ASSIGNEMENT

Name: Ahsan Bashir Gill

Roll No. : 13L-4761

Section: A

Course: International Business

Instructor: Dr. Ayub Siddiqui

PAKISTAN TRADE POLICY

TRADE:

World imports had been remained constant from 2011-2014 but reduced significantly since 2015. There

are many contributing factors for this drop in the imports and Pakistan has also been affected by this

situation up till now. The drop in imports were because of weak global economic activity and reduced unit

price of commodities. Economic growth was not satisfactory in OECD (Organization for Economic Co-

operation and Development) countries which slows down the growth of China as well. Moreover, the ratio

between world real GDP growth and real growth in imports have declined.

Majority of Pakistan’s exports are directed to the China and OECD region. Historical figures show strong

correlation between Pakistani imports to exports in China and OECD. As per FY 2016 figures, more than

50% of our exports are shipped to these two destinations i.e. China and OECD. So this overall affected

our exports in this background.

Because of the referendum conducted in 2016, the United Kingdom people have decided to exit from the

European Union. As a consequence of that referendum British Pound have witnessed an instant fall in its

value with reference to the other currencies. This made imports expensive in the United Kingdom. In these

uncertain circumstances, Pakistan’s exports to UK were reduced by 5% during July-December, 2016 over

the same period in 2015. Government has formally taken up with United Kingdom, initiation of a trade

dialogue between the two countries at an early date to resolve this issue.
Pakistan’s external sector was continued to face severe stress during 2016-17. Though the rate of export

reduction was slowed, Pakistan’s exports were only reduced by 3.06 % during the first 9 months of the

fiscal year 2016-17. Our imports continued to grow at a much faster rate and grew by a large 18.67%

during the first nine months of the FY-2017 as compared to the previous year.

Initiatives Undertaken for Export Promotion:

By looking at the downfall trend in global market and in Pakistan’s exports, commerce ministry of

Pakistan had made a strategic policy of trade 2015-18 and its aim was to boost the exports of Pakistan.

All private and public sectors were involved in the making of this strategy. In January 2017 Prime Minister

has announced a package for boosting exports of Pakistan. This “Export led growth” package has started

showing a positive impact on our economy and exports have also started recovering in the third and fourth

quarters of the outgoing fiscal year. As in March, 2017 year on year basis has witnessed a growth of 3.62%

and month on month growth in March remain 5.9% higher over February, 2017. Furthermore, exports in

April, 2017 also improved by 5.12% on year on year over last year and month on month by 0.22 percent

in April, 2017 over last month.

From 2010 State Bank of Pakistan lowered the rate of mark-up on Export Refinancing Facility (EFR).

The rates were reduced to 3.0 percent. Long Term Financing Facility (LTFF) also lowered from 11.4% to

6% in 2015 till today. This was done to allow investment in the export industry.

Pakistan has Free Trade Agreements with Malaysia, Sri Lank and China. Pakistan is also a member

SAFTA and ECOTA arrangement. In 2017, for the regional economic development, ECO Summit was

held, which was designed to give a enhancement to regional economic development. The road for CPEC

and other development projects in Central Asia are expected to give a positive response for the economy.

After Pakistan gets access to the Trade Facilitation Agreement from the WTO Pakistan’s trade will boost.
There are FTA negotiations being done with Thailand and Turkey as well. This FTA will be better for

Pakistan as it will provide entry to new markets i.e. ASEAN and EU.

Free Trade Agreements (FTAs):

China Pakistan FTA (CPFTA):

On Nov 24, 2006, The China-Pakistan Free Trade Agreement (CPFTA) was signed. It was implemented

on July 1, 2007. This FTA was only for the trade of goods not services. On Feb 21, 2009, the FTA for

trade of services was signed. It was implemented on Oct 10, 2009.

In 2006-2007 the trade between China and Pakistan was 4 billion dollars. In 2015-2016 the trade between

China and Pakistan was at 13.77 billion dollars. Pakistan has increased its exports by 200% i.e. in 2007 it

was 575 million dollars and in 2016 it is 1690 million dollars. China has also increased its exports to 250%

i.e. 3.5 million dollars in 2007 and 12.1 billion dollars in 2016.

Malaysia- Pakistan FTA (MPCEPA):

FTA between Pakistan and Malaysia was marked on Nov 8, 2007 at Kuala Lumpur. It was implemented

on Jan, 2008.The commitment for the decrease in tariff was to eliminate tariff on 43% of Pakistani import

and 78% of Malaysian import. The trade between Malaysia and Pakistan from the year 2007 to 2008 was

1238.8 Million dollars. Pakistani exports from the year 2007 to 2008 were 81.3 million dollars. In those

years, Pakistani import was 1157 million dollars. Because of the FTA, Pakistani export has boosted up to

188 million dollars and import has decreased to 814 million dollars.
Pakistan -Sri Lanka FTA (PSFTA):

In 2002, the FTA between Pakistan and Sri Lanka was marked which was implemented in 2005

Concession of 100% has been granted on 206 items to Pakistan in this FTA.

Because of this FTA Pakistani trade with Sri Lanka has increased from 200 million dollars to 321.7 million

dollars from 2015 to 2016. Pakistani export has also been boosted up from 155.8 million dollars to 247.1

million dollars.

SOUTH ASIAN FREE TRADE AREA (SAFTA):

In 1993, SAARC Preferential Trading Arrangement (SAPTA) was created. In the first meeting of SAFTA,

which was held in 2006, they decided the Tariff policy under SAFTA. All countries in the SAFTA have

acknowledged and implemented the Tariff policy phases.

Impact of Tariff Policy on Pakistan’s Trade with SAARC Region:

Because of the Tariff Policy Pakistani trade with the SAARC region has boosted up. From the year 2003

to 2004 Pakistani trade to SAARC was 866 million dollars and from the year 2006 to 2007 it has boosted

up to 1564 million in the 1st year of the implementation of Tariff policy.

Exports:

Exports from July to March, 2016 and 2017 have gone down to 15.1 billion dollars from 15.5 billion

dollars which was for the period of 2015 to 2016. It was a decrease of 3%. Because of the government

giving subsidies and other help to the export industry the exports during 2017 have increased by 3.5%

when we compare it to 2016. This is an indication of positive recovery.

Pakistani export to EU has gone up by 38%. Pakistani export to has gone up from 4.5 billion euros in 2013

to 6.28 billion in 2016. Pakistani export of textile to EU has gone up by 55% during the same period.
Major Exporting Countries:

Countries Share of Exports (Jul-Mar, FY2017)

USA 17%

China 7%

Afghanistan 6%

United Kingdom 8%

Germany 6%

U.A.E 4%

Others 52%

Imports:

During this ongoing year, Jul-Mar period, Pakistan’s imports are showing increasing pattern at a

comparatively faster rate 18.7% due to the increased economic activity as part of CPEC (China-Pakistan

Economic Corridor) project, mainly in the Energy sector. Heavy machinery is required, which has to be

imported for the construction projects under CPEC. It is also seen that the economy is presently showing

good signs and being led both by consumption as well as investments, resulting in comparatively higher

levels of imports.

The drastic increase in imports may not be a reason for major concern, the imports during the current

fiscal year comprised around $12 billion of capital goods(metals, machinery etc.), which will ultimately

results in increasing the country’s industrial capacity and helps in boosting exports.
Because of the increase in import of machineries, it will have a multiplier effect on the economy as the

manufacturing has the highest backward linkage among the all major sectors of our industries. As the

demand for manufacturing grows, it in turn will bring new opportunities for the betterment of society. It

will help in the creation of investment, jobs and innovations. Good progress on mega infrastructure

projects, vibrant domestic construction, and CPEC related economic activities; all have resulted in an

increased demand for machinery and commercial vehicles during fiscal year 2017. Many international

institutions of financial sectors has admitted the fact that Pakistan’s economy has been able to grow at a

better pace. Main reason for this growth is because of technological enhancement and industrialization.

There exists a positive long term relationship between growth in imports of machinery (capital goods) and

manufacturing sector growth of Pakistan.

The imports target made by the government for current financial year was set at $45.2 billion for FY2017.

There has been a growth of 18.7% for Pakistan imports bill in the first nine months of the current fiscal

year, increasing from $32,444.7 million during FY-2016 (July-March) to $38,503.8 million during Jul-

Mar FY-2017 showing an increase of $6059.2 million in absolute term.

Countries Share of Imports (Jul-Mar, FY2017)

China 28%

U.A.E 14%

USA 4%

Indonesia 4%

Japan 4%

K.S.A 4%

Others 42%
CONCLUSION:

Recession in developed advanced economies, impediments at structural institutional and entrepreneurship

both internal and external factors are responsible for constant exports. However the aim of the government

to increase the exports and in this connection a number of initiatives have been taken. As a result, the

negative effects of exports are bottoming out and visible improvements like Prime Minister Package for

commerce ministry is to boost the exports which shows its results in recent months have been seen. The

imports will be growing at a much faster rate because of development projects, investment in energy sector

and CPEC. CPEC is considered as game changer for Pakistan. This project will bring foreign investment

in Pakistan and more companies will look to set their factories in Pakistan which will ultimately results in

increasing of our exports.

Pakistani government must need to take further steps for raising their exports in order to decrease the day

by day increasing trade deficit. They should need to provide subsidy to our different sectors so there cost

of production decreases and they can sell their products at global level on competitive prices. Pakistan has

good bilateral relations with China, KSA, UK and Turkey etc, and that’s why they do not imposed high

tariffs on our products. Pakistan current trade policy is not good there government needs to build strong

relation with countries like India, USA and Iran etc so that they can also trade with them freely.