic manufacturing. Our cover story focuses on real examples from Procter & Gamble, and mentions that they are by no means alone in using imports as a precursor ingredient to their eventual local manufacturing expansion.

It is examples like this that lead us to advocate for economic freedom for all: the government should not try to shape the economy in a particular direction by encouraging this and discouraging that, and instead focus on providing an enabling environment for all businesses, and treat all economic activity as equal under the law. If we do so, maybe we can find new ways of growth that we have not even witnessed yet.

Farooq Tirmizi
The writer was previously, managing editor, Profit Magazine. He can be reached at [email protected]

4 COMMENTS

  1. Yes, imports are not Evil yet, in Pakistan, it is proving as such. We are a net Importer country. Major importer of Energy. Prior to PTI Government, all other Governments did not (knowingly) push for Oil & Gas exploration and development. The previous governments were happy to invest in coal and gas based IPPs but they did not (knowingly) initiate a single major water dam which is a biog winner for the economy i.e. water storage, flood management and cheap power. Our previous governments were busy in enabling sugar and wheat smuggling in connivance with Security Establishment. All of this chaotic and currupt policies and practices led to serious trade imbalance. I believe you are wrong, we must set up industries for import substitution, we must focus on cheap energy i.e. hydel, solar, wind and coal. We have to find more hydrocarbons within the country. STOP smuggling. STOP importing luxury items. Promote MAKE in Pakistan. And above all FUCK PML-N PPP ANP JUI-F and MQM….

    • I do agree with you. Imports are necessary for import substitution. Being a SMES there are many problems. Finished goods from abroad are cleared grossly under invoiced/misdeclaration ,border smuggling. Very difficult to survive. In such circumstances. Go for commercial imports. Corrupt system don’t let you allow imports substitution.

  2. Great analysis Mr Tirmizi. Unless we change our mindset, we will forever remain poor. What we do not realize is that even locally manufactured goods such as fridges and air conditioners consist of over 80% imported goods. We will be saving far more on fuel and cost of cars, if we were to import them rather than try to assemble them here.

  3. Well, in the world, Japan and America is rich,they also number 1 country in world import goods for domestic consumption. Why ? Remember the theory of comparative advantage in economics. If you think you can save cost and input of manufacturing chain,so import is a solution. For example, you want make a good moustache electric shaver machine? OK, you must have supplier for small apparel,small spare parts to assemble. Means must import machinery to make small spare parts at millions USD ? So how many Shaver you can sell in market and how many years take to return the investment with cash flow ?????

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