Pakistan’s Market Access Pakistan’s Market Access InitiativeInitiative

Challenges and Challenges and OpportunitiesOpportunities

ByByMs. Humaira Zia MuftiMs. Humaira Zia MuftiMinistry of CommerceMinistry of Commerce

2828thth August 2005 August 2005

1

2

Policy FocusPolicy FocusDomestic Dimension Domestic Dimension Strengthen the Production BasesStrengthen the Production Bases Improve QualityImprove Quality Ensure ComplianceEnsure Compliance Enhance Design CapabilitiesEnhance Design Capabilities Develop Human Resource with Develop Human Resource with

reference to Technical Skillsreference to Technical Skills Provide volumes for achieving Provide volumes for achieving

Economies of Scale.Economies of Scale.

Cont’d..Cont’d.. 2

3

Cont’d….Policy FocusCont’d….Policy Focus

Foreign DimensionForeign Dimension Expand Market Access AbroadExpand Market Access Abroad Improve Country’s Business Image Improve Country’s Business Image

AbroadAbroad Showcase Pakistan’s strengths to Showcase Pakistan’s strengths to

foreign buyersforeign buyers Launch new Trade DiplomacyLaunch new Trade Diplomacy Trade not Aid Approach. Trade not Aid Approach. Envoys’ ConferencesEnvoys’ Conferences Warehousing: New and existing Warehousing: New and existing

marketsmarkets Expo Pakistan: Annual Mega Expo Pakistan: Annual Mega

Exhibition Exhibition 3

4

Macro Economic ReformMacro Economic Reform

Trade Policy Trade Policy Tariff PolicyTariff Policy Investment Investment

Policy Policy Fiscal PolicyFiscal Policy Monetary PolicyMonetary Policy

4

5

Trade Policy ReformTrade Policy Reform

S.no.S.no. CategoryCategory StatusStatus

11 Import/Export RegimesImport/Export Regimes LiberalizeLiberalizedd

22 CCI & E DepartmentCCI & E Department AbolishedAbolished33 Import licensingImport licensing AbolishedAbolished44 License fee @ 6%License fee @ 6% AbolishedAbolished

55 Import/Export Import/Export RegistrationRegistration AbolishedAbolished

5

6

Top rate brought down to 25%Top rate brought down to 25% Number of slabs reduced from 42 in Number of slabs reduced from 42 in

1985 to 16 in 1995, 7 in 1999 and 5 1985 to 16 in 1995, 7 in 1999 and 5 in 2005.in 2005.

Discriminatory SRO Regime Discriminatory SRO Regime eliminatedeliminated

Level playing field provided by Level playing field provided by tariffication of concessional duties.tariffication of concessional duties.

SMEs’ access to low tariff raw SMEs’ access to low tariff raw materials enhanced.materials enhanced. Cont’d..Cont’d..

Tariff ReformsTariff Reforms

6

7

Duties on hundreds of tariff lines Duties on hundreds of tariff lines comprising industrial inputs i.e. comprising industrial inputs i.e. Raw Materials and Capital Goods Raw Materials and Capital Goods gradually reduced to 0-5%gradually reduced to 0-5%

Para-tariffs abolished i.e. Iqra, Para-tariffs abolished i.e. Iqra, Import Surcharge, Regulatory Import Surcharge, Regulatory Duties, Flood Relief Surcharge, Duties, Flood Relief Surcharge, etc.etc.

Tariff discrimination between Tariff discrimination between Commercial and Industrial imports Commercial and Industrial imports eliminated eliminated

Contd….Tariff ReformsContd….Tariff Reforms

7

8

Tariff ReformsTariff ReformsTop Rate ReductionsTop Rate ReductionsYear Year Top RateTop Rate

19851985 120%120%19901990 90%90%19941994 65%65%19971997 45%45%19991999 35%35%20002000 30%30%20012001 25% 25%

Source: Central Board of Revenue 8

9

Investment Policy ReformsInvestment Policy Reforms All economic sectors open to Foreign Direct All economic sectors open to Foreign Direct

Investment—Industrial, Agricultural and Investment—Industrial, Agricultural and Services.Services.

Equal treatment to local and foreign investors.Equal treatment to local and foreign investors. 100 % foreign equity allowed100 % foreign equity allowed No Government sanction required.No Government sanction required. Remittance of Royalty, Technical & Franchise Remittance of Royalty, Technical & Franchise

Fee, Capital, Profits, Dividends allowed.Fee, Capital, Profits, Dividends allowed. Foreign investment fully protected through Foreign investment fully protected through

Foreign Private Investment (Promotion & Foreign Private Investment (Promotion & Protection) Act 1976, Protection of Economic Protection) Act 1976, Protection of Economic Reforms Act 1992 and Foreign Currency Reforms Act 1992 and Foreign Currency Accounts (Protection) Ordinance, 2001Accounts (Protection) Ordinance, 2001

9

10

Fiscal Policy ReformsFiscal Policy Reforms High growth rate achieved – over 7% High growth rate achieved – over 7%

expected this financial year.expected this financial year. Deficit reduction (4% of GDP)Deficit reduction (4% of GDP) Debt reduced.Debt reduced. Major reduction in Debt Service Charge.Major reduction in Debt Service Charge. Improved revenue collection – Sales Tax, Improved revenue collection – Sales Tax,

Custom Duty, Income Tax.Custom Duty, Income Tax. Wealth Tax abolished.Wealth Tax abolished. Central Excises being phased out.Central Excises being phased out. Substantial increase in reserves-Substantial increase in reserves-

over $12.8 Billionover $12.8 Billion PSDP doubledPSDP doubled Social Sector expenditure substantially Social Sector expenditure substantially

increasedincreased 10

11

Monetary Policy ReformsMonetary Policy Reforms

State Bank AutonomyState Bank Autonomy Banking and Capital market Banking and Capital market

Reforms.Reforms. Cost of Capital reducedCost of Capital reduced Exchange rate stabilizedExchange rate stabilized Substantial improvement in Substantial improvement in

liquidityliquidity11

12

Establishment of Technology Up-Establishment of Technology Up-gradation Fundgradation Fund

Launching Enterprise Capacity Building Launching Enterprise Capacity Building SchemeScheme

Improving Country’s Business ImageImproving Country’s Business Image Freight Subsidy—Inland and OffshoreFreight Subsidy—Inland and Offshore Establishment of Zones for Agri-Establishment of Zones for Agri-

ProductsProductsand Fisheriesand Fisheries

Establishment of Special Export ZonesEstablishment of Special Export Zones Establishment of Garment CitiesEstablishment of Garment Cities Rehabilitation of Industrial EstatesRehabilitation of Industrial Estates Establishment of Combined Effluent Establishment of Combined Effluent

Treatment PlantsTreatment Plants

Major Trade Policy Major Trade Policy InitiativesInitiatives

Cont’d..Cont’d..12

13

Facilitation of Garment Exports Facilitation of Garment Exports through Textile Garment Packagethrough Textile Garment Package

Incentivizing export of Horticulture Incentivizing export of Horticulture ProductsProducts

Encouraging Women EntrepreneursEncouraging Women Entrepreneurs Opening Land Route Trade with Opening Land Route Trade with

AfghanistanAfghanistan Strengthening Trade DiplomacyStrengthening Trade Diplomacy Attracting Buyer Driven FDI for Export Attracting Buyer Driven FDI for Export

Sourcing from PakistanSourcing from Pakistan Zero-Rating of Sales for Textile ChainZero-Rating of Sales for Textile Chain Support for Quality Assurance and Lab Support for Quality Assurance and Lab

AccreditationAccreditation Strengthening of SMEs Industrial Strengthening of SMEs Industrial

ClustersClusters Relocation of Industries to PakistanRelocation of Industries to Pakistan

Contd….Major Trade Policy InitiativesContd….Major Trade Policy Initiatives

13

14

Two Pillars of Export Two Pillars of Export StrategyStrategy

Drive Volume and Value of ExportsDrive Volume and Value of Exports

Create enabling environment for Create enabling environment for the above to succeedthe above to succeed

14

15

Strategy to Drive Volume and Strategy to Drive Volume and ValueValue

(Pillar –I)(Pillar –I) Enhancing world market share of Enhancing world market share of Core Product Categories in top 10 Core Product Categories in top 10 MarketsMarkets

Pursuing Value Addition through Pursuing Value Addition through capacity building and capability capacity building and capability enhancement of exportersenhancement of exporters

Export Product Diversification Export Product Diversification Geographic DiversificationGeographic Diversification Translating traditional ties with Translating traditional ties with

Countries into commercial Countries into commercial opportunities opportunities

Leveraging International Trade Leveraging International Trade Blocs / Agreements for enhanced Blocs / Agreements for enhanced Market AccessMarket Access

15

16

Strategy for Creating an Strategy for Creating an Enabling Environment Enabling Environment (Pillar-II)(Pillar-II)

Reducing cost of doing businessReducing cost of doing business Improving industrial & commercial Improving industrial & commercial

infrastructureinfrastructure Tariff rationalization, decontrol & Tariff rationalization, decontrol &

liberalisation of investmentliberalisation of investment Quality & Standards management to Quality & Standards management to

reinforce confidence in ‘Made in Pakistan’reinforce confidence in ‘Made in Pakistan’ Social, environmental & security complianceSocial, environmental & security compliance Business image building of PakistanBusiness image building of Pakistan Export related skills developmentExport related skills development Protection of Intellectual Property RightsProtection of Intellectual Property Rights Developing SME sector as vendors & Developing SME sector as vendors &

exportersexporters16

17

ChallengesChallenges Rapidly growing importsRapidly growing imports Exports as key for economic turnaroundExports as key for economic turnaround Infrastructure deficienciesInfrastructure deficiencies Shortage of skilled manpowerShortage of skilled manpower Conformity to quality and standardsConformity to quality and standards Maintaining fiscal stability Maintaining fiscal stability

17

18

Required InfrastructureRequired Infrastructure Physical InfrastructurePhysical Infrastructure Financial InfrastructureFinancial Infrastructure Legal InfrastructureLegal Infrastructure Intellectual InfrastructureIntellectual Infrastructure Technological InfrastructureTechnological Infrastructure Social InfrastructureSocial Infrastructure

18

19

Institutional StrengtheningInstitutional Strengthening Export Promotion Bureau (EPB)Export Promotion Bureau (EPB) Foreign Trade Institute of Foreign Trade Institute of

Pakistan (FTIP)Pakistan (FTIP) National Tariff Commission (NTC)National Tariff Commission (NTC) Pakistan Standards and Quality Pakistan Standards and Quality

Control Authority (PSQCA)Control Authority (PSQCA) Pakistan National Accreditation Pakistan National Accreditation

Council (PNAC)Council (PNAC) Pakistan Intellectual Property Pakistan Intellectual Property

Rights Organization (PIPRO)Rights Organization (PIPRO)19

20

The economy picked up further in The economy picked up further in FY2005, with GDP growth coming in at FY2005, with GDP growth coming in at over 8.4% for the first time in 8 years. over 8.4% for the first time in 8 years. With sound macroeconomic With sound macroeconomic fundamentals achieved and key sectors fundamentals achieved and key sectors strengthened by reforms implemented strengthened by reforms implemented in the 4-5 years, the economy is well in the 4-5 years, the economy is well positioned to sustain 7% or more positioned to sustain 7% or more growth in the medium term. growth in the medium term.

20

PakistanPakistan

ADB’s Asian Development Outlook – 2005

Market Access Market Access InitiativesInitiatives

BilateralBilateral RegionalRegional

21

ECOTA(Economic Cooperation Organization Trade Agreement)

ECO member countries are: Pakistan, Iran, Afghanistan, Turkey,

Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, Kyrgyzstan and Uzbekistan.

Agreement was signed - July 2003. Initial Agreement = reduction of

maximum tariff slab to 15% within 8 years.

On a fast track initiative, reduction of tariff to 10% on all traded items in 5 years. 3rd Ministerial meeting of ECO states

was held in July, 2005.

REGIONALREGIONAL

22

SAFTA was signed on 6 January 2004 SAFTA was signed on 6 January 2004 at Islamabad. at Islamabad.

The Agreement shall come into force The Agreement shall come into force on 1st January 2006.on 1st January 2006.

Tariff Reduction to 0-5%: vulnerable Tariff Reduction to 0-5%: vulnerable sectors protected through Sensitive sectors protected through Sensitive ListList

Non-Least Developed Countries (Non-Non-Least Developed Countries (Non-LDCs)LDCs) India – Pakistan - 7 years (2013)India – Pakistan - 7 years (2013) Sri Lanka – 8 years (2014)Sri Lanka – 8 years (2014)23

SAFTA(South Asian Free Trade Area)

Cont’d..Cont’d..23

LDCs (Bangladesh, Bhutan, Nepal, LDCs (Bangladesh, Bhutan, Nepal, Maldives)-(2016)Maldives)-(2016)

Pakistan, India, Sri Lanka for LDCs–Pakistan, India, Sri Lanka for LDCs–3 years (2009)3 years (2009)

Current Negotiations:Current Negotiations: Sensitive lists; rules of origin; Sensitive lists; rules of origin;

technical assistance and technical assistance and revenue loss compensation revenue loss compensation mechanism for the LDCsmechanism for the LDCs

24

Contd….SAFTA

24

Preferential Trading Arrangement (PTA) with Preferential Trading Arrangement (PTA) with D-8 D-8 (Bangladesh, Egypt, Indonesia, Iran, (Bangladesh, Egypt, Indonesia, Iran,

Malaysia, Nigeria, Pakistan, and Malaysia, Nigeria, Pakistan, and Turkey)Turkey) Two meetings heldTwo meetings held Next meeting dueNext meeting due

Trade Preferential SystemTrade Preferential System (TPS) with(TPS) with OICOIC Negotiations initiatedNegotiations initiated

Slow progress due to divergent views in Slow progress due to divergent views in a large membership of OICa large membership of OIC

Gulf Cooperation Council (GCC)Gulf Cooperation Council (GCC) Agreement signed in August 2004 Agreement signed in August 2004

envisaging establishment of Free Trade envisaging establishment of Free Trade Area with PakistanArea with Pakistan

Pakistan has requested G.C.C. for initiation Pakistan has requested G.C.C. for initiation of negotiation. First round is expected in of negotiation. First round is expected in September, 2005September, 2005

25

The FTA with Sri Lanka was signed in June 2002.

Operational since 12 June, 2005.

BILATERALBILATERALSri LankaSri Lanka

Cont’d..Cont’d..

PakistanPakistan(No. of (No. of items)items)

Sri LankaSri Lanka(No. of (No. of items)items)

Immediate concession list Immediate concession list (ICL) (ICL) 206206 102102

No concession list (NCL)No concession list (NCL) 540540 697697 Tariff on items (other than NCL) will be eliminated: Pakistan - 3 years

Sri Lanka – 5 years 26

ChinaChina PTA signed with China in November PTA signed with China in November

2003 is operational since 1st January 2003 is operational since 1st January 2004. 2004.

In December 2004 during the official In December 2004 during the official visit of the Prime Minister to China it visit of the Prime Minister to China it was announced to initiate extension of was announced to initiate extension of PTA, Joint Feasibility Study on FTA and PTA, Joint Feasibility Study on FTA and to negotiate an Early Harvest to negotiate an Early Harvest Programme.Programme.

Following achievements made during Following achievements made during visit of the Chinese Premier On 5th April visit of the Chinese Premier On 5th April 2005:-2005:-

Completion of Joint Study and Completion of Joint Study and commencement of FTA negotiations; commencement of FTA negotiations; andand

Early Harvest Programme was Early Harvest Programme was finalized.finalized.

Cont’d..Cont’d.. 27

Pakistan’s ProductsPakistan’s Products Bed-linen, table linen & other home

textiles, towels, cotton & blended fabrics, synthetic yarn, synthetic fabrics, mangoes, oranges, dates, tarpaulin and marble articles like tiles, surgical goods, sports goods & cutlery etc., dyes, guar gum, industrial alcohol and medicines, etc.

China’s ProductsChina’s Products Some organic chemicals &

machinery for textile, leather production, etc.

Contd….ChinaContd….China

28

PTA signed in March 2004 Tariff reduction (average)

Pakistan 338 items 18% Iran 309 items 18%

It is expected that the Agreement will be operational at an early date.

IranIran

The Framework Agreement on PTA was signed on 19th January 2004.

First round of Technical Negotiation was held from 25 – 27 May 2004 in Islamabad. Draft text of PTA and wish lists were exchanged.

Negotiations ongoing-- Pakistan is requesting Turkey to expand its offer list.

Turkey Turkey

29

Joint statement on Comprehensive Joint statement on Comprehensive

Economic Partnership (CEPT) was Economic Partnership (CEPT) was signed on 21st August, 2003. First signed on 21st August, 2003. First Meetings on CEPT was held in Meetings on CEPT was held in Islamabad on 25-26th Oct, 2004. Islamabad on 25-26th Oct, 2004.

Both sides have agreed to initiate Both sides have agreed to initiate negotiations on establishing CEPTnegotiations on establishing CEPT which would lead to FTA.which would lead to FTA.

The CEPT will include:The CEPT will include:i)i) Areas of Economic Areas of Economic

Cooperation;Cooperation;ii)ii) FTA; andFTA; andiii)iii) Liberalization of trade in Liberalization of trade in

goods,goods,services and investment.services and investment.

ASEAN COUNTRIESASEAN COUNTRIESIndonesiaIndonesia

30

SingaporeSingapore First meeting of Joint Study Group First meeting of Joint Study Group

held at Islamabad in February, held at Islamabad in February, 2005. 2005.

Decided to negotiate FTA in the Decided to negotiate FTA in the next meeting.next meeting.

Malaysia Malaysia During the visit of the Prime During the visit of the Prime

Minister of Malaysia to Pakistan on Minister of Malaysia to Pakistan on 15-18 February, 2005, it was 15-18 February, 2005, it was decided to negotiate bilateral FTA. decided to negotiate bilateral FTA.

3 meeting of the TNC have been 3 meeting of the TNC have been held so far.held so far.

31

Laos DPRLaos DPR Cabinet has approved to initiate Cabinet has approved to initiate

negotiations with Laos. negotiations with Laos. Date of the meeting is being fixed Date of the meeting is being fixed

through diplomatic channels.through diplomatic channels.

ASEAN + 1ASEAN + 1 High level visits from Pakistan to High level visits from Pakistan to

ASEAN countriesASEAN countries

32

BangladeshBangladesh First round of negotiations were First round of negotiations were

held in Dhaka in November 2003. held in Dhaka in November 2003. Finalization of negotiation is Finalization of negotiation is expected by the end of this yearexpected by the end of this year

NepalNepal Cabinet has approved negotiations Cabinet has approved negotiations

with Nepal. with Nepal. Date of the first meeting being Date of the first meeting being

fixed through diplomatic channels.fixed through diplomatic channels.

SOUTH ASIASOUTH ASIA

33

USAUSA Pakistan signed a Trade and Investment Pakistan signed a Trade and Investment

Framework Agreement (TIFA) with USA in June Framework Agreement (TIFA) with USA in June 2003.2003.

The First round of TIFA Talks was held on 28-The First round of TIFA Talks was held on 28-30th September, 2004 at Washington.30th September, 2004 at Washington.

Bilateral Investment Treaty negotiations Bilateral Investment Treaty negotiations initiated:initiated: Draft BIT discussed at LondonDraft BIT discussed at London

(7th -11th Feb, 2005)(7th -11th Feb, 2005) Second Round due in IslamabadSecond Round due in Islamabad

(2005)(2005) U.S was requested to start FTA negotiations.U.S was requested to start FTA negotiations.

34

AfricaAfrica Ministry of Commerce is evaluating Ministry of Commerce is evaluating

proposal for initiating PTA with South proposal for initiating PTA with South Africa and Al-Maghreb countries Africa and Al-Maghreb countries (Tunisia, Algeria and Morocco).(Tunisia, Algeria and Morocco).

Thailand - JapanThailand - Japan Pakistan is desirous to have a PTA Pakistan is desirous to have a PTA

/FTA with Thailand, Japan./FTA with Thailand, Japan.

Bangkok AgreementBangkok Agreement Pakistan keen to join Bangkok Pakistan keen to join Bangkok

Agreement. Agreement. (Bangladesh, China, India, (Bangladesh, China, India, South Korea, Laos and Sri Lanka) South Korea, Laos and Sri Lanka) 35 Cont’d..Cont’d.. 35

36

MERCOSUR MERCOSUR Member countries: Argentina, Member countries: Argentina,

Brazil, Uruguay, ParaguayBrazil, Uruguay, Paraguay During the visit of the President to During the visit of the President to

South America initial proposal for South America initial proposal for FTA was made.FTA was made.

FTA negotiations initiated.FTA negotiations initiated.

European UnionEuropean Union Trade diplomacy to secure GSP Trade diplomacy to secure GSP

concessions.concessions.36

Thank YouThank You