Professional Documents
Culture Documents
December 2017
Disclaimer:
The findings, interpretations, and conclusions expressed herein are those of author(s) and do not necessarily reflect the views of the Board of Directors and
Members of the Pakistan Business Council or the companies they represent.
The Pakistan Business Council
Any conclusions or analysis based on ITC, UNCTSD, PBS, WTO and IMF are the responsibility of the author(s) and do not necessarily represent the
opinion of the ITC, UNCTSD, PBS, WTO and IMF.
Although every effort has been made to cross check and verify the authenticity of the data used, the Pakistan Business Council does not guarantee the data
included in this work. All data statistics are correct as of 15th September, 2017 and may be subject to change.
ii For any further inquiries, please contact Samir S. Amir at samir@pbc.org.pk and Salik Saeed at salik@pbc.org.pk
List of Contents
SECTION I 1 Pakistan – Malaysia FTA 68
About PBC 3 Pakistan – Indonesia PTA 73
The PBC’s Member Companies 6 Pakistan – Mauritius PTA 78
Members’ Contribution to the Economy 8
Represented Sectors of the Economy 9 SECTION IV 83
Members Profile 10 The European Union 85
Key Engagements and Interventions 11 Central Asian Republics 91
PBC’s Research Contribution 12
PBC’s Centre of Excellence in Responsible Business (CERB) 14 SECTION V 93
Regional Trade 93
SECTION II 15 Trade Prospects within the Region 95
Background 17 Pakistan – India Bilateral Trade 98
Composition of Imports – 2016 19 Trade with Afghanistan 105
Imports Breakdown - Financial Year 2017 Vs. Financial Year 2016 20 Trade with Iran 109
Exports 29
Exports Breakdown - Financial Year 2017 Vs. Financial Year 2016 30 SECTION VI 115
Pakistan’s Share in World Exports 34 Comparison of Pakistan’s Reported Trade Figures Versus Figures Reported
by its Trading Partners for 2016 117
Pakistan’s Export Concentration Index 37
Pakistan – India Trade Figure Discrepancy 118
Share of Industrial Sector in the Economy 38
Pakistan – China Trade Figures Discrepancy 119
Pakistan Deindustrializing Prematurely 39
Pakistan’s Free Trade Agreements 40
SECTION VII 123
GDP Growth - Consumption Driven with Low Levels of Investment 42
Paper & Paperboard 125
Growing Middle Class 45
Electric Motors 126
Low Agricultural Productivity 47
SECTION I
PBC and its Role in the Economy
About PBC
The Pakistan Business Council (PBC) is a business policy advocacy forum, representing private-sector businesses that have substantial investments in
Pakistan’s economy. It was formed in 2005 by 14 (now 66) of Pakistan’s largest enterprises, including multinationals, to allow businesses to meaningfully
interact with government and other stakeholders.
The Pakistan Business Council is a pan-industry advocacy group. It is not a trade body nor does it advocate for any specific business sector. Rather, its key
advocacy thrust is on easing barriers to allow Pakistani businesses to compete in regional and global markets.
The PBC works closely with relevant government departments, ministries, regulators and institutions, as well as other stakeholders including professional
bodies, to develop consensus on major issues which impact the conduct of business in and from Pakistan. The PBC has submitted key position papers and
recommendations to the government on legislation and other government policies affecting businesses. It also serves / has served on various taskforces
and committees of the Government of Pakistan as well as those of the State Bank, the SECP, the FBR and other regulators with the objective to provide
policy assistance on new initiatives and reforms.
PBC membership has grown over the last decade to include most of the leading private sector businesses within multiple sectors in Pakistan. The entry
threshold, however, is kept high to maintain focus and quality. A company, in order to be eligible to become a member of the PBC has to be of a certain
size and has to enjoy good reputation in the industry.
The PBC conducts research and holds conferences and seminars to facilitate the flow of relevant information to all stakeholders in order to help create an
informed view on the major issues faced by Pakistan.
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6
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Represented Sectors of the Economy
PBC is an advocacy group, and not a sector specific trade body. The 66-member companies are diverse in nature and belong to multiple industries in both
the manufacturing and service sector. All in all, the members belong to 14 sectors of the economy.
Services
PBC not only benefits from global best practice, it is able to take a holistic approach to promoting investment, both foreign and domestic. There are very
few bodies that can speak for both foreign and local investment.
10
Key Engagements and Interventions
PBC has been involved with key stakeholders on multiple forums and has been engaged in various legislative initiatives. Some of the key engagements
of the PBC since 2007 include:
• The Holding Company Law - 2007
• The Law on Large Import Houses – 2007
• The Housing Advisory Group of the SBP - 2008
• The Real Estate Investment Trust Law – 2008
• The Special Economic Zone Act -2012
• For negotiating the Afghanistan Pakistan Transit Trade Agreement - 2011
• The revised Code of Corporate Governance for Listed Companies - 2012
• The Takeover Code - 2012
• The Corporate Law Reform Commission - 2007 to 2012
• The Law on Private Equity & Venture Capital – (Work in progress)
• The Corporate Rehabilitation Act – (Work in Progress)
• Corporate Governance Rules (2013) For Public Sector Companies
13
PBC’s Centre of Excellence in Responsible Business (CERB)
The formation of the Centre of Excellence in Responsible Business (CERB) is the first of many envisaged centres of excellence by the PBC. The aim of
the centre is to make PBC more inclusive, relevant and authoritative. CERB is an outreach initiative to build capacity and capability of medium sized
businesses. The underlying objectives of CERB are guided by, but not restricted to, the UN Sustainable Development Growth Goals. The vision for the
Centre is to make it a multi-sector business coalition assisting Pakistani enterprises to pursue economic, social and environmental value creation in the
short, medium and long term
The two key pillars are:
• Ethics, Values and Governance Forum:
It promotes responsible practices to strengthen the formal sector in pursuit of sustainable value creation
• Inclusive and Sustainable Development Forum:
This forum focuses on generating livelihoods, promoting women’s empowerment and decoupling growth from its impact on the environment
The mission for CERB is to engage with businesses and industry leaders and to encourage a transformation towards the conduct of responsible (sustainable
and inclusive) business in Pakistan. Moreover, it also wants to leverage private sector growth for inclusive development, poverty reduction and sustainability.
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14
Flickr
SECTION II
The State of Pakistan’s Economy
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Background
Pakistan’s macroeconomic indicators at the end of the last calendar year (January to December 2016) showed that Pakistan’s economy had marginally
improved in 2016. The foreign exchange reserves stood at $23.2 billion as on December 30th1, 2016 against $20.8 billion in the previous year, showing
an increase of 11.5% year-on-year (YoY). The country witnessed its GDP growing at the fastest rate in at least a decade at 5.7% against 4.4% in the 2015
calendar year. However, both the trading account balance and the current account balance had worsened in the wake of rising imports, declining exports
and a slowdown in remittances. As of December 2016, the trading account balance stood as negative $26.5 billion, down by 21% on a YoY basis and the
current account showed a deficit of $5 billion.
-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-5 -5.04
-10
-15
-20
-26.46
-30
Pakistan’s exports in FY 2017 were the lowest in 6 years while imports were the highest ever recorded in USDs, this led to an account deficit of USD 32.6
billion. Typically, remittances provide significant import cover, however the remittances too have fallen marginally in FY 2017. A detailed analysis on
Pakistan’s exports and imports is provided in the next section.
The current account deficit has grown by almost 2.4 times over the previous year which poses a serious challenge to Pakistan’s economic health. Prompt
structural reforms and the utmost focus by policymakers and stakeholders is required in order to manage the current account, otherwise Pakistan will have
to go into another multilateral bailout program.
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Composition of Imports – 2016
Mineral fuels, mineral
oils and products
Others 20%
31%
Edible vegetables
2%
The top ten commodities imported in 20162 accounted for 69% of the total imports in US Dollar terms; in 2015, their contribution was 67%. The share of
oil and gas imports has reduced to 20% as compared to 23% in 2015 and 31% in 2014 of the total import bill. This can be attributed to falling global oil
prices over the past two years and a nominal increase in domestic production. Mineral fuels have historically been the biggest drain on Pakistan’s foreign
reserves and with a reducing oil import bill, the country has been able to save billions. In terms of USD, fuel imports declined by 5% in 2016.
2 Unless explicitly stated, trade data used in this report is based on UN Comtrade which reports data on a calendar year basis.
19
Imports Breakdown - Financial Year 2017 Vs. Financial Year 2016
Composition of imports for the Financial Year 2017 vs. composition of imports for the Financial Year 2016 at HS-02 Level is given below:
FY 2016-2017 FY 2015-2016
HS Code
Serial No. Description % Change
(2 Digit) Import Value Import Value
% of Imports % of Imports
(‘000 US$) (‘000 US$)
3 28-39 Agricultural & Other Chemicals 7,584,454 14.30 7,225,953 16.17 4.96
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Imports of Capital Goods
The largest increase in imports was observed in capital goods. The following table compares imports of capital goods in FY 2017 with imports of capital
goods in FY 2016:
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
As evident from the table, the largest portion of machinery imports is for power generation. Under CPEC, multiple power generation projects costing more
than $22 billion are under development and for which power generation machinery is being imported. However, it is expected to reduce in the coming
21
Imports of Petroleum
Petroleum and its products make up the second largest group of products imported into the country, cumulatively constituting 20.56% of the total import
bill for the FY 2017. Its bifurcation is provided in the table below:
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
With petroleum prices stabilizing in the international market, Pakistan’s import of petroleum has sharply increased over the year. The import of petroleum
products, which mainly includes refined petroleum, has gone up the most. This is partly due to the introduction of higher octane rating fuel in the country
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as well as increased usage. Pakistan’s local oil refineries lack the capacity to meet domestic demand leading to imports of large quantities of refined
petroleum products.
The import volume of crude petroleum has gone up by 37% from 5.93 million metric tons to 8.12 million metric tons. On the other hand, the volume of
petroleum products has gone up by 46.12% from 10.12 million metric tons to 14.80 million metric tons.
Moreover, LNG imports have more than doubled during the year. Pakistan’s indigenous gas reserves are depleting due to which reliance on imported LNG
has increased. Added to it, LNG is also being widely used in the area of power generation which has further increased its demand.
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Imports of Chemicals
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
Imports of Agricultural & Other Chemicals 7,584,454,000 14.30 7,225,953,000 16.17 4.96
Milk, Cream & Milk Food 258,533,000 0.49 278,797,000 0.62 -7.27
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Imports of Metal Group
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
26
Imports of Transport Group
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
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Exports
Pakistan’s aggregate exports have been on a continuous decline. In the year 20163, total exports fell by around 7% over 2015. Textile articles and cotton
exports are the major revenue earners which have remained more or less stagnant over the past 5 years while exports of non-textile commodities have
significantly reduced.
FY 2016-2017 FY 2015-2016
HS Code
Serial No. Description Export Value Export Value % Change
(2 Digit) % of Exports % of Exports
(‘000 US$) (‘000 US$)
30
Exports of Textiles Group
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
Art, Silk & Synthetic Textile 204,272,000 1.00 287,894,000 1.39 -29.05
31
Exports of Food Group
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
32
Exports of Miscellaneous Items
FY 2016-2017 FY 2015-2016
PARTICULARS % Change
US$ % Share US$ % Share
Surgical Goods & Medical Equipment 339,019,000 1.66 358,768,000 1.73 -5.50
34
1.60%
Vietnam 8
mes since ‘98
1.40% 1.35%
1.20%
1.00%
BD 40%
BD 140%
0.80% up since
up since
‘98
‘98
0.60%
0.48%
0.40%
0.24%
0.16% 0.17% 0.15% 0.14%
0.20%
0.10% 0.13%
0.00%
1998 2010 2016
The chart above shows Pakistan’s export performance over the years relative to peer countries. While Pakistan’s share in world exports has marginally
35
Over the past 19 years, Pakistan’s export volume has grown 2.4 times, in the same time period, Bangladesh has increased its exports by 7.3 times and
Vietnam by an impressive and significant 24.0 time.
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Pakistan’s Export Concentration Index
The figure below shows Pakistan’s score on the Export Concentration Index versus that for India, Bangladesh and Vietnam. Export Concentration Index
is calculated as a sum of squared shares of products constituting a country’s exports. It ranges from 0 to 1, where 0 depicts perfect diversification and 1
shows that the exports are concentrated on a single product.
Industrial Sector
20.9 29.0 40.3
(% of GDP)
Manufacturing Industry
13.5 16.6 18.1
(% of GDP)
The industrial sector typically includes manufacturing, construction, mining & quarrying and electricity, gas, water supply & other utility services. In
developing countries, manufacturing is a major contributor to GDP. However, it can be seen that in the case of Pakistan, the share of industries on the
whole, and manufacturing particularly are both lower than that for India and Indonesia. Both these countries are economically stronger than Pakistan.
There has been a reversal of industrialization, or deindustrialization, in Pakistan over the years.
Deindustrialization in Pakistan’s case can be attributed to multiple factors including energy shortages, rising cost of energy, poorly negotiated FTAs which
have hurt local industry, massive smuggling, under-invoicing, dumping and misuse of the Afghan Transit Trade coupled with a huge informal sector
adding to the pressure on the organized domestic manufacturing sector. Because of short-sighted policies, many commodities are exported without much
value addition principally to Pakistan’s competitor countries who then use Pakistan’s raw materials to compete with Pakistan’s exporters in international
markets. In the absence of intervention by the Government, Pakistan is slowly but surely turning into a nation of traders.
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Pakistan Deindustrializing Prematurely
The industrial sector plays a pivotal role in the development of countries; growth in this sector has been the main contributor of development for most
advanced nations. Premature deindustrialization is when economies tend to move away from the industrial sector on relatively lower levels of income.
Studies show that manufacturing employment has a positive correlation with the richness of an economy.
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Pakistan’s Free Trade Agreements
A Free Trade Agreement (FTA) is an agreement between two or more countries to minimize tariffs, quotas and to provide preferential tariffs on most, if
not all, goods and services traded between them. An FTA generally starts off with a reduction in tariffs before eventually eliminating them in a typical
period of 5-10 years.
Ideally, an FTA leverages relative comparative advantage in each other’s value chain and obtains preferential tariff access vs. non-FTA/other FTA partners.
It enhances value-added and employment generating exports and skews import of raw materials and intermediate goods to add value locally. An FTA
should move the trade balance positively with the world, if not with a certain partner. It should strengthen regional connectivity and eventually evolve the
partnership into a conduit to third countries.
Pakistan has signed three major FTAs and three major Preferential Trade Agreements (PTAs), with another 10 in various stages of negotiations. The
FTAs in place are with China, Malaysia and Sri Lanka while the PTAs are with Indonesia, Iran and Mauritius. However, none of the trade agreements
that Pakistan has signed has benefited the country except in the case of Sri Lanka. On the contrary, the poorly negotiated FTA’s have hurt local industry.
There has been an influx of cheap goods from partner countries which has impacted domestic manufacturing while Pakistan has not been able to tap into
the partner country’s markets. Finally, under-invoicing and misdeclaration of import consignments to take advantage of tariff concessions has further
undermined local manufacturing.
The following table depicts the impact of the FTAs and PTAs on the external account and as a consequence on domestic industry. It also shows the
difference in trade figures for Pakistan and the partner countries.
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Overview of Pakistan’s Trade Agreements
Pakistan's Exports Pakistan's Trade
Pakistan's Exports in Pakistan's Trade Variance in Reported
Reporting in the Year of Balance in the Year
Country Year Implemented 2016 Balance in 2016 Trade Figures 2016
Country Implementation of Implementation
(US$ Million) (US$ Million) (US$ Million)
(US$ Million) (US$ Million)
Pakistan 154 94 237 161
Sri Lanka 2005 78
Sri Lanka 116 73 304 238
Pakistan 36 35 17 13
Mauritius 2007 4
Mauritius 39 39 18 17
Note: Iran has not reported its trade figures for 2016, therefore Pakistan’s reported figures have been used. 41
GDP Growth - Consumption Driven with Low Levels of Investment
% of GDP
Particulars
Pakistan Sri Lanka Indonesia India Bangladesh
Pakistan, over the years, has become a consumption driven economy. Private and government consumption levels are well above regional peers. In an
environment of excessive consumption, there remains little room for savings and investment. Economists suggest that there exists a direct relationship
between savings and investment, with higher levels of consumption, savings are reduced and investments are minimal.
On the debt side, private sector debt as a percentage of GDP stands at 14% which is well below regional competitors. One of the reasons for low private
sector debt is the crowding out of the private sector from the debt market by the government. Banks prefer investing in government debt due to the low
risk attached with sovereign debt as compared to the relatively riskier private debt. Moreover, the informal sector is poorly documented which constraints
banks from lending to it.
Finally, the policy environment in the country is not investment friendly either. Inconsistent government policies and a fragile socio-political environment
hampers investor to make long-term investments.
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Private Consumption as a Percentage of GDP
85
81.2 80.1
80
76.2
75
70 68.2
%
64.4
65 61.8
59.4
60
55.9
55
50
1991 2001 2011 2016
Pakistan India
Private Consumption as a percentage of GDP has been increasing over time. As seen in the figure above, in the past 25 years, Pakistan’s private consumption
has been on a rise which comes at the expense of savings. Savings in an economy determine the level of investments, therefore with lower savings, the
investments in an economy go down.
Comparing Pakistan’s savings rate with India, it can be seen that India’s consumption levels have always been lower than that of Pakistan. In 1991, the
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Gross Capital Formation as a Percentage of GDP
45
40.7
40 38.6
35 32.9
30.37
30 27.04
25
19.08
20 17.2
15.8 15.47 15.2
15
10
2000 2005 2010 2015 2016
Pakistan India
Gross Capital Formation (GCF) in an economy measures the net increase in physical assets in a period. As evident from the figure above, Pakistan’s GCF
has been on a decline since 2005. This is in line with the increase in level of consumption, an increase in national consumption level has translated into
lower investments. On the other hand, India’s GCF after having peaked at 41.0% in 2010 has been on a decline, it is however much higher than Pakistan’s.
Investments, or Gross Capital Formation, in an economy has a multiplier effect on national income. Therefore, it is important that there is sufficient capital
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Growing Middle Class
Living Standards Measure (LSM) is an index which was developed to segment the population based on their consumption and spending on multiple
commodities and services. Income is not used in this measure to classify segments of the population. Twenty-nine variables are used in this measure
including consumer durables such as ownership of a freezer, microwave oven, dishwasher, television, cell phone, air conditioners, cars, bikes, etc. Added to
it, services such as running water, electricity, home security services are also included in this composite index. The population is divided into 10 segments
where LSM 5 and above are considered middle and upper class.
As per the LSM measure, 70 million people in Pakistan can be classified as middle class and this number is expected to continue to grow by almost 2
million per annum. Pakistan’s middle class has been growing rapidly coupled with increasing urbanization. This, in turn has, fuelled consumerism. This
combination of population growth coupled with rapid urbanization helps explain to some extent the high rate of private consumption in Pakistan where
people, in order to improve their living standards, spend more on consumer durables as opposed to saving for the future. The penetration of durables in
Pakistan has increased manifolds post 2000 and this penetration has clearly outpaced India’s.
The following figure depicts the percentage of population in lower and middle-income groups in India and Pakistan:
The figure above shows the penetration rate of consumer durables amongst households in the two countries as of 2014. As evident, with the exception of
Televisions, a higher percentage of Pakistani households have access to all other consumer durables as compared to India.
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Low Agricultural Productivity
Agriculture is an important sector in Pakistan’s economy. As of 2016,
Pakistan Crop Yield as a % of Global Best
it had a 19.5% share in the country’s GDP. The agricultural produce,
PAKISTAN WORLD’S BEST PAKISTAN AS A % particularly cotton, is an input to Pakistan’s main manufacturing
CROP
(Tons/Hectare) (Tons/Hectare) OF BEST
industry. Low agricultural output translates into low industrial
Wheat 3.1 8.1 (France) 38% output and higher costs.
Low productivity also acts as a major barrier to Pakistan becoming a major player in the world processed food industry.
Agricultural sector is important to Pakistan’s economy as it employs around 42% of the labour force. A thriving and more efficient agricultural sector will
help elevate the living conditions of the large number of people it employs and also improve the competitiveness of industry.
Textile products are the biggest export revenue earner for Pakistan and one of the core industries in the country. Cotton, being the input commodity to
the industry, holds immense importance. Pakistan’s cotton output has been stagnant for at least the last 16 years while India’s cotton output has more than
doubled in the same time frame. Low cotton output can be accredited to poor quality of seeds, weak irrigation system and inefficient soil management.
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Low yield of cotton adds to the pressure on the already struggling textile industry as it increases their cost of production. In order for the textile industry
to remain competitive internationally, steps must be taken to increase cotton yields.
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An Overvalued Currency
Pak Rs. Vs. Destination Market Currencies over the last 5 years
The Pakistani Rupee remained
unchanged against US Dollar
throughout 2016.
Historically there has been, on an
average, a 5% depreciation per annum
in the value of the Rupee against the
US Dollar, and this had been the trend
during the past 20 years at least.
The Interest Rate Differential Model
and the Inflation Rate Differential
model suggest that PKR should have
witnessed a 7-8% correction against
Pak Rs. Vs Key Textile Competitor Sourcing Currencies over the last 5 years US$ in 2016.
Effective use of the exchange rate tool
allows countries to promote exports.
However, in the case of Pakistan,
the currency became relatively
expensive making Pakistan’s exports
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Higher Input Cost for Export Industries
There exists significant input cost disparity between Pakistan and peer textile exporting countries.
As can be seen from the table above, all the four countries under consideration have lower input costs than Pakistan.
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A Tax Regime Skewed in Favour of the Undocumented Sector
Corporate Tax % VAT/GST %
Singapore 17% 7%
As evident from the table above, corporate tax rates in Pakistan are highest amongst the 5 economies under consideration including Singapore. In
addition, the high incidence of indirect taxes in Pakistan adds to the cost of production for the formal sector and makes tax evasion lucrative. More than
70% of Pakistan’s tax revenues are raised through indirect taxes, however indirect taxes are an inefficient means of taxation as they are regressive in nature.
Pakistan’s corporate tax rates are highest in the region and also much higher than the global average. Shareholders of companies pay an effective 47% in
income tax which is unreasonable and counterproductive for corporatization. Such high taxes impede corporatization and incentivizes businesses to stay
outside the tax net and evade taxes.
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% of GDP % Tax Revenue
Manufacturing sector, at 13.5% of the GDP, contributes a disproportionately high share of the tax burden at 58% of the tax collection. The retail and
wholesale sectors, which contribute 18.5% to the GDP make a contribution of 1% to tax collection.
Industry cannot be expected to thrive and grow under the current tax structure. The FBR will need to increase the tax base if the government wants
industry to thrive in Pakistan. In addition, the tax system is complicated and complex with up to 47 different types of levies imposed on the tax paying
entities in the major cities of the country. This only adds to the cost of doing business for companies.
Withholding taxes on non-filers were introduced in Pakistan with the aim of bringing the non-tax compliant individuals and entities into the tax net.
However, it has now become more of an additional means of raising tax revenue for the government rather than identifying the non-tax payers and
penalizing them.
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PBC’s Position on CPEC
The PBC welcomes the China Pakistan Economic Corridor (CPEC) initiative of the Chinese and Pakistani governments. Chinese, or for that matter
FDI from any country, should be viewed as a positive development given Pakistan’s current economic circumstances. It brings the desperately needed
investment into the key areas of energy and infrastructure which will help domestic industry grow.
Collaboration with China on such a level creates an opportunity for Pakistani businesses to partner with Chinese firms particularly in the area of textile
manufacturing. China is the world’s largest apparel manufacturer, however with rising labour costs Chinese labour-intensive jobs will have to be relocated
in order to retain global competitiveness. Pakistan has the opportunity to capitalize on this and to integrate its local industry into the value chains of the
Chinese apparel firms. It is expected that as a result of wage increase in China, up to twenty million jobs will be displaced in the coming years. If Pakistan
is able to divert a part of the displaced jobs into the country, it could be beneficial to the domestic economy.
However, PBC would like a more critical debate on the impact of CPEC on domestic industry and the economy as a whole in the long-run. Currently, there
is a lack of transparency which is creating doubts and concerns. Under CPEC, concessions are being given to Chinese businesses which may potentially
undermine domestic industry. Tax exemptions have been offered to businesses which will be established in the Special Economic Zones (SEZs) as part of
CPEC and profits have been guaranteed to Chinese businesses in the energy sector. This may affect the domestic manufacturing industry as they may lose
their market share to the facilitated foreign investors. PBC identifies three main imperatives for sustainable growth; jobs, taxes and value-added exports.
The likely impact of investments under CPEC on these areas needs to be clarified. PBC suggests that the government creates more transparency in this
regard.
Moreover, the potential impact of CPEC on the external accounts needs to be clarified. Most of the investments in the program are debt investments which
will eventually have to be repaid in addition to the profits that will be repatriated to the host country. This will put a lot of added pressure on the already
distressed Balance of Payment (BoP). Unless there is a sharp increase in exports, the external account may worsen. It is important that the government and
relevant institutions carry out a study to evaluate the impact on Pakistan’s current account and BoP in the next 5 years at least.
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1- Pakistan Sri Lanka FTA
- Pakistan’s first Free Trade Agreement was with Sri Lanka.
- Total trade between the two countries was $314 million in 2016.
- As part of the FTA, Pakistan got market access at zero duty for 102 products including agricultural goods, rice (with quantity
restrictions) and engineering goods.
- On the other hand, Sri Lanka got access for 206 products at zero duty including tea (with quantity restrictions), rubber and coconut.
- In April 2014, further tariff concessions were given to Sri Lanka on 993 items. This included tariff concession of 50% on the import of
herbal cosmetics marketed as Sri Lankan brands, 20% on the import of tiles, cubes and similar articles and 100% tariff concession on
the import of black and green tea.
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1.2-Pakistan
1.2- Pakistan–– Sri
Sri Lanka
LankaTrade Trends
Trade Trends
Million US$
250
200
150
100
77
50
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sri lanka's Share in Pakistan's World Trade Pakistan's Share in Sri Lanka's World Trade
1.60 2.50
1.40
1.16 2.00
1.20
1.00 1.50 1.22
% Share
% Share
0.80
1.00
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1.3- Comparison of Pre- and Post-FTA Trade Figures
2016 2015
Imports
(US$ Million) (US$ Million)
Vegetable plaiting materials 17 18.6
Oil seeds and oleaginous fruits 2 10.7
Edible fruit and nuts 7.3 10.1
Wood and articles of wood 8.7 9.3
Rubber and articles 6.3 8.4
2016 2015
Exports
(US$ Million) (US$ Million)
Cotton 89.9 74.2
Salt; sulphur; earths and stone 30.6 35
Pharmaceutical products 22.1 22.2
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1.4- Brief Analysis
• Pakistan has always had a trade surplus with Sri Lanka.
• The FTA became operational in 2005, and the surplus has increased steadily from $94.5M to $160.5M in 2016.
• In the same time period, exports grew from $153.7M to $237.2M while imports grew from $59.2M to $76.7M.
• Pakistan’s exports to Sri Lanka as a ratio of its total exports to the world has had an increasing trend, however the ratio of imports from Pakistan as a
ratio of total imports by Sri Lanka has gone down.
• This could be explained by the overall decline in Pakistan’s exports to the world over the past few years, and is possibly also as a reflection of how Sri
Lankan imports from the world have increased.
• Pakistan’s Imports from Sri Lanka relative to its total imports from the world has had a slow declining trend, and the same trend can be observed from
the Sri Lankan perspective.
• While imports from Sri Lanka have increased over the years, Pakistan’s imports from the world have increased at a much faster rate.
• The major exports to Sri Lanka, cotton and salt have been decreasing since 2013.
• Total imports by Pakistan from Sri Lanka have decreased YoY, however the top 5 imports have increased.
• Pakistani imports of oil seeds and oleaginous fruits have witnessed a fivefold increase compared to 2015.
• “Coffee, tea, mate and spices” which was the most imported category in 2015 fell to number 7 in 2016, worth $3 million down from $18.5 million in
2015.
• 1st Phase of the FTA completed in 2012 – negotiations for 2nd Phase are currently in progress
• Bilateral trade between Pakistan and China totalled $15.3 billion in 2016 as per Pakistan’s reported data. Bilateral trade between
Pakistan and China was worth $19.2 billion as per Chinese reported data
• Pakistan got market access to China at zero duty for cotton fabrics, bed linen and other home textiles, marble and tiles, leather articles,
sports goods, iron & steel products, industrial alcohol and engineering goods.
• China was granted zero duty market access on commodities required for industrial growth such as industrial machinery, organic and
inorganic chemicals and raw materials for various industries including intermediary goods for the engineering sector.
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62
2.1- Comparison of Key Economic Indicators
Pakistan China
2016 2015 2016 2015
Million US$
14,000
12,000
10,000
8,000
6,000
4,000
1,591
2,000
-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
China's Share in Pakistan's World Trade Pakistan's Share in China's World Trade
35 0.7
29.11
30 0.6
25 0.65
0.5
% Share
20
% Share
0.4
The Pakistan Business Council
15
0.3
10 7.75
0.2
5 0.10
0 0.1
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 -
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Imports from China (% of Total Imports)
Exports to China (% of Total Exports) Imports from PK (% of Total Imports) Exports to PK (% of Total Exports)
64
2.3- Comparison of Pre- and Post-FTA Trade Figures
2016 2015
Imports
(US$ Million) (US$ Million)
Electrical machinery and
3,363.7 2,566
equipment
Machinery, mechanical
2,940.4 1,666.3
appliances
Iron and steel 1,061.4 1,015.5
Organic chemicals 635.6 570.4
Man-made filaments 556.3 509.6
2016 2015
Exports
(US$ Million) (US$ Million)
Cotton 968.2 1261.7
Cereals 220.8 167.1
Ores, slag and ash 77.7 70.6
Fish and other aquatic
65
2.4- FTA Concessions Utilization
5%
43%
57%
95%
Although China has granted a higher number of concessional lines for Pakistani products, Pakistan has not been able to make use of the same. A mere
5% of the concessional
Although linesahave
China has granted been
higher utilized
number out of the total
of concessional linesavailable 7,550products,
for Pakistani lines. On the other
Pakistan hashand, Pakistan
not been able tooffered 6,830
make use concessional
of the lines
same. A mere 5%ofofwhich
China has been using
the concessional lines 57%.
have been utilized out of the total available 7,550 lines. On the other hand, Pakistan offered 6,830 concessional lines of which China
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67
3- Pakistan – Malaysia FTA
- Early Harvest Program became operational from January, 2006.
- The Free Trade Agreement was signed in November 2007 and came into force in January 2008.
- Pakistan was allowed duty free market access for cotton yarns and fabrics, jewellery and fruits.
- Malaysia was granted preferential market access for palm oil & basic raw materials for industry, intermediate goods and machinery.
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68
3.1- Comparison of Key Economic Indicators
Pakistan Malaysia
2016 2015 2016 2015
70
3.3- Comparison of Pre- and Post-FTA Trade Figures
2016 2015
Imports
(US$ Million) (US$ Million)
Animal or vegetable fats and
385.7 294.6
oils
Mineral fuels, oils and products 96.3 111.4
Machinery, mechanical
65.5 61.5
appliances
Organic chemicals 39.5 42.5
Plastics and articles thereof 39.2 39
2016 2015
Exports
(US$ Million) (US$ Million)
Cereals 50.2 73.1
Made-up textile articles 20.2 16.6
Fish and aquatic invertebrates 12.1 12.2
71
3.4- Brief Analysis
- As of 2016, the export and import figures with Malaysia stand at almost the same level as 2006 before the FTA became operational.
- Bilateral trade between Pakistan and Malaysia has decreased since 2011.
- The imports peaked in 2011 at $2.73 billion against import of just $0.94 billion in 2016.
- The drop in subsequent years reflects the signing of a PTA with Indonesia which diverted Palm Oil imports from Malaysia to Indonesia
- The exports to Malaysia never took off. There has been relatively little increase in exports.
- Malaysia is a very small trading partner for Pakistan. Pakistan’s exports to Malaysia make up just 0.74% of Pakistan’s total exports. On the other
hand, Pakistan’s share in Malaysia’s trade is even smaller.
- Animal and vegetable fat oils were the most imported commodity in 2011. In 2016 as well, this was the biggest import from Malaysia; however, the
volume of imports fell from $2.2 billion to $386 million.
- Cereals have been the biggest export to Malaysia, however trade levels for the product have been fluctuating. In 2016, a YoY fall can be observed
for cereals.
- Cotton exports to Malaysia have gradually declined and in 2016 it was the 4th largest export by Pakistan to Malaysia.
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72
4- Pakistan – Indonesia PTA
- Pakistan’s Preferential Trade Agreement with Indonesia became operational in September 2013.
- Indonesia agreed to offer market access to Pakistan on 216 tariff lines on preferential tariffs and for oranges at zero duty.
- Pakistan has preferential access for fresh fruits, cotton yarn & fabrics, ready-made garments, fans, sports goods, leather goods and
industrial products.
- Pakistan extended a 15% Margin of preference (MoP) over the standard MFN tariff rates to Indonesian palm oil products, similar to
what was extended to Malaysian palm oil products under the Pakistan – Malaysia FTA.
74
4.2-
4.2-Pakistan
Pakistan ––Indonesia
Indonesia Trade
Trade Trends
Trends
Pakistan - Indonesia Trade Overview
2.5
Billion US$
2.09
2.0
1.5
1.0
0.5
[VALUE]
0.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia's Share in Pakistan's World Trade Pakistan's Share in Indonesia's World Trade
5 1.6
1.4
4 4.44 1.45
1.2
3 1.0
% Share
% Share
2016 2015
Exports
(US$ Million) (US$ Million)
Cereals 41.2 51.8
Cotton 30.6 50.5
Paper and paperboard; articles 15.6 0.4
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76
4.4- Brief Analysis
• The trade deficit with Indonesia has widened, particularly after the implementation of the PTA.
• Imports from Indonesia have almost doubled since 2013, while exports on the other hand have marginally decreased.
• Indonesia has been an important import partner of Pakistan, with more than 4% of Pakistan’s total imports coming from that country. Pakistan’s
share in Indonesia’s total trade has also been increasing.
• Indonesia is the largest producer, and therefore the largest exporter of palm oil.
• “Animal, vegetable fats and oils” is the biggest import from Indonesia. Palm oil makes up about 99% of this category and 65% of Pakistan’s total
imports from Indonesia.
• Cotton and Cereals are the main exports of Pakistan to Indonesia; however, there has been a decline in the export value for both the commodities.
• There has been a noticeable increase in the exports of “Paperboard articles” to Indonesia.
• The paperboard articles with HS-06 label of 481159 carrying title “Paper & paperboard, coated/impregnated/covered with plastics” was the main
export in the category.
• The Pakistani cabinet ratified the agreement on 30th October 2007 and it became operational on 30th November 2007.
• Pakistan has preferential tariff access for cereals, microwave ovens, fresh fruits, plants, carpets and other floor coverings, made-up
textile articles and leather goods, tobacco items, salt and limestone and cement.
• On the other hand, Pakistan has extended about 25% Margin of Preference (MoP) over the standard MFN tariff rate to Mauritian textile
and clothing items. Other items on the preferential list include plants, black tea, fish such as tuna, mixes and doughs for the preparation
of bakers’ wares, and organic surface-active products and preparations for washing skin.
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78
5.1- Comparison of Key Economic Indicators
Pakistan Mauritius
2016 2015 2016 2015
Million US$
60
50
40
30
17.17
20
10
- 4.20
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mauritius' Share in Pakistan's World Trade Pakistan's Share in Mauritius' World Trade
0.30 2.50
0.25
2.00
0.20
1.50
% Share
% Share
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0.15
0.08 1.00
0.10
0.50
0.37
0.05
0.01
- - 0.19
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Imports from Mauritius (% of Total Imports)
Exports to Mauritius (% of Total Exports) Imports from PK (% of Total Imports) Exports to PK (% of Total Exports)
80
5.3- Comparison of Pre- and Post-PTA Import Figures
2016 2015
Imports
(US$ Million) (US$ Million)
Ships, boats and floating
2.4 34.8
structures
Soap and washing preparations 1.0 0.64
Iron and steel 0.61 1.1
Pulp of wood or other fibrous
0.047 0.1
material
Made-up textile articles 0.041 0.008
2016 2015
Exports
(US$ Million) (US$ Million)
Cereals 7.50 7.30
Cotton 3.30 7.50
Made-up textile articles 0.93 1.20
Raw hides and skins and leather 0.84 0.65
81
5.4- Brief Analysis
• Pakistan has a trade surplus with Mauritius. In 2016 the surplus amounted to almost $13 million.
• In 2015, there was a trade deficit with Mauritius but it was due to unusally high imports of “Ships, boats and floating structures”.
• Mauritius is a very small economy, and therefore not a very prominent trading partner of Pakistan.
• Since the implementation of the PTA in 2007, exports have had a declining trend, as can be seen from exports to Mauritius as a share in Pakistan’s
total exports.
• On the other hand, imports from Mauritius have picked up slightly.
• Ships, boats and floating structures was the most imported commodity, however there was a surge in the import of this item between the years
2011-2015 and then imports dropped again in 2016.
• On the exports side, cotton exports dropped YoY by almost 56% making it the second biggest export as compared to the leading export in 2015.
• The exports of cereals to Mauritius have been fluctuating; but they have been on a negative trend since 2007.
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82
Pixabay
SECTION IV
Export Potential With Selected Trading Partners
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84
1- The European Union
• The European Union consists of 28-member countries.
• Of this, total Pakistani exports to the EU were $6.92 billion. Clothing and textiles exports amounted to more than 78% of total exports
to the EU.
• If considered as a single market, EU is Pakistan’s most important export market accounting for 33.7% of the country’s exports to the
world.
• Despite GSP Plus status since 2014, Pakistan has been unable to improve its penetration into the European market while other competitors
increased their share in EU trade. For instance, Bangladesh’s exports to the EU have risen by 200% from $7.65 billion in 2006 to $22.87
billion in 2016. On the contrary, Pakistan in the same time period increased its exports by around 50% in 11 years.
• The GSP+ status allows 70% of Pakistan’s exports to enter EU market at preferential rates while 20% are at zero tariff.
Other than Sri Lanka, Pakistan’s export competitors which all started from a comparable base have seen large increases in their exports to the EU in the
The Pakistan Business Council
last 15 years.
India and Vietnam have been able to increase their exports to the bloc the most. Vietnam has increased its exports by more than 6 times since 2003, and
India by almost 2.4 times. Pakistan on the other hand has not been able to achieve similar growth numbers.
Since 2013, a 10% growth in exports has been achieved by Pakistan as compared a 27% growth by Bangladesh.
86
1.2- Share of Selected Countries in EU’s Trade with the World
88
1.4- Benefits of GSP+ to Pakistan
• The Common Customs Tariff ad valorem duties on majority of products exported to the EU by Pakistan have been suspended or reduced.
• In the textiles sector, the major export sector of Pakistan, GSP+ status has resulted in a preferential margin between GSP and GSP+ of 5% for cotton
and fabrics, and 9% for apparel and made- up textiles.
Example:
COMMODITY EU-28 TARIFF GENERAL TARIFF GSP TARIFF GSP+ TARIFF LDC TARIFF
603210
Bed Linen, knitted or crocheted
12% 20% 9.6% 0% 0%
(Designated ‘Sensitive Item’ by the
EU)
Effectively ratify and implement 27 conventions pertaining to the areas of human Pakistan may face difficulties in ratifying and implementing certain laws particularly in
and labour rights, environment and good governance. the areas of human and labour rights due to devolution of these to the provincial level.
Accept biennial monitoring (every two years) and reporting requirements imposed Pakistan lacks the capacity for monitoring and reporting, which needs to be developed
by each convention. in order to retain the GSP+ status.
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90
2- Central Asian Republics
• The land-locked Central Asian Republics (CAR) consist of five countries of the former Soviet Union. These are Kazakhstan, Kyrgyzstan,
Tajikistan, Turkmenistan and Uzbekistan.
• Pakistan can access CAR via three land routes; Afghanistan, Iran or China.
• In July 2012, Pakistan and Afghanistan agreed to extend Afghanistan Pakistan Transit Trade Agreement (APTTA) to Tajikistan.
• In 2016, Pakistan’s trade with CAR accounted for a mere 0.13% of the country’s trade with the world.
• Trade with CAR is faced with numerous impediments that include, but are not limited to, regional insecurity, terrorism, narcotics
production trafficking, poor infrastructure and the resultant cost due to weak legal and regulatory systems, restrictive trade policies,
poor border management, lack of banking arrangements and the absence of effective transport facilities.
• The CAR markets are mainly dominated by Chinese, Indian, Iranian, Russian and Turkish products.
• Kazakhstan and Uzbekistan are the larger of the five countries in terms of both population and the size of their economies.
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• While Kyrgyzstan and Turkmenistan are not big enough in terms of geographical size and population base, the purchasing power of the citizens is
relatively high.
• However, it should be taken into account that the cumulative population of CAR is barely 36% of Pakistan’s population and the total size of the
economies of the five countries combined is equivalent to 88% of Pakistan’s economy.
• The PBC in 2017 has done a Central Asia Country Series in which the ‘5’ Central Asian countries have been covered in greater detail.
92
SECTION V
Regional Trade
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94
1- Trade Prospects within the Region
• The SAARC region conducted world trade of around $810 billion in 2016
• Despite this, a mere 5.6% or $45.1 billion of the total SAARC trade was between SAARC member countries; significantly lower than
other regional trade blocs.
• The primary reason for this under-utilization are the still active historical political disputes and the non-tariff barriers which hamper
trade between the two largest economies in the region; Pakistan and India.
• If trade between the two countries is normalized in an equitable and acceptable manner, it could result in a significant increase in trade
volumes which would in turn benefit the economies and consumers in both the countries.
25.0
22.8
20.0
% Share
15.0
14.3
10.0
5.0 5.6
-
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
The Pakistan Business Council
Inter-ASEAN Trade as a % of Its World Trade Inter-SAARC Trade as a % of Its World Trade Inter-MERCOSUR Trade as a % of Its World Trade
96
1.2- Pakistan – India Trade as a Percentage of their Inter-SAARC Trade
Pakistan’s trade with India as a % of its SAARC trade is almost 42% depicting the dominance of India in the SAARC region and Pakistan’s limited trade
with other SAARC countries.
On the other hand, Pakistan has an almost 11% share in India’s SAARC trade which shows the relatively weak position that Pakistan has in India’s trade
97
2- Pakistan – India Bilateral Trade
In 2016, bilateral trade between Pakistan and India was almost $2 billion, with Pakistan having a trade deficit of around $1.3 billion. However, this deficit
has been narrowing over the years.
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98
2.1- Pakistan – India Bilateral Trade’s Share in Their World Trade
Both India and Pakistan have low trade activity with each other, with Pakistan constituting a meagre 0.33% share in India’s world trade while India holds
99
2.2- Pakistan’s Top 5 Imports from India
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Cotton imports have been declining since they peaked in 2013; in 2016, they fell by almost 28% over 2013. However, despite the fall in its imports, it still
continues to be the top import of Pakistan from India. On the other hand, imports of organic chemicals, edible vegetables and dyeing extracts have picked
up relative to 2015.
100
2.3- Pakistan’s Top 5 Exports to India
101
2.4- Trade Potential between Pakistan and India
Pakistan’s Top 10 Potential Exports to India
102
Pakistan’s Top 10 Potential Imports from India
103
2.5- PBC’s Position on Trade with India
The Pakistan Business Council supports trade with India as it believes that regional trade promises to be the next growth opportunity for Pakistan. PBC
however would like the Government of Pakistan to ensure that Pakistani businesses have a level playing field in India, especially in areas where Pakistan
has a competitive advantage, for example cement, textiles and some agricultural products.
Since 2013, the Pakistan Business Council has been tracking trade patterns between Pakistan and India and has noted with concern that though India
granted Pakistan MFN status in 1996, there has been no significant increase in Pakistan’s exports to India. One of the major reasons identified by the PBC
is the web of elaborate Non-Tariff Barriers (NTBs) that India has in place for defending its domestic industry.
PBC was officially notified as the Secretariat in Pakistan for the Pakistan India Joint Business Forum (PIJBF) in June 2013. The PIJBF, setup by the
governments of Pakistan and India, comprises of 15 prominent businessmen from each country. The PIJBF has met 6 times since its inception, the last
time in Delhi in 2015, and has formed sector specific task forces to address the impediments in India Pakistan trade normalization. Progress has mostly
been slow reflecting perhaps the overall lack of improvement in India Pakistan relations.
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3- Trade with Afghanistan
• The first Afghan Transit Trade Agreement (ATTA) came into force on March 02, 1965, essentially as a bilateral arrangement between Afghanistan
and Pakistan.
• Pakistan granted this transit facility to Afghanistan in line with its commitment to the UN Convention on law of the sea which makes special
provisions for granting landlocked countries access to international seas.
• Later, Afghan Pakistan Transit Trade Agreement (APTTA) superseded ATTA. It was signed on 28th July 2010 and became fully operational in June
2011.
• Under the APTTA, Afghan trucks are permitted to carry export goods to India till Wagah, and also to deliver and collect Afghan export and import
consignments from the ports of Karachi & Gawadar.
• Afghanistan and Pakistan have mutually agreed to boost trade to $5 billion in the coming years. Moreover, a revised draft of APTTA was to be
exchanged; however, no progress has been made on this front due to persistent border tensions between the two states.
• A Peshawar-Kabul motorway has been planned which aims at boosting trade ties between the two neighbours and aims to increase people-to-
people interactions. Although no timeline or terms have been formalised regarding this, but when executed it will enhance economic integration.
• Pakistan and Afghanistan have in principal agreed that provisions of TIR Convention, a Convention on International Transport of Goods under
cover of TIR Carnets, will be adopted and implemented to the maximum extent. The Convention provides that Customs secure containers and
vehicles to be used for transport of goods. An internationally valid guarantee is used to cover risk of duties and taxes that are expected to occur
throughout the journey.
• Pakistan Railways is developing Azakhel Dry Port in Nowshera which is expected to be completed and handed over to Pakistan Customs by
6
in 2011, exports have dropped to around $1.4
4 billion while imports have marginally picked
2
up in the same time period. The bilateral
0.79
trade in 2016 was $1.7 billion while the trade
0
surplus has reduced to $1 billion from $2.5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
billion in 2011.
% Share in Total Exports from World % Share in Total Imports from World
Afghanistan is an important trading partner
for Pakistan, where 6.7% of last year’s exports
of Pakistan went to the bordering country,
Pakistan - Afghanistan Trade Overview despite the decline. It should be taken into
3,000 2,660 account that a lot of trade that happens
Million US$
In 2016 the imports of fruits reached their historical high at $131 million, grapes and apples were the most imported fruits.
107
3.3- Pakistan’s Top 5 Exports to Afghanistan
Across all 5 categories of exports, a decline can be observed. The borders were closed for around 2 months in 2016 which hampered Pakistan’s exports.
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These top 5 categories cumulatively made up around 50% of Pakistan’s total exports to Afghanistan which shows their relative importance.
Afghanistan has the potential to grow wheat and meet its domestic demand but the poor quality of seeds, an outdated irrigation system and low precipitation
impedes production due to which it has to import flour. Kazakhstan exported around $286 million worth of wheat to Afghanistan while Pakistan exported
wheat worth $130 million in 2016.
108
4- Trade with Iran
• Pakistan’s trade with Iran has witnessed an overall declining trend over the past 10 years at least.
• Exports have reduced from a high of $426 million in 2008 to less than $36 million in 2016.
• On the other hand, Pakistan’s imports from Iran have been volatile. The imports peaked in 2009 to almost a billion dollars, but as of 2016 they stood
at $323 million.
• Pakistan has a Preferential Trade Agreement with Iran which became operational in September 2006.
• Under the PTA, Iran gave concessions on 309 tariff lines, while Pakistan offered concession to Iran on 338 tariff lines.
• Until 2010, crude oil was the biggest import from Iran; however, Pakistan minimized its import of crude oil from the country post 2010.
• Milled rice has been the biggest export of Pakistan to Iran until 2012, however, the import volume has been reducing YoY.
• The overall import of milled rice, HS-100630, by Iran has not shrunk, but imports from Pakistan have reduced drastically. Iran now buys rice from
India instead.
• Pakistan has historically not been a very important trading partner with Iran despite being neighbouring countries. The share of Pakistan in Iran’s
international trade was 0.60% in 2006 which has marginally reduced to 0.55% in 2016.
• Iran’s imports from the world reduced by almost 59% while imports from Pakistan reduced by more than 80% between 2006 and 2016.
The import of electrical energy has substantially risen over the past 5 years at least, replacing fuel as the most imported commodity from Iran. Electricity
111
4.3- Pakistan’s Top 5 Exports to Iran
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Until 2012, Pakistan’s biggest export to Iran was rice. However, rice exports shrunk after that reducing the overall exports of Pakistan to Iran. The exports
of Paper and paperboard with HS-06 code ‘481159’ picked up from 2013 onwards touching almost $19 million in 2016 which constituted around 53% of
Pakistan’s entire exports to Iran in the year.
112
4.4- The Decline of Pakistan’s Rice Exports to Iran
As can be seen from the figure above, Pakistan had a dominant share in Iran’s rice market; however, the share has sharply declined, particularly after 2008
when India’s rice penetrated into Iran’s market. In 2003, Pakistan’s rice exports to Iran constituted around 16.5% of Iran’s entire rice imports which steadily
increased until 2008, after which it dropped sharply to less than 1% in 2016. India, on the other hand, had negligible rice exports to Iran until 2007. In
Note: Iran’s rice import data for the years 2007, 2008 & 2009 are not available.
113
Pixabay
SECTION VI
Misreporting and Trade Data Discrepancy
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116
Comparison of Pakistan’s Reported Trade Figures Versus Figures Reported by
its Trading Partners for 2016
118
Pakistan – China Trade Figures Discrepancy
120
Synthetic Fibres & Garments Import from China
There is an urgent need for Pakistan to upgrade its reporting mechanism so as to curb the problem of misdeclaration of imports. The chart depicts vast
discrepancy in import figures. Pakistan’s reported imports of synthetic fibres from China are just 36% of the figures reported by China as exports to
Pakistan.
However, the difference has reduced in 2016. In 2015, the discrepancy was even higher. Pakistan’s reported figures were less than 23% of China’s reported
figures for synthetic fabric exports. While exports reported by China to Pakistan for synthetic fibres and garments have been reducing since 2014, imports
121
Pixabay
SECTION VII
Analysis of Production Data for Selected Industries
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124
1- Paper & Paperboard
Top 5 Paper & Paperboard Exporters to Pakistan in 2016
Exporting Country Value (US$) Share (%)
China 159,574,000 24.93
Sweden 95,265,000 14.89
Indonesia 92,107,000 14.39
Russian Federation 35,490,000 5.55
Japan 22,908,000 3.58
Tariffs 15.2 15.1 16.2 18 19 20.1 20.7 19.5 18 18 In 2016, domestic manufacturing increased by almost 12%
standing at 633,000 tonnes. On the other hand, the import
volume also went up by a significant 46% which can also be
noted in the total import value. The overall demand for paper
& paperboard went up by 27% in the year under observation.
SOURCE:
2009 9,306 107,390 12.30 Trade Data: United Nations Commodity Trade Statistics
2010 11,228 302,028 12.20 Database. [Product Code: HS 850140,850151-850153]
2011 10,695 410,965 12.40 Manufacturing Data: Pakistan Bureau of Statistics, Quantum
2012 7,857 645,769 12.30 Index of Large Scale Manufacturing Industries 2016
2013 8,075 998,250 10.70
Tariff Data: Federal Board of Revenue, Pakistan Customs
2014 9,764 99,829,095 10.35
Tariff 2016-2017
126 2015 8,321 647,265 10.35
2016 7,789 865,621 9.07
3- Tea
Top 5 Tea Exporters of Tea to Pakistan in 2016
Exporting Country Value (US$) Share (%)
Kenya 391,552,000 79.92
Rwanda 32,194,000 6.57
India 18,249,000 3.72
Burundi 12,576,000 2.57
Viet Nam 10,737,000 2.19
SOURCE:
SOURCE:
SOURCE:
The Pakistan Business Council
SOURCE:
SOURCE:
Trade Data: United Nations Commodity Trade Statistics
The Pakistan Business Council
Import of Ceramic Tiles has been on a rise since 2010 where the
imported quantities have outpaced domestic manufacturing.
However, in 2016 the trend has been reversed where the locally
manufactured ceramic tiles were greater in quantity than the
imports in terms of volume. A 25% increment in domestic
production was observed in 2016.
In terms of value, the imports stood at $174 million in 2016
against $141 million in 2015.
SOURCE:
SOURCE:
Trade Data: Pakistan Association of Automotive Parts &
The Pakistan Business Council
135
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