Cotton Textile and Leather Exports: What Cost Foreign Exchange? (Notes & Comments)

Abstract

The senior author has elsewhere argued [8] that foreign exchange earned by the export of West Pakistan-manufactured goods has a high domestic cost. Much the same contention has been advanced by Hecox [7], Islam [9] and MacEwan [11]. In these papers the relationship between costs and earnings is usually based on fairly abstract assumptions. The purpose of this note is to reduce the calculations to a "plain man" level. Specifically, we try to calculate how many rupees of indigenous resources are expended to earn each extra rupee of foreign exchange which is received from exporting cotton textiles and leather goods rather than their primary ingredients, namely raw cotton and hides and skins i. Since this note was written, the Board of Economic Inquiry, Lahore, at the request of the West Pakistan Planning and Development Department, has undertaken a wider study applying the same general approach used here.