Executive Summary

This research will focus on the potential as well as the current state of the export market in
Pakistan. Pakistan has been a country which has faced multiple ups and downs in its short
history. It has undertaken the journey from the fasted growing economy in all of Asia to being
labelled as a “failed state”. In the current scenario, Pakistan is on its way back to the economic
prosperity. This calls for adequate attention of international businesses as technically, now is the
most suitable time to invest in Pakistan. As Pakistan is an agricultural country, the most of the
products it produces are agricultural in nature apart from some manufactured products. These
products will make the main pivotal point of discussion in this study.

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Contents
Introduction ................................................................................................................................................... 4
The trend of exporting the commodities ....................................................................................................... 4
Costs, benefits and risks ................................................................................................................................ 6
Choice of distribution strategy ...................................................................................................................... 8
Recommendations and summary .................................................................................................................. 9
References ................................................................................................................................................... 10

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Introduction
Pakistan was labeled as the “Model Developing Country” by Harvard in 1960s. However, after
several events such as 3 wars with its neighbor India, Afghan war, and the international war on
terrorism it was labeled as a failed state by many and many other predicted a complete collapse
of the country on various occasions (Lieven, 2012). Fast forward, 10 years, Pakistan is on its way
back to economic prosperity and is at a turning point in its history. It is a major exporter of many
commodities such as cotton, rice and marble. Many experts have claimed that now is the best
time to invest in Pakistan due to the bright future. There is a period of economic and social
prosperity ahead of Pakistan due to scads of factors such as the advent of CPEC, potential
discoveries of oil and raw materials, eradication of issues such as terrorism and so on. The port
city of Gwadar is expected to become an international trade hub similar to Dubai after the
completion of CPEC project. These factors have already started taking a toll on the international
business scenario and multiple foreign businesses have started their ventures in Pakistan and
multiple others are expected to follow suit. Pakistan has a population of 200 million and a
diverse range of landscapes ranging from vast deserts and sea shores in the south to snow
covered peaks of the Himalayas in the North (Parveen et al, 2019). This calls for a number of
businesses to operate in the companies which are diverse in nature and deal in products as well
as services. Moreover, due to the improved security conditions, the tourism industry is also
expected to boom and to grow at an exponential rate. This is another call for multiple businesses
to start their ventures in Pakistan. On top of all this, the new government of Pakistan is also
making conditions highly favorable for foreign businesses to operate in Pakistan. The
government of Pakistan has even openly invited international businesses to start their ventures in
Pakistan and have promised to facilitate the process to every possible extent.

The trend of exporting the commodities

Pakistan is an agricultural country by nature and due to this fact; the exports of the country are
mostly agricultural products while the major imports of the country are technological products
and raw materials (Khan et al). There has been a trade deficit in the imports and exports of
Pakistan. Pakistan has bilateral as well as multilateral trade agreements with a number of

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countries all over the world. Due to the nature of its trades, it is a member of the WTO (world
Trade Organization). It is also a trustee of the SAFTA (South Asian Free Trade Agreement) as
well as the CPFTA (China Pakistan Free Trade Agreement).

Due to the current lack of materials such as oil and petroleum, the biggest import products of
Pakistan are Refined Petroleum, Crude petroleum, Petroleum gas and automobile cars. The
Refined Petroleum being imported by Pakistan amounts to a total of $7 billion and is the biggest
item being exported to Pakistan. The second major item being exported to Pakistan is Crude
Petroleum which amounts to a total of $2.88 billion. The third biggest import of Pakistan is the
Palm oil which sums up to a grand total of $2 billion. In the electronic and technology sector, the
biggest item being exported to Pakistan is the automobile cars. The imports of automobile cars in
Pakistan amount to $1.35 billion. Due to the nature of the products being imported, there top
countries which export these commodities to Pakistan include China, UAE, Saudi Arab,
Indonesia and Japan (Munir and Sultan, 2019).

On the other hand, Pakistan is also a major exporter of multiple products. As mentioned above,
Pakistan is an agricultural country which is the main reason behind the major exports of Pakistan
being products such as rice, oranges, mangoes, cotton and so on. Other major export
commodities include furniture, cement, marble, textiles. It is also famous for its manufactured
goods such as sports items and surgical supplies. The footballs made in the city of Sialkot are
famed to be used in the FIFA World Cup every 4 years. The military defense equipment also
makes for a major export of Pakistan which includes products such as tanks and radars. The
Suzuki automobiles which are assembled in Pakistan are also exported to Afghanistan among
many other countries. Russia is a major exporter of Pakistani commodities (Afzal et al, 2019).
The following figure can help in better understanding of the trends in the exports of Pakistan:

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This shows some minor fluctuations over the years, but in an overall perspective, the exports of
Pakistan have risen over the years facing some small declines over the way (Anjum and Sgro,
2017).
Costs, benefits and risks
Due to the nature of the process, there are a number of costs which the exporters are liable to
pay. There are different rates of taxes depending upon a number of conditions. These taxes
include VAT taxes, Corporation taxes and Income taxes. Each country has its own set of rules
and regulations when it comes to matters such as exports. The initial costs include the domestic
production costs. These are the costs which have to be incurred it the process of manufacturing
or the production of the commodities to be exported. After this, the logistics costs are to be
incurred by the exporter. These are the costs which are to be incurred as a result of transporting
the goods to the desired location or the country. This may be done wither by sea, by land, or by
air. This choice mainly depends upon the nature of the product being exported and other factors
related to it such as the product life, product size, and product quantity and so on. The
distribution costs must also be factored in here. These are the costs which are to be incurred as a
result of the distribution of the products in the intended market. One thing must be kept in mind
here that these costs are not applicable in all the products. Some companies may opt for some
distributions strategies which may allow such costs to be omitted. These strategies have been
discussed in the later part of this assignment. Other than all this, there are several other costs
which may come as a part of the deal. These include costs such as the ones needed to cover the
infrastructure support costs. There may be some criminal activities too which may tarnish the
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costs to be incurred. These include activities such as theft or bribery. These are the main costs
which are incurred as a result of the process of export process (Sharma, 2019).

There are a number of benefits of exporting products. The benefits are for the country as well as
the producer of the goods which may be a private entity. In context of the private producers, the
main benefit is that there is a higher level of exposure. This means that more consumers can be
targeted. For example, in a hypothetical situation, if a local manufacturer is targeting 10,000
consumers at home, by inclining more towards the export process, the same producer can target
50,000 consumers abroad. This can result in a significant expansion of the business and a higher
amount of profits. By doing so, a larger market can be tapped. This is also an ideal case scenario
for the country of origin which in this case is Pakistan. The goal of every country is to maximize
its exports and minimize its imports. This results in a trade surplus. If the opposite of this
happens, i-e imports exceed exports there is a trade deficit which means financial losses.
Pakistan is facing a trade deficit at the moment. If the exports are increased, this gap between the
exports and imports can be mitigated which will be a prudent factor for the economy of Pakistan.
The financial resources saved as a result can then be allocated elsewhere for various purposes
such as human development, infrastructure development, and better facilities of the citizens.
Apart from all this, there some considerations which must be made here in this regard as well.
For example, the GDP size and the per capita income ratio of the targeted country must be kept
in mind to evaluate the suitability level for the intended products to be exported there. By doing
so, the performance of the export process can be optimized (Mubarak and Naghavi, 2019).

With all these benefits, there are multiple risks as well which may pose a threat to the export
system of Pakistan. There are three main risks which may be faced by exporters of commodities.
These are property ownership rights, criminal activities and financial risks. All three of these will
be explained individually. Firstly, the biggest threat for any exporter is the property ownership
rights of the rightful owners. Due to the absence of any physical presence in the country where
the goods are being exported, this is a very real threat which is being faced by exporters of not
only Pakistan, but exporters all over the world. This is true for not only intangible goods, but also
for intangible products. The intangible products are prone to threats such as intellectual property
violations. Another major threat being faced by exporters worldwide is the issue of criminal
activities. This mainly depends upon the law and order situation of country the commodities are

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being exported to. This issue again is mainly due to factors such as lack of physical presence and
little or no experience in the foreign markets. Apart from all this, another major form of threat
which is common for any exporter is the potential financial risks. There may be issues such as
bad debts and non-payment of dues. The products being exported may also be rejected or
damaged en route. There may be the presence of some anti-business elements in the intended
country as well which may pose a threat to the business activities being conducted there. The
volatile nature of the economy can also be a significant factor here. If there are factors such as
unstable political scenario and high rates of inflation, there is a much less desirability of doing
business there. Hence, these risks must be kept in mind before endeavoring to venture into the
world of exports (Uddin et al, 2019).

Choice of distribution strategy

The distribution strategy is of monumental importance in the export operations of the company.
The distribution strategy can be defined as the course of action decided to be used in the supply
chain of the products from manufacturing locally to the retailers or the final consumers in the
foreign markets. Utmost care must be rendered in the choosing of the distribution strategy as it is
a highly critical matter for the company. This can be the decisive factor behind the prosperity or
the failure of the company. A right strategy can lead to optimization of the profits by minimizing
the costs while an unsuitable strategy can lead to blunders being made and event the collapse of
the supply chain. There are some points worth pondering over here in this case which must be
kept in mind here by the SMT of the company entering into the export market. Firstly, reducing
costs must not be the sole requirement of the distribution strategy. The quality of performance
must be the top priority here and a suitable threshold level must be devised for this purpose. The
most suitable course of action here is to minimize the costs as long as the threshold level of
quality is being achieved. Another important point to be kept in mind here is to learn from the
experienced entities in the market. The distribution strategy of a successful entity in the export
market can be used as a model. However, the same strategy can be successful for one company
while being disastrous for the other. This may be due to reasons such as difference of products,
different financial situations and so on. These factors must also be kept in mind here in this case.
By doing so, the company can devise a suitable strategy for the purpose of exporting the desired
products to the country targeted (Padda and Asim, 2019).

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There are several methods which are popularly used for the purpose of exporting from one
country to another. The choice of these methods depends upon the company venturing to export
the commodities. One popular method used in this regard is the use of help from an external
agent which is based in the country where the products have to be exported to. This is mostly
suitable for new and inexperienced companies which can use outside help. This can also help
with the issue of lack of market experience in the foreign markets. Not only this, a type of
partnership is devised which means that there are less responsibilities for the companies now.
Due to these specifications, this is mostly suitable for new market entrants and companies which
are facing shortage of financial resources. For example, APEX Trading Company is a company
which is utilizing the use of this strategy. There are some risks associated with this strategy as
well which include a higher level of threat of issues such as fraud and other criminal activities.
Another popular strategy being used in the export sector is to undertake the logistics process and
deliver the commodities to the retailers or the final consumers on its own. A higher amount of
financial resources as well as market experience and relations are needed for this which is why
this strategy is suitable for mature and experienced companies. Khaadi is a company which is
rendering the use of this strategy in case of the newly opened stores in the UAE (Abbasi et al,
2019).

Recommendations and summary

For the purpose of choosing a suitable strategy for the purpose of exporting commodities from
Pakistan to any other country in the world, first an internal analysis of the company must be
conducted. This will lead to a better understanding of the facts and ground realities. Keeping
these in mind, the suitable strategy can be devised. The strategy must factor in all the necessary
conditions which are internal as well as external in nature, the external factors include factors
such as the economy, political stability and so on (Bilgili et al, 2019). If the process is completed
correctly, the exports can prove to be highly beneficial for not only the company but for the
country of origin as a whole.

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References

Abbasi, B.N., Umer, M., Shah, S.I., Tang, J., Ullah, I., Abbas, H. and Khan, I., 2019.
Impact of Export Subsidies on Pakistan’s Exports. American Journal of Economics, 9(1), pp.11-
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Afzal, M., Ahmed, S.S. and Shahzad, M.W., 2019. Impact of Merchandize and Services
Trade on Economic Growth of Pakistan. Journal of Contemporary Research in Business,
Economics and Finance, 1(1), pp.30-36.

Anjum, M.I. and Sgro, P.M., 2017. A brief history of Pakistan’s economic
development. Real world economics review, pp.171-178.

Bilgili, F., Ulucak, R., Soykan, M.E. and Erdog˘ an, S., 2019. Can Exchange Rate
Volatility Influence the Export Positively? Evidence from Turkey Under the Regime
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Khan, M.N., Ahmad, A. and Jehan, N., Pakistani Firms' Efficiency: An Empirical Study
of Pakistani Listed Firms through Data Envelopment Analysis.’

Lieven, A., 2012. Pakistan: A hard country. PublicAffairs.

Mubarak, M.S. and Naghavi, N., 2019. Negotiating with Managers from Pakistan. In The
Palgrave Handbook of Cross-Cultural Business Negotiation (pp. 267-282). Palgrave Macmillan,
Cham.

Munir, K. and Sultan, M., 2019. Export Competitiveness with Border Sharing Countries:
An Assessment of Pakistan. Competitiveness Review: An International Business Journal, (just-
accepted), pp.00-00.

Padda, I.U.H. and Asim, M., 2019. What determines compliance with cleaner
production? An appraisal of the tanning industry in Sialkot, Pakistan. Environmental Science and
Pollution Research, 26(2), pp.1733-1750.

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 Parveen, S., Mahmood, B., Chuadhry, A. and Iqbal, M.S., 2019. Impediments faced by
educational institutions in creation of knowledge economy: a case study of Punjab
Pakistan. Amazonia Investiga, 8(18), pp.164-174.

Sharma, S., 2019. Pakistan at 100.

Uddin, M., Chowdhury, A., Zafar, S., Shafique, S. and Liu, J., 2019. Institutional
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pp.344-358.

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