TRADE POLICY OF PAKISTAN

2009 - 12 TRADE POLICY 2009 An important component of the TRTA II project will be to work towards sustainably building the capacity of Pakistan so that they are better placed to formulate trade policies and regulations which enhance export competiveness. Inevitably, there are a number of pre-requisites which feed into the goal of formulating ideal trade policies and regulations for export success. These factors can be summarized as follows:

Strong expertise of policy makers that is in-line with the constantly evolving trading system Policy research capacity that is responsive to policy makers needs Understanding of commercial dynamics as well as business implications of trade policy measures and regulatory framework

A structured public and private consultation mechanism among all key stakeholders which impacts on national decision making

An effective and efficient implementation, monitoring and evaluation mechanism

Whilst these pre-requisites have been promoted in Pakistan to varying degrees of success, further efforts are required. Thus Component 1 is intended to promote these pre-requisites through carefully designed activities and an appreciation of the existing context. Specifically, it will aim to reinforce the skills of government officers working in trade related ministries and implementing agencies on issues related to trade policy, commercial diplomacy and regulatory reform. In addition, it will aim to promote comprehensive, regular and well informed public-private dialogue among the government, private sector, and civil society and research institutes for trade policy development, monitoring and evaluation.

Accordingly, the targeted interventions of Component 1 to achieve these goals constitute the following:

Strengthening of research institutes expertise of trade policy. Strengthen Government officers capacity on specific trade policy and evolving international trade negotiation.

Fostering of public-private dialogue for a coherent national export strategy.

Trade Policy Objectives

People centric: Poverty alleviation and employment generation through export led growth.

Enhance the competitiveness of Pakistans exports. Increase the sophistication level of Pakistans exports by increasing the technology component and value addition.

Trade Facilitation. Process Improvement Aligning Tax Reform with Trade Facilitation with the aim to reduce the cost of doing business. Address supply side constraints power shortage & high financial cost. Reduce anti-export bias . Reducing Cost of Doing Business. Protection and promotion of SMEs. Focus on products with higher sophistication potential. Promote agricultural development through exports. Enable Pakistani exporting companies overcome the negative effects of global demand contraction.

Trade Review (Export and Import 2008-09) Exports:

Exports 2007-08 US$ 19 1 Billion. Export Target 2008-09 US$ 22.1 Billion. Actual Exports 2008-09 US$ 17.8 Billion. WTO estimated a 9% shrinkage in global trade. Pakistan is less hurt than competitors-Export growth in China declined by 24%, India by 31% and Bangladesh by 14%.

Exports Review
Exports were 6.7% less than 2007-08 due to

Exogenous factors - demand shrinkage, financial crisis and ensuing protectionist policies. Domestic Factors - Power shortages/outages, high financial cost, bad law & order situation and competitiveness erosion.

Traditional sectors like textile (- 9.5%), Leather (- 29%) declined, whereas Rice (8%), Engineering goods (26%), Jewelry (35%) recorded growth in exports.

Exports Historical

Export of Major Commodity Groups (US$ billon)

Import Review

Imports were US$ 34.8 billion in 2008 09 as compared to US$ 40 billion in 2007-08, a decrease of 13 %.

Lower imports are attributed mainly to demand shrinkage of items in Transport Group (-41%), and Textile Group (-29%) whereas imports of Petroleum decreased by 17% due to drop in international prices of crude oil; imports of fertilizer were lower both in terms of value (39%) and quantity (45%).

Challenges
External Factors:

Economic downturn in our major markets: Consumer confidence erosion in USA and its ripple effects in EU; Economic slowdown. Buyers perception of Pakistan as a supplier of low quality products and inability to deliver in bulk and in time.

Negative travel advisories.

Domestic Factors:

High cost of finance. Energy Crisis (Electricity and Gas). Law and Order. Lack of International Competitiveness. Investment declined to 19.7% of GDP as against 22.0% of last year. Large Scale Manufacturing growth declined by 7.7% (Jul-Mar) as against increase of 4.8% in 2007-08.

Opportunities

Favorable market access owing to bilateral trade agreements. Potential of doubling the value-addition of cotton of which Pakistan is the 4th largest producer.

Strong resource base in many sectors (food, building stones, gems & jewelry, leather, rice, cement, light engineering).

Growing Services Sectors.

Inference
Pakistan is fortunate to be less hurt by global recession and this has placed Pakistan in a position to take rebound opportunity if :

Supportive & Targeted policies are adopted to help export sector increase competitiveness & improve product sophistication.

Supply side constraints like power shortages and high cost of finance are removed. Law & Order situation is improved.

Overarching Goals of Strategic Trade Policy (Framework 2009-12)

Ensuring sustainable energy supply. Reducing cost of capital. Reforming domestic commerce. Promotion of Trade in Services. Consolidating gender sensitive trade policies. Greening of Exports. Connecting Supply and demand better.

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