Characteristics of Foreign Trade

Of Pakistan
Export of raw material and semi finished goods
Dependence of few commodities
Import of machinery, industrial raw material, electrical goods
Imports of agriculture products and other food items
Increased used of petroleum products
Import of services and other invisible expenditures
Limited trade relations
International trade by private sector
Unfavorable balance of payments
Unfavorable balance of trade
Unfavorable terms of trade
 Major exports and Imports of Pakistan
Exports Imports
Raw cotton Machinery
Textile products and cotton Petroleum
yarn
Rice Chemicals
Leather and leather products Vehicles and spare parts
Carpets and rugs Edible oil
Synthetic textile Wheat
Surgical instruments Tea
Sports goods Fertilizers
 Exports Imports

Readymade garments Plastic material

Vegetable ,fruit and fish Paper board

Tents Iron ore and steel

Engineering goods Coal

Chemical and Pharmaceutical Pharmaceutical products

products
 Direction of Exports

 Pakistan trades with a large number of countries

 Exports are highly concentrated in just a few like , USA,
Japan, Germany, UK, Hong Kong, Dubai and Saudi Arabia.
 USA making up approximately 24% of the total
 Japans exhibited continues decline on account of a protracted
recession in the Japanese economy
 The share of exports to Germany, UK and Hong Kong
remained relatively constant while Dubai and Saudia has risen
due to Textile manufactures
 Trends in Imports
 Imports are targeted to increase by 4.8% to $12.8 billion in
fiscal year 2003-04
 Net increase of $580 million over last years
 During July-April,2003-04 this figure grew by 19.0% and
stood at $12012.4 million as against $10097.8 million
 Food group components, which accounts for 7.2% total
imports ,grew by 4.5%
 Combined increases of $78.8 million in palm oil and tea for
domestic consumption
 Direction of Imports
 Pakistan's major imports come from select few countries USA, Japan,
Kuwait, Saudi Arabia, Germany ,UK and Malaysia
Causes of Adverse Balance of Payments
1. Decrease in exports
2. Increase in imports
3. Lack of modernization of export oriented industries
4. Import restrictions by developed countries
5. Invisible expenditures (foreign exchange liability)
6. Unfavorable terms of trade
7. Devaluation of currency
8. Fall in workers remittances/ foreign remittances
 Decrease in exports
 Exports earnings of Pakistan mostly depend upon the export of
few agricultural products such as raw cotton, cotton products
and rice
 Pakistan has to face severe competition with Egypt, India and
China for the export of cotton ,cotton textiles and rice
 Due to increase in the rate of Inflation, prices of exportable
goods are also increasing difficult to compete in the international
market
 Political uncertainty , lack of law and order situation, strikes and
lockouts resulted in the production losses and exports could not
be increased , hence foreign exchange earnings have reduced.
 Increase in imports
 Pakistan’s imports on account of machinery,
industrial raw material pharmaceuticals, vehicles,
electronic goods, spare parts are persistently
increasing
 Due to rapid increase in the population the demand
for food grains is also increasing and due to the hard
luck of ours we have to import, wheat ,edible oil, tea
spices, and even sugar.
 More over increased domestic demand and price rise
of petroleum is a great headache and pressure on
foreign exchange resources of Pakistan
 Lack of Modernization of Export
Oriented Industries
 Lack of planning, we could not set up import substitution
industries in the country
 Value added goods factories are very less and the development
of Industrial sector is unorganized
 No attention is being paid on the modernization of the existing
industries
 The number of sick Industries is gradually increasing.
 Nationalized factories are running in to losses
 All these factors result in the high cost of production and sub-
standard quality, which give us low price in the International
market and reduces the foreign exchange earnings.
Imports Restriction by Developed Countries

 Many countries have imposed anti dumping duties on

Pakistan’s cotton and cotton products .

 Propaganda about exploitation of child labor has also

resulted in the hand-made product’s export.

 Moreover some European countries have developed

the substitutes of cotton products such as Synthetic
textiles causing reduction in Pakistan’s exports.
Increase in invisible expenditure
 Expenditures such as expenses on embassies, foreign
education,
 Increasing number of pilgrims for Haj/ Umra and
other holy places
 Interest and service charges of foreign banks,
insurance companies
 Increase freight charges of shipping companies etc.
are increasing the foreign exchange liability of
Pakistan.
 Unfavorable terms of trade

 Price of export goods of Pakistan are decreasing

where as prices of import goods are increasing
continuously in the international market, which
means that terms of trade are going against Pakistan

 Pakistan has to export more goods for the import of

the same quantity of goods
 Devaluation of currency

 Pakistan has devaluated its currency many

times, which resulted in the increase in of
import bill (expense of foreign exchange)
whereas our export bill ( earnings of foreign
exchange) could not increase. Thus
devaluation has badly affected the balance of
payments of the country
 Fall in workers remittances
 Last many years workers remittances from
foreign countries are decreasing
 Due to the fact that construction programs
have reduced in Middle East countries
 These countries are experiencing slump in oil
prices
 Comparatively very cheap labor is available to
Middle East countries from India, Bangladesh,
Sri-Lanka and Philippines
 Measures for improvement in BOP
 Increase in exports by providing different incentives
 Decrease in imports by setting up key industries
 Increase in invisible earnings
 Search of a new markets
 Quality and packaging of international standard
 Revival and restoration of sick industries
 Foreign in joint ventures
 Promotion of labor intensive industries
 Increase in Exports
1. Decrease the cost of production, for which rate of
interest for setting up industries should be reduced
2. Cost of transport particularly railway freight should
be minimized
3. Customs duties on the export- oriented industries
should be reduced
4. Modern techniques of production should be applied
5. Instead of exporting raw material, value added
goods should be produced and exported
6 Those industries should be encouraged and set up
which use locally produced raw material .
7 The labor productivity should be enhanced by
imparting education , training and providing
different types of facilities of life
8 Goods of different varieties keeping in view the
demand and requirement of foreigners should be
developed, produced and exported
 Decrease in Imports
 Import substitution industries should be set up
 For the production of edible oils, seeds should be
grown locally
 Tea consumption should be discouraged
 Production of food grains such as wheat should be
increased
 Import of luxurious items should be banned or heavy
taxed
 Basic and key industries should be developed which
can produce machinery and spare parts for
manufacturing industries.
 Increase in Invisible Earnings
 National shipping company should be strengthened for
assisting the international trade. The freight charges of this
company will become a source of savings foreign exchange .
 Domestic commercial banks and insurance companies should
be strengthened and be given the task for facilitating the
Pakistan international trade.
 Expenses of our embassies abroad, which involve foreign
exchange, should be reduced . VIP culture should put to an
end and unnecessary tours and medical expenditure of high
government officials should be disallowed
 Foreign countries visits by the general public
should be discouraged in order to save the
precious foreign exchange of the country .

 The efficiency of trade attaches of Pakistan

Embassies should be improved . It is their duty
to do their best for developing markets of
Pakistani products in the countries they are
posted .
 Search of New Markets
 Governments officials and business community should
participate in trade fairs arranged by foreign countries
 Trade agreements with different countries should be made.
 Seminars and trade Exhibitions should be arranged with in the
country in which foreign delegates should be invited to
participate .
 Booklets, brochures , pamphlets about the Pakistani products
and economy of Pakistan should be distributed to foreign
business community.
 Research for Marketing should be conducted.
 Quality and Packaging of International
standard

 Revival and restoration of sick industries

 Foreign joint ventures

 Promotion of labor intensive industries

 World Trade Organization

 It was established on January 1,1995

 Represents the most powerful of all the
multilateral institutions that are responsible for
the global economic management
 145 countries are its members
 The preamble of WTO
 Raising standards of living, ensuring full employment
and steadily growing volume of real income and
effective demand and expending the productions of
and trade in goods and services .

 There is need for positive efforts designed to ensure

that developing countries secure a share in the growth
in international trade commensurate with the needs of
their economic development
 Basic Principles

 Non- discrimination between counties

 Free trade , gradually through negotiations
 Predictability through binds
 Promoting competition .
 WTO Does Not Require
 Does not prevent member states from
establishing their own trade and non-trade
policy objective s
 Does not require them to eliminate all barriers
to import of goods and services
 Does not direct national administrative and
procedural system
 Does not require member states to have a
uniform set of trade regulations