Characteristics ofCharacteristics of Foreign Foreign Trade Of PakistanTrade Of Pakistan

Export of raw material and semi finished goodsExport of raw material and semi finished goodsDependence of few commoditiesDependence of few commoditiesImport of machinery, industrial raw material, Import of machinery, industrial raw material, electrical goodselectrical goodsImports of agriculture products and other food Imports of agriculture products and other food itemsitemsIncreased used of petroleum productsIncreased used of petroleum productsImport of services and other invisible Import of services and other invisible expendituresexpendituresLimited trade relationsLimited trade relationsInternational trade by private sector International trade by private sector Unfavorable balance of paymentsUnfavorable balance of paymentsUnfavorable balance of tradeUnfavorable balance of tradeUnfavorable terms of tradeUnfavorable terms of trade

Major exports and Imports of Major exports and Imports of PakistanPakistan

ExportsExports ImportsImportsRaw cottonRaw cotton MachineryMachinery

Textile products and Textile products and cotton yarncotton yarn

PetroleumPetroleum

RiceRice ChemicalsChemicals

Leather and leather Leather and leather productsproducts

Vehicles and spare Vehicles and spare partsparts

Carpets and rugsCarpets and rugs Edible oil Edible oil

Synthetic textileSynthetic textile WheatWheat

Surgical instrumentsSurgical instruments TeaTea

Sports goodsSports goods FertilizersFertilizers

Exports ImportsExports Imports

Readymade garmentsReadymade garments Plastic materialPlastic material

Vegetable ,fruit and fishVegetable ,fruit and fish Paper boardPaper board

TentsTents Iron ore and steelIron ore and steel

Engineering goodsEngineering goods CoalCoal

Chemical and Chemical and Pharmaceutical productsPharmaceutical products

Pharmaceutical productsPharmaceutical products

Direction of ExportsDirection of Exports

Pakistan trades with a large number of countriesPakistan trades with a large number of countries Exports are highly concentrated in just a few Exports are highly concentrated in just a few

like , USA, Japan, Germany, UK, Hong Kong, like , USA, Japan, Germany, UK, Hong Kong, Dubai and Saudi Arabia.Dubai and Saudi Arabia.

USA making up approximately 24% of the totalUSA making up approximately 24% of the total Japans exhibited continues decline on account of Japans exhibited continues decline on account of

a protracted recession in the Japanese economya protracted recession in the Japanese economy The share of exports to Germany, UK and Hong The share of exports to Germany, UK and Hong

Kong remained relatively constant while Dubai Kong remained relatively constant while Dubai and Saudia has risen due to Textile manufacturesand Saudia has risen due to Textile manufactures

Trends in Imports Trends in Imports Imports are targeted to increase by 4.8% to Imports are targeted to increase by 4.8% to

$12.8 billion in fiscal year 2003-04$12.8 billion in fiscal year 2003-04 Net increase of $580 million over last years Net increase of $580 million over last years During July-April,2003-04 this figure grew by During July-April,2003-04 this figure grew by

19.0% and stood at $12012.4 million as against 19.0% and stood at $12012.4 million as against $10097.8 million $10097.8 million

Food group components, which accounts for Food group components, which accounts for 7.2% total imports ,grew by 4.5%7.2% total imports ,grew by 4.5%

Combined increases of $78.8 million in palm oil Combined increases of $78.8 million in palm oil and tea for domestic consumptionand tea for domestic consumption

Direction of ImportsDirection of Imports Pakistan's major imports come from select few countries Pakistan's major imports come from select few countries

USA, Japan, Kuwait, Saudi Arabia, Germany ,UK and USA, Japan, Kuwait, Saudi Arabia, Germany ,UK and MalaysiaMalaysia

Causes of Adverse Balance of PaymentsCauses of Adverse Balance of Payments

1.1. Decrease in exportsDecrease in exports

2.2. Increase in importsIncrease in imports

3.3. Lack of modernization of export oriented industriesLack of modernization of export oriented industries

4.4. Import restrictions by developed countriesImport restrictions by developed countries

5.5. Invisible expenditures (foreign exchange liability)Invisible expenditures (foreign exchange liability)

6.6. Unfavorable terms of tradeUnfavorable terms of trade

7.7. Devaluation of currencyDevaluation of currency

8.8. Fall in workers remittances/ foreign remittancesFall in workers remittances/ foreign remittances

Decrease in exportsDecrease in exports Exports earnings of Pakistan mostly depend upon the Exports earnings of Pakistan mostly depend upon the

export of few agricultural products such as raw export of few agricultural products such as raw cotton, cotton products and ricecotton, cotton products and rice

Pakistan has to face severe competition with Egypt, Pakistan has to face severe competition with Egypt, India and China for the export of cotton ,cotton India and China for the export of cotton ,cotton textiles and rice textiles and rice

Due to increase in the rate of Inflation, prices of Due to increase in the rate of Inflation, prices of exportable goods are also increasing difficult to exportable goods are also increasing difficult to compete in the international marketcompete in the international market

Political uncertainty , lack of law and order situation, Political uncertainty , lack of law and order situation, strikes and lockouts resulted in the production losses strikes and lockouts resulted in the production losses and exports could not be increased , hence foreign and exports could not be increased , hence foreign exchange earnings have reduced.exchange earnings have reduced.

Increase in imports Increase in imports Pakistan’s imports on account of machinery, Pakistan’s imports on account of machinery,

industrial raw material pharmaceuticals, industrial raw material pharmaceuticals, vehicles, electronic goods, spare parts are vehicles, electronic goods, spare parts are persistently increasing persistently increasing

Due to rapid increase in the population the Due to rapid increase in the population the demand for food grains is also increasing and demand for food grains is also increasing and due to the hard luck of ours we have to import, due to the hard luck of ours we have to import, wheat ,edible oil, tea spices, and even sugar.wheat ,edible oil, tea spices, and even sugar.

More over increased domestic demand and More over increased domestic demand and price rise of petroleum is a great headache price rise of petroleum is a great headache and pressure on foreign exchange resources of and pressure on foreign exchange resources of Pakistan Pakistan

Lack of Modernization of Lack of Modernization of Export Oriented Industries Export Oriented Industries

Lack of planning, we could not set up import Lack of planning, we could not set up import substitution industries in the countrysubstitution industries in the country

Value added goods factories are very less and the Value added goods factories are very less and the development of Industrial sector is unorganized development of Industrial sector is unorganized

No attention is being paid on the modernization of No attention is being paid on the modernization of the existing industries the existing industries

The number of sick Industries is gradually The number of sick Industries is gradually increasing.increasing.

Nationalized factories are running in to lossesNationalized factories are running in to losses All these factors result in the high cost of All these factors result in the high cost of

production and sub-standard quality, which give production and sub-standard quality, which give us low price in the International market and us low price in the International market and reduces the foreign exchange earnings.reduces the foreign exchange earnings.

Imports Restriction by Developed Imports Restriction by Developed CountriesCountries

Many countries have imposed anti dumping Many countries have imposed anti dumping duties on Pakistan’s cotton and cotton duties on Pakistan’s cotton and cotton products .products .

Propaganda about exploitation of child labor has Propaganda about exploitation of child labor has also resulted in the hand-made product’s export.also resulted in the hand-made product’s export.

Moreover some European countries have Moreover some European countries have developed the substitutes of cotton products developed the substitutes of cotton products such as Synthetic textiles causing reduction in such as Synthetic textiles causing reduction in

Pakistan’s exportsPakistan’s exports..

Increase in invisible Increase in invisible expenditureexpenditure

Expenditures such as expenses on Expenditures such as expenses on embassies, foreign education, embassies, foreign education,

Increasing number of pilgrims for Haj/ Increasing number of pilgrims for Haj/ Umra and other holy places Umra and other holy places

Interest and service charges of foreign Interest and service charges of foreign banks, insurance companiesbanks, insurance companies

Increase freight charges of shipping Increase freight charges of shipping companies etc. are increasing the foreign companies etc. are increasing the foreign exchange liability of Pakistan.exchange liability of Pakistan.

Unfavorable terms of Unfavorable terms of tradetrade

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

Pakistan has to export more goods for the Pakistan has to export more goods for the import of the same quantity of goodsimport of the same quantity of goods

Devaluation of currencyDevaluation of currency

Pakistan has devaluated its currency Pakistan has devaluated its currency many times, which resulted in the many times, which resulted in the increase in of import bill (expense of increase in of import bill (expense of foreign exchange) whereas our foreign exchange) whereas our export bill ( earnings of foreign export bill ( earnings of foreign exchange) could not increase. Thus exchange) could not increase. Thus devaluation has badly affected the devaluation has badly affected the balance of payments of the country balance of payments of the country

Fall in workers Fall in workers remittancesremittances

Last many years workers remittances Last many years workers remittances from foreign countries are decreasing from foreign countries are decreasing

Due to the fact that construction Due to the fact that construction programs have reduced in Middle East programs have reduced in Middle East countries countries

These countries are experiencing slump These countries are experiencing slump in oil pricesin oil prices

Comparatively very cheap labor is Comparatively very cheap labor is available to Middle East countries from available to Middle East countries from India, Bangladesh, Sri-Lanka and India, Bangladesh, Sri-Lanka and Philippines Philippines

Measures for improvement Measures for improvement in BOPin BOP

Increase in exports by providing different Increase in exports by providing different incentivesincentives

Decrease in imports by setting up key industriesDecrease in imports by setting up key industries Increase in invisible earningsIncrease in invisible earnings Search of a new marketsSearch of a new markets Quality and packaging of international standardQuality and packaging of international standard Revival and restoration of sick industriesRevival and restoration of sick industries Foreign in joint venturesForeign in joint ventures Promotion of labor intensive industriesPromotion of labor intensive industries

Increase in ExportsIncrease in Exports

1.1. Decrease the cost of production, for which rate Decrease the cost of production, for which rate of interest for setting up industries should be of interest for setting up industries should be reduced reduced

2.2. Cost of transport particularly railway freight Cost of transport particularly railway freight should be minimized should be minimized

3.3. Customs duties on the export- oriented Customs duties on the export- oriented industries should be reduced industries should be reduced

4.4. Modern techniques of production should be Modern techniques of production should be applied applied

5.5. Instead of exporting raw material, value added Instead of exporting raw material, value added goods should be produced and exported goods should be produced and exported

6 Those industries should be encouraged and 6 Those industries should be encouraged and set up which use locally produced raw set up which use locally produced raw material .material .

7 The labor productivity should be enhanced 7 The labor productivity should be enhanced by imparting education , training and by imparting education , training and providing different types of facilities of life providing different types of facilities of life

8 Goods of different varieties keeping in 8 Goods of different varieties keeping in view the demand and requirement of view the demand and requirement of foreigners should be developed, produced foreigners should be developed, produced and exportedand exported

Decrease in Imports Decrease in Imports Import substitution industries should be set Import substitution industries should be set

up up For the production of edible oils, seeds For the production of edible oils, seeds

should be grown locallyshould be grown locally Tea consumption should be discouragedTea consumption should be discouraged Production of food grains such as wheat Production of food grains such as wheat

should be increasedshould be increased Import of luxurious items should be banned Import of luxurious items should be banned

or heavy taxed or heavy taxed Basic and key industries should be developed Basic and key industries should be developed

which can produce machinery and spare which can produce machinery and spare parts for manufacturing industries.parts for manufacturing industries.

Increase in Invisible Increase in Invisible Earnings Earnings

National shipping company should be strengthened National shipping company should be strengthened for assisting the international trade. The freight for assisting the international trade. The freight charges of this company will become a source of charges of this company will become a source of savings foreign exchange .savings foreign exchange .

Domestic commercial banks and insurance Domestic commercial banks and insurance companies should be strengthened and be given the companies should be strengthened and be given the task for facilitating the Pakistan international trade.task for facilitating the Pakistan international trade.

Expenses of our embassies abroad, which involve Expenses of our embassies abroad, which involve foreign exchange, should be reduced . VIP culture foreign exchange, should be reduced . VIP culture should put to an end and unnecessary tours and should put to an end and unnecessary tours and medical expenditure of high government officials medical expenditure of high government officials should be disallowed should be disallowed

Foreign countries visits by the general Foreign countries visits by the general public should be discouraged in order public should be discouraged in order to save the precious foreign exchange to save the precious foreign exchange of the country .of the country .

The efficiency of trade attaches of The efficiency of trade attaches of Pakistan Embassies should be Pakistan Embassies should be improved . It is their duty to do their improved . It is their duty to do their best for developing markets of best for developing markets of Pakistani products in the countries they Pakistani products in the countries they are posted .are posted .

Search of New MarketsSearch of New Markets Governments officials and business community should Governments officials and business community should

participate in trade fairs arranged by foreign countriesparticipate in trade fairs arranged by foreign countries Trade agreements with different countries should be Trade agreements with different countries should be

made.made. Seminars and trade Exhibitions should be arranged Seminars and trade Exhibitions should be arranged

with in the country in which foreign delegates should with in the country in which foreign delegates should be invited to participate .be invited to participate .

Booklets, brochures , pamphlets about the Pakistani Booklets, brochures , pamphlets about the Pakistani products and economy of Pakistan should be products and economy of Pakistan should be distributed to foreign business community.distributed to foreign business community.

Research for Marketing should be conducted.Research for Marketing should be conducted.

Quality and Packaging of International Quality and Packaging of International standardstandard

Revival and restoration of sick Revival and restoration of sick industries industries

Foreign joint ventures Foreign joint ventures

Promotion of labor intensive industries Promotion of labor intensive industries

World Trade World Trade Organization Organization

It was established on January 1,1995It was established on January 1,1995 Represents the most powerful of all Represents the most powerful of all

the multilateral institutions that are the multilateral institutions that are responsible for the global economic responsible for the global economic managementmanagement

145 countries are its members 145 countries are its members

The preamble of WTOThe preamble of WTO Raising standards of living, ensuring full Raising standards of living, ensuring full

employment and steadily growing volume of employment and steadily growing volume of real income and effective demand and real income and effective demand and expending the productions of and trade in expending the productions of and trade in goods and services .goods and services .

There is need for positive efforts designed to There is need for positive efforts designed to ensure that developing countries secure a ensure that developing countries secure a share in the growth in international trade share in the growth in international trade commensurate with the needs of their commensurate with the needs of their economic development economic development

Basic Principles Basic Principles

Non- discrimination between Non- discrimination between counties counties

Free trade , gradually through Free trade , gradually through negotiationsnegotiations

Predictability through binds Predictability through binds Promoting competition .Promoting competition .

WTO Does Not RequireWTO Does Not Require

Does not prevent member states from Does not prevent member states from establishing their own trade and non-establishing their own trade and non-trade policy objective strade policy objective s

Does not require them to eliminate all Does not require them to eliminate all barriers to import of goods and services barriers to import of goods and services

Does not direct national administrative Does not direct national administrative and procedural system and procedural system

Does not require member states to have Does not require member states to have a uniform set of trade regulationsa uniform set of trade regulations