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Department: Karachi University Business School

Program: BS (BBA)
Semester: Spring 2021
Course: International Business
Course Instructor: Mr. Ishaq Shiekh
Topic: Trade Deficit and Exports of Pakistan
Submitted by: Syed Tayyab Shere
Seat Number: EBS19542072
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Trade deficit of Pakistan in last 5 years

Year Balance of Trade Percentage of

(Million Rupees) Deficit

2015-16 -2,494,075.7 11.1745%

2016-17 -3,393,170.6 8.9768%

2017-18 -4,128,964.5 7.6193%

2018-19 -4,298,068.4 6.4727%

2019-20 -3,598,088.5 7.3039%

2020 March
-2021 March -3,811,028.80 7.3471%

Export Rebate Policy Variations In Pakistan

The State Bank of Pakistan (SBP)’s Export Finance Scheme (EFS)was
introduced in 1973 with a view to facilitating non-traditional and emerging
commodities. Four years later, all manufactured goods were included in the
scheme,3 under which, exporters could borrow at concessionary rates. The
difference between rates on EFS and the market lending rate varied between
0.5 percent in December 1994 and 7.4 percent in December 1998. However,
under the reforms process these margins were rationalized afterwards.
Currently, the gap between the SBP’s announced EFS rate and the market
lending rate is fixed at 2 percent. Under the rebate/refunds scheme, custom
duties, sales tax, and excise duty, etc. paid on raw materials were refundable
if the goods made of these raw materials were exported afterwards. As under
the EFS, the primary objective of this scheme was also to encourage
taxpayers/exporters to export more. Procedures were rationalized by
standardizing rates and linking the drawback to the FOB value of exports.
These export promotion subsidy schemes are difficult to administer and are
subject to manipulation for rent-seeking purposes. For example, export
financing is available on production of an irrevocable letter of credit, which
can easily be falsely obtained. It is difficult to check whether funds that have
been obtained are being used for the purpose intended, while exporters
complain of procedural delays. It is because of rent-seeking possibilities and
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procedural difficulties that many economists have called for these policies to
be discontinued. The Central Board of Revenue (CBR) addresses the
problem of fake invoices and delays in refunds cause by the need to
manually verify documentation. The study concluded that the prevailing duty
drawback rates (DDRs) were higher than the actual incidence of custom duty
on those items. The report also concluded that DDR procedures were
complex and in some parts even anomalous, but that this was typical of DDR
schemes in other parts of the world as well. Pakistan’s export performance
over the last 35 years has been less than spectacular, especially when we
account for extensive government efforts to boost exports. Through the
1970s and 1980s, exports as a percentage of gross domestic product (GDP)
declined even from the low level of 5 percent in 1970. In the late 1980s, we
see the ratio of exports to GDP picking up as some liberalization policies
were put in place. The ratio of exports to GDP increased to about 14 percent
in 1992 and has remained at about 13 to 14 percent since then. Figure 1 also
shows that there might not be any clear relationship between the EFS and
export performance. The introduction of the EFS in 1973 does not appear to
have had any immediate impact. Even though the EFS/GDP ratio started
rising sharply in 1977 when all manufactured products were allowed to take
concessionary credit under the scheme, export performance did not show
such improvement. The ratio declined to 3.62 percent in 1985 and then
remained at around 4.75 percent on average till 1998. Interestingly, from
1985 to 1998, exports as a percentage of GDP rose from 8 to 14 percent.
The decline in export financing as a percentage of exports after 1999 was
mainly associated to the FE-25 scheme of foreign exchange loans. From this
analysis, it is straightforward to conclude that the impact of the EFS on
exports is insignificant.

Fig. 1. Exports and Export Financing as Percentages of GDP

Exports Financing as percetnage of GDP Exports as percentage of GDP

Exports Financing as Percentage of GDP Exports as Percentage of GDP

9 15
ExPD 8
poG 14
f E
rtso 7 xpor
Ex
e 13
Figa po
ts
na 6 rts
nc 12 asas
5 p
e Pe
inpe
rc 11 rc
g en
t s4 e rc
n
asag 10 tage
en
Pen 3 ta
rcnc 9
of ge
eni 2 G of
D
tana
i 8 G
F 1
ges D
of 0 7
G 1973-74
1974-75
1975-76
1976-77
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Rebate/refunds followed an increasing trend in the first few years when the
negative list took effect in 1981.It was 0.6 percent of GDP (6.3 percent of total
exports) in 1982–83 and 0.64 percent of GDP (6 percent of total exports) in
1987–88 when the International Monetary Fund (IMF)-funded structural
adjustment program was started. Due to tariff rationalization in 1987–88, the
rebate/refunds scheme was expected to decline. However, it continued to
grow till 1992–93 when it reached 0.77 percent of GDP (5.82 percent of
exports). It started falling in 1993–94 and sank as low as 0.42 percent of GDP
(3.18 percent of exports) in 1994–95. There is, overall, a positive relationship
between rebate/refunds as a percentage of GDP and exports as percentage
of GDP. Moreover, the decrease in rebate/refunds as a percentage of GDP
could be associated with the decline in tariff on imports (the correlation
between average tariff and rebate/refunds as a percentage of exports has
been 73 percent since tariff rationalization started). Manufacturers use raw
materials or machinery to produce foods for export. This implies that
rebate/refunds on raw materials or machinery may have a lagged impact on
exports. Table 1 shows a strong positive correlation between exports as a
percentage of GDP and rebate/refunds as percentage of GDP.

The correlation between the two variables increases and becomes significant
when we analyse it using lags. On the other hand, the correlation between
exports as a percentage of GDP and export financing as a percentage of
GDP at all lags and levels is around 30 percent, which is quite low and
insignificant.

Table 1
Correlation of Exports as a Percentage of GDP with Export
Subsidies
Export Financing as Rebates/Refunds as
P Percentage of GDP Percentage of GDP
Level 0.316 (0.34) 0.528 (0.63)
1 0.315 (0.34) 0.659 (0.90)
2 0.309 (0.33) 0.717 (1.05)
3 0.319 (0.34) 0.790 (1.31)
4 0.282 (0.30) 0.863 (1.74)b
5 0.292 (0.31) 0.896 (2.06)a

Notes: Indicate significance levels of 5 and 10 percent, respectively. Values in

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parentheses indicate t-values.
Sports Goods Major Market & Worth
The global sports equipment and apparel market size was valued at
$470,403 million in 2019 and is expected to grow at a CAGR of 7.2% to
reach $817,170 million by 2027. North America was the highest contributor to
the global sports equipment and apparel market with $138,758 million in
2019.
North America was the largest region in the global sports market,
accounting for 35% of the market in 2020. Asia Pacific was the second
largest region accounting for 30% of the global sports market. Africa was
the smallest region in the global sports market.
In 2020, the total revenue of the sports equipment market in the United
States was 14.5 billion U.S. dollar, a slight increase since 2019.
Pakistan exported sports goods to 90 countries. However, the major market
of Pakistan sports goods industry is in Germany, USA, UK, France and Italy.
Pakistan also exports sports goods to Spain, Netherlands, Hong Kong,
Denmark, Canada, Belgium, Dubai and Chile. Today the sports goods sector
of Pakistan has acquired an important place in the international trade of
sports goods. Currently it is supplying products to almost every country of the
world, directly or indirectly. The products are mostly made for international
markets and have received worldwide recognition because of the care that
goes into the selection of raw material, design, manufacturing and shipping
The product range includes soccer balls, volley balls, rugby balls, beach
balls, exercise balls, cricket balls, hockey balls, baseball balls, tennis balls,
shuttle cocks, nets, gloves, hockey sticks, cricket bats, baseball bats,
protective guards, pads, sportswear, etc.
Adidas, Nike, Micassa, Puma, Mitre, Select, Umbro, Lotto, Diadora,
Decathlon, Wilsons, etc, are some of the world renowned brands sourcing a
large portion of their supplies of sports goods from Sialkot; further enhancing
the credibility of the city as an internationally acknowledged quality
manufacturing and exporting center.
Due to better quality of sports goods Pakistan’s sports items gain foreign
fame. Because of its well production process starts from adaptation of raw
material to delivering to customers.
This process involves better selection of raw material, designing of goods,
production process and timely delivering to customer. Today the Pakistan’s
sports goods are being explained by the following statistics the sports goods
industry in the country is chiefly clustered around the city of Sialkot which
accounts for nearly 95 percent of the industry’s total production.
Experts also recorded that sports goods producers in Sialkot are
predominantly small and medium sized firms comprising over 360 formal and
over 10,000 informal units.
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List of Major Exports of Pakistan

The major exports of Pakistan include textiles, leather and sports goods,
chemicals, carpets, and rugs. Meanwhile, Pakistan also exports significant
quantities of rice, sugar, cotton, fish, fruits, and vegetables. The country
ranks among Asia’s largest camel market, second-largest apricot and ghee
(oil), and third-largest cotton, onion, and milk market. Here’s a look at some
exports that help Pakistan stand out in the exporting community across the
world:

 Rice

 Mangoes

 Oranges 

 Cotton

 Surgical Instruments

 Leather Goods 

 Furniture

 Sea Food 
 Sports Goods
 Football

 Cricket Balls

Role of Sports goods in Exports of Pakistan

Sports Goods
Sports goods industry of Pakistan plays a vital role in international trade of
sports goods. Now, this industry is exporting its products to different countries
in the world. These products are manufactured to export according to
requirements of international targeted markets. Because of better quality of
sports goods Pakistan’s sports items gain international fame. Due to its well
production process starts from adaptation of raw material to delivering to
customers. This process involves better selection of raw material, designing
of goods, production process and timely delivering to customer. Pakistan is
exporting a large portion of its sports goods from Sialkot to international
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`famous brands like Adidas, Nike, Puma, Lotto, Umbro, Mitre, Micassa,
Diador, Wilson and Decathlon.

The share of Pakistan sports goods in total exports of Pakistan is 1.51%

(2015-16) with football as major export product having 43% share of total
sports goods exported in 2012-13 and major export of Pakistan sports goods
are to Europe.
The exports of sports goods witnessed a decrease of 13.65 per cent during
the first nine months of current financial year (2020-21) as compared to the
exports of corresponding period of last year.
Pakistan exported sport goods worth $192.267 million during July-March
(2020-21) against the exports of $222.650 million during July-March (2019-
20), showing a decline of 13.65 percent, according to the Pakistan Bureau of
Statistics (PBS).
Among the sports products, the export of footballs decreased by 23.21 per
cent as it went down from $123.364 million last year to $94.732 million during
the current year while the gloves export also declined by 19.18 per cent by
going down from $60.428 million last year to $48.835 million during the
current year, the PBS data revealed.
However, the exports of all other sports goods commodities witnessed an
increase of 25.33 percent by growing from $38.858 million last year to
$48.700 million during the current year. Meanwhile, year-on-year basis, the
sports export rose by 5.70 percent in March 2021 when compared to the
export of the same month of last year.
The Pakistan Sports goods and manufacturing association plays vital role in
promotion of this industry. Although Sialkot, situated in the Punjab province of
Pakistan, who is expert in producing and exporting sports goods and sport
accessories all over the world since 100 years.

Football
Over 42 million soccer balls worth Rs17.473 million have been exported from
Sialkot ahead of the FIFA Football World Cup 2014. Sialkot made soccer ball
“Brazuca” was used in FIFA Football World Cup matches in Brazil after a gap
of 32 years. The ball was produced by Forward Sports Sialkot for Adidas
The success story of Sialkot industries is based on the unmatched skill and
craftsmanship of local workers.
In 1980s Sialkot gained international celebrity status when it produced the
“Tango Ball” used in FIFA Football World cup in 1982 which led further growth
of soccer ball industry.
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All the major international brands like Adidas, Nike, Puma, Select, Litto,
Umbro, Mitre, Micassa, Diadora, Wilsoms and Decathion are sourcing their
supply of footballs from this export-oriented city and hub of cottage industry of
the country.
Sialkot is the only city of Pakistan where 99 percent products are exported to
various countries of the world. Sialkot based small and medium industries are
earning foreign exchange of over US 1.6 billion dollars annually through
exports and strengthening the national economy.
Under the directives of federal government a project of “Sports Industries
Development Centre” (SIDC) has been initiated costing more than Rs435.637
million in Sialkot for modernizing soccer ball industry. The SICD is fully
equipped with latest machinery which has already started its trail production.
The prime objective of setting up of SIDC was to help sports goods sector to
adopt modern technology of mechanized “Thermo Lamination Balls” by
providing the common facilities, technical advisory services, molding
machinery services and training.
It may be mentioned that the Federal government has taken this bold step to
address the problems of soccer ball industry of Sialkot, besides
modernization of sports goods sector.

Export of footballs from Pakistan during July-May (2017-18) has increased

by 10.64 percent as compared to same month of the previous year.As
many as 37.28 million numbers of manufactured footballs valuing US
$153.018 million were sent abroad during the period under review
compared to the export of 32.568 million football worth of $138.3 million
during July-May (2016-17), latest data of Pakistan Bureau of Statistics
(PBS) reported.Meanwhile, on year basis, the export of footballs also
witnessed a surge of 29.4 percent in May 2018 compared to that of May
2017.

Although, Due to Covid lockdown, the export of footballs decreased by

10.18%, from $160.580 million last year to $144.235 million during the
period 2020-21, but is expected to rise after relaxation in export conditions
and resumption of sports activities.

Cricket Balls
Cricket is a very popular sport and has a multitude of followers all over the
world. Cricket Equipment majorly consists of cricket ball, cricket bat, gloves,
knee pads, caps, etc. Cricket Balls are as essential in the game of cricket as
racquets in Tennis. Cricket Balls are generally made from leather and
exporters offer balls that are made from genuine and good premium quality
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leather. Export quality Cricket Balls are hard and offer adequate bounce on
being delivered to the batsmen that offer them ease in placing their shots.
Exporters from Pakistan are renowned as one of the leading Cricket Balls
Manufacturer in Pakistan. They are also major suppliers of cricket balls to
UK, USA, Australia, Europe and Africa. One of the most imminent quality of
their balls is their reasonable market rates.

Export Region
For Pakistan USA is major export region, Our exports to the US during Jul-
Apr 2021 have increased by 29 percent to $4,092 million as compared to
$3,173 million in Jul-Apr 2020. This is a substantial increase of $918 million
and credit goes to our exporters for making this possible under difficult global
conditions.

Contribution of Sports Industry in overall Exports of Pakistan

The share of Pakistan sports goods (192.267 millions) in total exports
(3035,525.2 millions) of Pakistan is. 0.00638% in (July 2020-March 2021).
Pakistan exported sport goods worth $192.267 million during July-March
(2020-21) against the exports of $222.650 million during July-March (2019-
20), showing a decline of 13.65 percent, according to the Pakistan Bureau of
Statistics (PBS).
Among the sports products, the export of footballs decreased by 23.21 per
cent as it went down from $123.364 million last year to $94.732 million during
the current year while the gloves export also declined by 19.18 per cent by
going down from $60.428 million last year to $48.835 million during the
current year, the PBS data revealed.
However, the exports of all other sports goods commodities witnessed an
increase of 25.33 percent by growing from $38.858 million last year to
$48.700 million during the current year. Meanwhile, year-on-year basis, the
sports export rose by 5.70 percent in March 2021 when compared to the
export of the same month of last year.