Pakistan has been awarded the status of GSP Plus recently till 2017. 406 members of the European Parliament voted in favor of Pakistan whereas 186 voted against. It is expected that with this status, Pakistan can increase its exports by $2 billion. The status will allow 20% of Pakistani products to enter EU with zero tariff whereas, 70% will be exported on preferential rates. Recent statistics show that Pakistan’s GDP has increased from 3.6% to 5.1% which maybe an indicator of country’s direction.

GSP Plus will help Pakistani textile manufacturers to compete with the regional players like Bangladesh and Sri Lanka which already have duty-free access to EU. Most of the textile products will enjoy this concession in tariff. It is projected that the textile industry will earn profit of 1 trillion rupees per year. The current exports to EU of $9.5 billion are more than half of the total exports (of $13.1 billion) to European Union. According to Chairman APTMA Punjab, Pakistan’s textile exports will rise from $13 billion to $26 billion in next five years. Recently, Germany has increased the textile orders by 30% and it is expected that Pakistan will be able to attract famous German brands like PUMA, ADIDAS, Marc O’Polo, HUGO Boss, and Tom Tailor towards Pakistan as their sourcing destination.

Although, it is very clear that this status will surely help Pakistan stabilize her economy but let’s peek through the reality window. Can Pakistan really take benefit from this status? Let’s not forget that the status is conditional on the export performance. Punjab, which contributes around 75% of the textile exports is severely hit by energy crisis and was not supplied gas for more than 60 consecutive days from December 2013 to February 21, 2014. Though, the supply was resumed on 21st February but only for 6 hours a day. This is a simple demand-supply law. When the manufacturers can’t produce the required amount, there is no purpose of GSP Plus status as exporters won’t be able to meet the demands. In 2012, gas was supplied to Punjab for 180 days, 170 days in 2013, and it’s likely that it won’t even cross 150 days in 2014. And because of the energy crisis, many textile units are moving to other countries like Sri Lanka, Bangladesh, and Turkey where energy situation is relatively better.

Textile units are dependent upon Gas and Electricity. Though, many big plants are running generators to generate electricity but Gas has to be supplied by the government, it can’t be produced with generators. And with no gas or shortage of gas, units can’t produce at their full capacity which in future can impact the expected increase in exports.

There is no doubt that GSP Plus status can play a very vital role in improving the economy of country but without dealing with energy crisis, it will not be an easy task. Government can shift the production process and import low-cost raw material from India. It is also of great concern that the Government provides security to foreign assets and profits, the main source of FDI and also simplify process of repatriation of capital investments.