Transcript PBC MEMBERS’ MEETING

PAKISTAN BUSINESS
COUNCIL
Revival of the Manufacturing Sector
Focus on Trade Aspects
December 2010
Table of Contents
Background … 3
World Trade Organization … 9
Tariff Rates for Selected Commodities for Pakistan & India … 11
Trade and Manufacturing Data for Selected Commodities … 12
Television Sets … 13
Paper and Paperboard … 14
Electric Motors … 15
Tea … 16
Ceramics … 17
Footwear … 18
Textiles – Synthetic Fabrics, Ready Made Garments … 19
Pakistan’s Free Trade Agreements … 20
Pakistan – Sri Lanka FTA … 22
Pakistan – China FTA … 28
Pakistan – Malaysia FTA … 34
Export Potential with Major Trading Partners … 40
Total EU Imports from Bangladesh, Pakistan, Sri Lanka and Viet
Nam … 41
Total US Imports from Bangladesh, Pakistan, Sri Lanka and Viet
Nam … 42
Under Utilization of SAARC … 43
Afghan Transit Trade Agreement … 44
Salient Features of the New APTTA … 46
Recommendations of Industries not considered in the APTTA … 47
Pakistan Afghanistan Bilateral Trade … 48
Top 10 Pakistani Exports to Afghanistan in 2009 … 49
Afghanistan’s Transit Trade … 50
Incentive to Smuggle … 51
Top 10 Imported Commodities under the ATTA by Afghanistan … 52
Limited Potential of CAR … 53
Problems of Under Invoicing and Misreporting … 54
Comparison of Official 2009 data From Top 10 Import Partners … 55
Pakistan – China: Difference in Reported Import/Export Figures … 56
Pakistan – China: Discrepancy in Import Figures for Selected
Commodities - 2009 … 57
Pakistan – UAE: Difference in Reported Import/Export Figures … 58
Page 2
Background
• Government & Industry urgently need to develop
a strategy to reduce the trade gap and to bring
about higher levels of economic growth
• It is critical to revive the manufacturing sector as
this will lead to:
– Creation of jobs
– Reduction in imports as domestic manufacturing
regains domestic market share
– Increased competitiveness in export markets
Page 3
Background
The current Foreign Exchange situation is grave. With
commodity prices rising again after dropping in 2009, the
current account deficit of $15.3 B is very high and not
sustainable.
Billions
Pakistan's Trade Gap
$45
Exports
$40
Imports
$32
$35
$35
$30
$35
$15.3 B
$25
$20
$15
$18
$10
$18
$19
$5
$0
2003
2004
2005
2006
2007
2008
Source: United Nations Commodity Trade Statistics Database
* Data on the basis of GoP Fiscal Year. Fiscal year runs from Jul – Jun. Source: State Bank of Pakistan
Page 4
2009
FY09*
FY10*
Background
Durable Cons.
Goods
(Machines &
Appliances)
10%
Mineral Fuels
28%
Organic
Chemicals
5%
Plastics
4%
Others
28%
2009
Reducing our import bill
looks difficult due to the
highly inelastic
composition of our
imports
Electrical
Machinery
(Sound, Mobile
Telephony, TV)
8%
Iron and Steel
5%
Animal or Veg
oils/fats
4%
Auto-Vehicles &
parts
Fertilizers
3%
3%
Pharmaceuticals
2%
In 2009, top 10 items
accounted for 72% of our
imports. In 2008, they
accounted for 77% of our
imports.
Durable Cons.
Goods
(Machines &
Appliances)
9%
Mineral Fuels
33%
Electrical
Machinery
(Sound, Mobile
Telephony, TV)
9%
Animal or Veg
oils/fats
5%
Organic
Chemicals
4%
Others
23%
2008
Source: United Nations Commodity Trade Statistics Database
Page 5
Cereals
4%
Iron and Steel
4%
Plastics
3%
Cotton
Auto-Vehicles
3%
3%
Background
Billions
Majority of Pakistan’s exports are still based around a
single crop (Cotton)/manufacturing sector (Textiles).
Export diversification, though necessary, looks difficult in
the near term
Pakistan's Exports
$25
Other Exports
Textiles & Textile Articles
$20
$15
$6
$10
$11
$11
$11
$10
2005
2006
2007
2008
2009
$6
$10
$5
$4
$10
$7
$8
$4
$8
$9
2003
2004
$0
Source: United Nations Commodity Trade Statistics Database
Page 6
Background
As a result, Pakistan’s export performance in the world
has declined with competitors starting to either catch up
or outstrip Pakistan
Percentage Share in World Exports
0.55%
Bangladesh
0.50%
Pakistan
Sri Lanka
Viet Nam
0.45%
0.40%
0.35%
0.30%
0.25%
0.20%
0.15%
0.10%
0.05%
0.00%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: United Nations Commodity Trade Statistics Database
Page 7
Background
The discussion has to be framed within the
context of global manufacturing trends
Annualized percent change
Global Industrial Production
30
20
10
0
-10
2005
2006
2007
2008
2009
2010
-20
-30
-40
World
Advanced economies
Emerging Asia
Pakistan
Page 8
Emerging economies
Source: IMF, FBS, Pakistan Economic Survey 2009-10
The World Trade
Organization
Page 9
Revival of the Manufacturing
Sector: WTO a Hindrance?
• Proponents of WTO stress that structural
imbalances, trade malpractices and misuse of the
ATTA are the real culprits.
• In addition, there seems to be an inability to fully
exploit the opportunities created through WTO &
existing FTAs
• Pending conclusive evidence we can only make
educated guesses on the real causes behind the
lackluster performance of our manufacturing
sector
Page 10
Tariff Rates for Selected
Commodities for Pakistan & India
HS07 Code
040210
320413
283421
843920
840681-2
844511-2
Paksitan Tariff
Indian Tariff
Applied Rate Bound Rate Applied Rate Bound Rate
Milk in powder form
25
100
60
60
Basic dyes & preparations based thereon
0
50
7.5
40
Nitrates of potassium
5
60
7.5
40
Machinery for making paper/paperboard
5
50
7.5
25
Steam turbines & other vapour turbines
5
50
7.5
25
Carding machines/Combing machine
5
55
7.5
25
Short Description
Source: World Trade Organization Bound and Applied Tariff rates for India and Pakistan
Bound tariff: Represents a commitment not to increase tariffs above the listed
rates for all countries
Applied tariff: Duties that are actually charged on imports. These can be below
the bound rates
Even though Pakistan’s applied rates are quite low, the high bound rates are
viewed negatively as they represent a risk to investors. The possibility of GoP
suddenly raising duties to the higher bound rate means that investors have to
account for it in their projections.
Page 11
Trade and Manufacturing Data for
Selected Commodities
Page 12
Millions
Television Sets
Televisions were removed
from the ATTA† negative
list in 2005. Domestic
manufactures and legal
imports started declining
at the same time. See
page 52 for Afghan
Imports under ATTA
Imports ($ value)
$60
$50
$40
$30
$20
$10
$0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff* 23.1%
23.0%
23.0%
22.9%
23.1%
32.7%
32.2%
† Afghan
*trade-weighted average of HS 02 subheadings of 8528
Domestic Manufacture and Import Quantities
Domestic Manufactures
Nos. in Thousands
1,000
Imports
800
600
Transit Trade Agreement
Television Imports by Pakistan in 2009
Trade Partner Amount Quantity
World
$6,531,724
48,303
Malaysia
$4,397,633
18,226
China
$884,128
12,525
USA
$268,476
4,807
UAE
$203,518
2,964
Korea Rep
$106,783
832
** 2009 manufacturing
data not available
400
200
0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
23.1%
23.0%
23.0%
22.9%
23.1%
32.7%
32.2%
*trade-weighted average of HS 02 subheadings of 8528
Page 13
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (HS 02 code:
8528)
Manufacturing Data: Pakistan Statistical
Year Book, Federal Bureau of Statistics
Tariff Data: World Trade Organization
Paper and Paperboard
Millions
Imports and Exports ($ value)
$400
$350
$300
$250
$200
$150
$100
$50
$0
Year
Exports
Market share of
domestic manufacturers
has been steadily
eroding
Imports
2003
2004
2005
2006
2007
2008
2009
Applied Tariff* 18.2%
18.0%
17.5%
17.2%
15.2%
15.1%
16.2%
*trade-weighted average of HS 02 subheadings of 4801-4814
Domestic Manufacture and Import Quantities
Thousand Tonnes
800
Domestic Manufacture
Imports
600
Paper and Paperboard Imports in 2009
Weight
Trading Partner
Amount
(tonnes)
World
$292,291,791 367,526
Indonesia
$50,913,854
65,232
China
$39,308,386
42,378
Russia
$26,605,380
45,646
Sweden
$25,929,648
35,179
Korea
$16,262,997
20,028
** 2009 manufacturing
data not available
400
200
0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
18.2%
18.0%
17.5%
17.2%
15.2%
15.1%
16.2%
*trade-weighted average of HS 02 subheadings of 4801-4814
Page 14
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS
02 code: 4801-4814)
Manufacturing Data: Pakistan Statistical
Year Book, Federal Bureau of Statistics
Tariff Data: Pakistan Country Profile,
World Trade Organization
Electric Motors
The decline in domestic
manufacture has
coincided with the
lowering of applied tariff.
Starting 2004, import
quantities started
outstripping domestic
manufacturing
IMPORTS ($ value)
Millions
$40
$35
$30
$25
$20
$15
$10
$5
$0
Year
Applied Tariff*
2003
2004
2005
2006
2007
2008
2009
18.2%
15.1%
11.9%
11.7%
10.7%
10.8%
9.5%
Thousands
*trade-weighted average of HS 02 subheadings of 850140, 850151-850153
300
Domestic Manufactures and Import Quantities
Domestic Manufactures
Imports
250
200
Electric Motors Imports in 2009
Trading
Amount
Quantity
Partner
World
$25,111,576
107,390
China
$10,489,882
60,650
Germany
$2,379,949
2,608
Italy
$1,991,089
3,826
Czech Rep.
$1,301,193
978
USA
$1,197,920
3,393
** 2009 manufacturing data
not available
150
100
50
0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
18.2%
15.1%
11.9%
11.7%
10.7%
10.8%
9.5%
*trade-weighted average of HS 02 subheadings of 850140, 850151-850153
Page 15
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 850140, 850151-850153)
Manufacturing Data: Pakistan Statistical
Year Book, Federal Bureau of Statistics
Tariff Data: Pakistan Country Profile,
World Trade Organization
Domestic Blended
quantities are steady.
Legal import quantities
have declined even though
Pakistan’s population has
been growing. Compare
with Afghan Imports
under ATTA on pg 52
Tea
Millions
Imports ($ value)
$250
$200
$150
$100
$50
$0
2003
2004
2005
2006
2007
2008
2009
Applied Tariff* 25.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
Year
Domestic Blended and Import Quantities
Thousand Tonnes
160
Domestic Blended
Imports
Tea Imports by Country in 2009
Weight
Trade Partner
Amount
(tonnes)
World
$222,076,481
88,747
Kenya
$141,180,758
51,685
Rwanda
$15,289,242
5,765
Malawi
$8,877,810
4,606
India
$8,252,613
3,643
Indonesia
$7,529,837
4,062
120
** 2009 domestic blend
data not available
80
40
0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
25.0%
10.0%
10.0%
10.0%
10.0%
10.0%
10.0%
Page 16
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 090230, 090240)
Manufacturing Data: Pakistan Statistical
Year Book, Federal Bureau of Statistics
Tariff Data: Pakistan Country Profile,
World Trade Organization
Ceramics
Millions
Imports ($ value)
The increase in import
quantities of ceramics
corresponds with the
building boom in
Pakistan
$100
$80
$60
$40
$20
$0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
25.0%
25.0%
25.0%
25.0%
25.0%
34.7%
32.8%
*trade-weighted average of HS 02 subheadings of 6901, 6904-6911
Thousand Tonnes
Import Quantities
300
250
200
Ceramics Imports by Pakistan
in 2009
Trading Partner
Amount
World
$57,668,499
China
$38,325,845
UAE
$5,726,314
Spain
$4,133,136
Indonesia
$2,008,996
Malaysia
$1,917,307
150
**Manufacturing data was
not available for Ceramics
100
50
0
Year
2003
2004
2005
2006
2007
2008
2009
Applied Tariff*
25.0%
25.0%
25.0%
25.0%
25.0%
34.7%
32.8%
*trade-weighted average of HS 02 subheadings of 6901, 6904-6911
Page 17
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 6901, 6904-6911)
Tariff Data: Pakistan Country Profile,
World Trade Organization
Footwear
Imports and Exports ($ value)
Millions
$200
Export
Export quantity is
back at the 2003 level
whereas imports have
steadily been
increasing
Import
$150
$100
$50
$0
2003
2004
2005
2006
2007
2008
2009
Applied Tariff
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
Millions of Pairs
Year
Import & Export Quantities
25
Imports
20
Export
Footwear Imports by Country in 2009
Trade
Quantity
Amount
Partner
(No. of Pairs)
World
$39,177,571
11,191,751
China
$33,632,567
9,638,661
Thailand
$3,455,745
1,024,639
Viet Nam
$659,148
163,270
Indonesia
$257,511
64,930
Italy
$228,404
58,467
15
**Manufacturing data was
not available for Footwear
10
5
0
2003
2004
2005
2006
2007
2008
2009
Applied Tariff 25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
25.0%
Year
Page 18
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 6401-6405)
Tariff Data: Pakistan Country Profile,
World Trade Organization
Millions
Textiles – Synthetic Fabrics,
Ready Made Garments
$800
Synthetic Fabrics - Imports & Exports ($ value)
Cause for concern is
that imports under
ATTA as well as exports
of synthetic fabrics to
Pakistan (reported by
China) are greater than
the total legal imports
reported by Pakistan
2003
25%
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 5407, 5408, 5512-5516)
Tariff Data: Pakistan Country Profile,
World Trade Organization
$600
$400
$200
$0
Year
Applied Tariff*
Total Imports - rep Pak
2004
25%
2005
14%
2006
15%
Exported to Pak - rep China
2007
15%
ATTA Imports
2008
15%
2009
15%
Total Exports - rep Pak
*trade-weighted average of HS 02 subheadings of 5407, 5408, 5508-5512
As in the case of
synthetic fabrics, total
imports reported by
Pakistan are less than
the exports to Pakistan
reported by China
Millions
Articles of Apparel & Clothing Accessories
Imports & Exports ($ value)
$4,000
$3,000
$2,000
$1,000
$0
Year
Applied Tariff
2003
25%
2004
25%
Total Imports - rep Pak
2005
25%
2006
25%
2007
25%
Exported to Pak - rep China
Page 19
2008
25%
2009
25%
Total Exports - rep Pak
Source:
Trade Data: United Nations Commodity
Trade Statistics Database (Product HS 02
code: 61 ,62)
Tariff Data: Pakistan Country Profile,
World Trade Organization
Pakistan’s Free Trade
Agreements
Page 20
Free Trade Agreements (FTA)
• An FTA is an agreement between two or more countries to
eliminate tariffs, quotas and preferences on most (if not all)
goods and services traded between them. An FTA generally
starts off with a reduction in tariffs before eventually leading to
elimination of tariffs in 5-10 years.
• With WTO talks stalled, more and more countries are resorting
to signing FTAs with their preferred trading partners. This could
create problems of market access. For example, the EU is
planning on signing an FTA with India but an EU FTA with
Pakistan is not on the horizon. This will have an effect on
Pakistan’s textile exports.
• Pakistan has signed 3 major FTAs (with about 10 more in the
works)
Page 21
Pakistan – Sri Lanka FTA
Page 22
Pakistan Sri Lanka FTA
• Pakistan’s first FTA. Operational from June 2005
• Total trade in 2009 was $273 Million
• Pakistan got market access at zero duty for 102
products including agricultural goods, rice (with
quantity restrictions) and engineering goods
• Sri Lanka was given duty free market access on 206
products including tea (with quantity restrictions),
rubber and coconut
Page 23
Comparison of Key Economic Indicators
SRI LANKA
2008
2009
PAKISTAN
2008
2009
$40.7 B
$42.0 B
$165 B
$167 B
6.0%
3.5%
2.0%
3.7%
20.2 M
20.3 M
166 M
170 M
$2,020
$2,068
$ 994
$ 981
2
$8.1 B
$7.1 B
$20.2 B
$17.6 B
Imports :
2
$13.6 B
$9.4 B
$42.3 B
$31.6 B
Trade Surplus/Deficit:
-$5.5 B
-$2.3 B
-$22.1 B
-$14.0 B
$4.8 B
$9.0 B
$13.6 B
$404 M
$5.44 B
$2.39 B
1
GDP :
1
GDP Growth :
1
Population :
1
Per Capita Income :
Exports :
1
Foreign Currency Reserves : $2.6 B
1
FDI, net inflow :
$752 M
1. World Bank – World Development Indicators (http://data.worldbank.org/indicator) 2. UNCTSD
Page 24
Trends in Pakistan - Sri Lanka Trade
Millions
Pakistan - Sril Lanka Trade
$250
$217
$200
$161 M
$150
$100
$56
$50
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports to Sri Lanka
Imports from Sri Lanka
--- FTA operational
Sri Lanka's share in Pakistan's World Trade
1.60%
Percentage
1.24%
1.20%
0.80%
0.18%
0.40%
0.00%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% Share in Total Exports of Pakistan
% Share in Total Imports of Pakistan
Source: United Nations Commodity Trade Statistics Database
Page 25
Comparison of Pre and Post FTA
Import figures
Import growth: Primarily in rubber with smaller growth registered in fruits/nuts.
Due to quantity restrictions on tea imported at a lower tariff, tea imports have
not grown
$27
2008
2009
$5
$8
$9
$3
$5
$7
$4
$10
$6
$7
$7
$8
$7
$8
$8
$6
$8
$15
2007
$6
$20
2006
$15
$13
$13
$10
$20
$21
$25
2005
$20
$30
$12
Millions
Top 5 Imports from Sri Lanka
$0
Rubber & articles of
Rubber
Fruit & Nuts
Veg. plaiting
materials
Coffee, tea & spices
Oil seeds and
oleaginous fruits
Source: United Nations Commodity Trade Statistics Database
Page 26
Comparison of Pre and Post FTA
Export figures
Export growth: Main export is cotton and its derivatives (yarn & fabrics). Mild
export growth has occurred in cereals, vegetables and knitted fabrics (growth in
the three commodities is ~ $43 million compared to 2005)
$110
$104
$99
$100
2005
2006
2007
2008
2009
$87
$120
$84
$80
$15
$0
$0
$2
$4
$3
$4
$20
$16
$13
$16
$27
$40
$3
$5
$10
$12
$13
$60
$7
$5
$13
$15
Millions
Top 5 Exports to Sri Lanka
$0
Cotton
Cereals
Veg,roots & tubers
Earths & stone;
Knitted or
plastering materials crocheted fabrics
Source: United Nations Commodity Trade Statistics Database
Page 27
Pakistan – China FTA
Page 28
Pakistan China FTA
• Early Harvest Program (EHP) operational from Jan 2006. FTA
operational from Nov 2006
• Total trade in 2009 was $4.78 Billion
• Pakistan got market access at zero duty for: Cotton fabrics,
bed-linen and other home textiles, marble and other tiles,
leather articles, sports goods, iron & steel products and
engineering goods, industrial alcohol
• China was given market access mostly on commodities
required for industrial growth: Industrial machinery, organic
and inorganic chemicals, raw material for various industries
including engineering sector, intermediary goods for
engineering sector
Page 29
Comparison of Key Economic Indicators
CHINA
2008
2009
PAKISTAN
2008
2009
$4,533 B
$4,984 B
$165 B
$167 B
9.6 %
9.1 %
2.0 %
3.7 %
1,325 M
1,331 M
166 M
170 M
$3,422
$3,744
$994
$991
2
$1,430 B
$1,202 B
$20.2 B
$17.6 B
Imports :
2
$1,131 B
$1,006 B
$42.3 B
$31.6 B
Trade Surplus/Deficit:
$299 B
$196 B
-$22.1 B
-$14.0 B
$2,453 B
$9.0 B
$13.6 B
$78.2 B
$5.44 B
$2.39 B
1
GDP :
1
GDP Growth :
1
Population :
1
Per Capita Income :
Exports :
1
Foreign Currency Reserves : $1,966 B
1
FDI, net inflow :
$147.8 B
1. World Bank – World Development Indicators (http://data.worldbank.org/indicator) 2. UNCTSD
Page 30
Trends in Pakistan - China Trade
Billions
Pakistan - China Trade
$5.0
$3.78
$4.0
$3.0
$2.78 B
$2.0
$1.00
$1.0
$0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports to China
Imports from China
--- EHP operational
China's share in Pakistan's World Trade
Percentage
15%
11.97%
10%
5.68%
5%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% Share in Total Exports of Pakistan
% Share in Total Imports of Pakistan
Source: United Nations Commodity Trade Statistics Database
Page 31
Comparison of Pre and Post FTA
Import figures
Import growth: Imports have grown across the board. Cause for concern from a
domestic manufacturing view is the increased import of the highlighted items
$600
$400
$200
2008
2009
$44
$77
$96
$167
$150
$800
2007
$119
$127
$160
$222
$276
$1,000
2006
$540
$691
$696
$861
$608
$1,200
$981
$1,067
$1,400
2005
$93
$137
$176
$163
$190
$1,382
$1,600
$429
$568
Millions
Top 5 Imports from China
$0
Electrical
Machinery
Machinery & parts Organic chemicals Synthetic yarn and Articles of iron or
fabrics
steel
Source: United Nations Commodity Trade Statistics Database
Page 32
Comparison of Pre and Post FTA
Export figures
Export growth: Growth has primarily been in Cotton and its derivatives
(yarn and fabrics) and raw materials. No growth in value added products
$701
$800
2005
2006
2007
2008
2009
$700
$600
$100
$3
$8
$7
$11
$21
$200
$29
$31
$38
$43
$34
$300
$28
$25
$30
$40
$47
$400
$26
$28
$88
$159
$75
$500
$272
$358
$377
$382
Millions
Top 5 Exports to China
$0
Cotton
Ores, slag & ash
Fish & other seafood Raw hides, skins & Copper & articles of
leather
copper
Source: United Nations Commodity Trade Statistics Database
Page 33
Pakistan – Malaysia FTA
Page 34
Pakistan Malaysia FTA
• Early Harvest Program (EHP) operational from Jan 2006.
FTA operational from Aug 2007
• Total trade in 2009 was $1.83 Billion
• Pakistan has duty free market access for: cotton yarn &
fabrics, fruits and jewellery. However, textile made-ups
are excluded.
• Malaysia was given preferential market access on palm
oil, industrial machinery, organic and inorganic
chemicals, raw material for various industries including
engineering sector and intermediary goods for
engineering sector
• Has received criticism for being a ‘Palm Oil’ FTA
Page 35
Comparison of Key Economic Indicators
MALAYSIA
2008
2009
PAKISTAN
2008
2009
$221 B
$192 B
$165 B
$167 B
4.6 %
-1.7 %
2.0 %
3.7 %
27.0 M
27.5 M
166 M
170 M
$8,187
$6,975
$994
$981
2
$199 B
$157 B
$20.2 B
$17.6 B
Imports :
2
$156 B
$124 B
$42.3 B
$31.6 B
Trade Surplus/Deficit:
$43 B
$33 B
-$22.1 B
-$14.0 B
Foreign Currency Reserves : $92 B
$97 B
$9.0 B
$13.6 B
$1.6 B
$5.44 B
$2.39 B
1
GDP :
1
GDP Growth :
1
Population :
1
Per Capita Income :
Exports :
1
1
FDI, net inflow :
$7.4 B
1. World Bank – World Development Indicators (http://data.worldbank.org/indicator) 2. UNCTSD
Page 36
Trends in Pakistan – Malaysia Trade
Millions
Pakistan - Malaysia Trade
$2,000
$1,608
$1,500
$1,000
$1.45 B
$500
$158
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Exports To
Imports From
--- EHP operational
Malaysia's share in Pakistan's World Trade
Percentage
10%
8%
5.09%
6%
4%
2%
0.90%
0%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
% Share in Total Exports of Pakistan
% Share in Total Imports of Pakistan
Source: United Nations Commodity Trade Statistics Database
Page 37
Comparison of Pre and Post FTA
Import figures
$1,246
$1,115
$1,400
$1,200
Top 5 Imports from Malaysia
2005
2006
2007
2008
2009
$725
$1,000
$800
$600
$436
$411
$43
$58
$69
$85
$49
$36
$53
$73
$66
$43
$200
$38
$29
$39
$54
$40
$113
$400
$5
$0
$3
$0
Millions
Import growth: Main import growth has been in Palm Oil. Little to no increase in
imports of other commodities
$0
Palm oil, other
animal/veg. oil
Petroleum Oil
Organic chemicals Plastics & articles Machinery & parts
of plastics
Source: United Nations Commodity Trade Statistics Database
Page 38
Comparison of Pre and Post FTA
Export figures
$63
$70
$60
Top 5 Exports to Malaysia
2005
2006
2007
2008
2009
$10
$5
$0
$0
$0
$10
$14
$11
$20
$6
$8
$9
$30
$11
$11
$11
$14
$11
$40
$16
$16
$16
$21
$18
$39
$50
$13
$10
$18
Millions
Export growth: Substantial growth has only been in the export of cereals (rice)
with mild growth in value-added textile products. Although Malaysia is a bigger
market, total exports in 2009 of $158 M are less than the exports to Sri Lanka
$0
Cereals
Cotton
Fish & other
seafood
Towels, Bed Linen
& Other Textile
Articles
Milled Corn
Source: United Nations Commodity Trade Statistics Database
Page 39
Export Potential with
Major Trading Partners
Page 40
Total EU Imports from Bangladesh,
Pakistan, Sri Lanka and Viet Nam
Billions
In 2002, of the total Pakistani exports to EU of $2 million, cotton and textiles made
up 54% while in 2009 they made up 62%. The 2009 corresponding percentage for
Bangladesh, Sri Lanka and Viet Nam is 92%, 59% and 17% respectively.
$14
$12
Bangladesh
Pakistan
Sri Lanka
Viet Nam
$11
$10
$8
$8
$6
$4
$2
$5
$4
$3
$2
$2
$3
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: United Nations Commodity Trade Statistics Database
Page 41
Total US Imports from Bangladesh,
Pakistan, Sri Lanka and Viet Nam
Billions
As in the case of EU, cotton and textiles make up majority of Pakistan’s exports
to the EU. In 2002, of the $2 million Pakistani exports to the US, cotton & textiles
contributed 79% which rose to 82.4% of exports to the US by 2009.
$16
Bangladesh
Pakistan
Sri Lanka
Viet Nam
$14
$13
$12
$10
$8
$6
$4
$2
$0
$4
$3
$3
$2
$2
$1
2000
$2
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: United Nations Commodity Trade Statistics Database
Page 42
SAARC is heavily under-utilized
In 2009 total world trade by SAARC countries was nearly $550 billion
30.0%
INTER-ASEAN TRADE SHARE IN ASEAN WORLD TRADE
INTER-SAARC TRADE SHARE IN SAARC WORLD TRADE
25.0%
24.7%
20.0%
17.4%
15.0%
10.0%
5.0%
3.3%
2.6%
0.0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Source: United Nations Commodity Trade Statistics Database
Page 43
Afghan Transit Trade
Agreement (ATTA)
Page 44
Afghan Transit Trade Agreement
(ATTA) - Background
• Original treaty signed in 1965 between Pakistan and
Afghanistan. A new treaty, the Afghanistan-Pakistan
Transit Trade Agreement (APTTA) signed in 2010
• Widespread misuse of ATTA is reported
o TV sets included in the 1996 negative list.
Domestic Production:
From 72,000 to 288,000
o TV sets removed from the negative list in 2005.
Domestic Production: From 795,000 to 534,000
Legal Imports: From 935,000 to 609,000
Page 45
Salient Features of the New APTTA
• Provides transit routes to Pakistan to the Central Asian
Republics (CARs)
• Afghan exports to India via Wagah allowed. Indian
exports to Afghanistan via Wagah not allowed
• Afghan Cargo allowed from 3 seaports: Port Qasim,
Karachi Port, Gwadar Port
• No negative list or provision of negative list included
• Measures adopted to reduce unauthorized trade:
– Installation of tracking device on transport unit
– Custom to Custom information sharing
– Provision of financial guarantees equivalent to Pakistan
import duties
Page 46
Recommendations of Industries
not considered in the APTTA
– Imposing quotas on transit items after calculating the
consumption of these goods in Afghanistan (Refused by
Afghanistan)
– Collecting customs duties at the seaports on transit items at
Pakistan’s Tariff rates, to be refunded once the cargo reaches
(Refused by Afghanistan)
– Setting an identical tariff structure for Afghanistan and
Pakistan to reduce smuggling margins (Cabinet Decision to
rationalize tariff regime but no long term road map)
– Documenting Afghan Imports/Exports – Letters of Credit and
registration with Afghan tax authorities for Afghan importers
(Provision of financial guarantees equivalent to Pakistan
import duties incorporated in APTTA)
Page 47
Pakistan Afghanistan Bilateral Trade
Bilateral trade between Pakistan and Afghanistan has been
increasing since 2000. In 2009, exports to Afghanistan totaled
$1.3 billion while imports were $122 million
Millions
Pakistan - Afghanistan Bilateral Trade
$1,600
$1,400
Exports
in million $
Imports
Afghanistan World Trade, 2009
Country
Trade
Share
USA
$ 1,636
19.6%
Pakistan
$ 1,495
17.9%
UAE
$ 1,132
13.5%
Nigeria
$
950
11.4%
India
$
592
7.1%
$1,200
$1,000
$800
$600
$400
$200
$0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: United Nations Commodity Trade Statistics Database
Page 48
Top 10 Pakistani Exports to
Afghanistan in 2009
$500
$400
Total Exports: $1.34 B
$394
$39
$41
$44
$59
$69
$85
$100
$94
$200
$149
$300
$149
Millions
The top 4 items (Petroleum products, stone & cement, cereals, edible oil), which
do not include any value added products, make up almost 60% of our exports
$0
Source: United Nations Commodity Trade Statistics Database
Page 49
Afghanistan’s Transit Trade
• To access seaports, two possible options exist for
Afghanistan: Chabahar/Bandar Abbas port in Iran and Port
Qasim, Karachi Port & Gwadar Port in Pakistan
• Afghanistan’s transit trade through Pakistan has been
increasing, reaching $1.9 billion imports in 2009
(representing an increase of over 900% from 2001 levels)
Millions
Afghanistan's Transit Trade through Pakistan
$2,500
$1,957
$2,000
$1,500
$1,000
$500
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
Imports
Source: Pakistan Customs
Slide 50
Incentive to Smuggle
Item
Afghanistan Tariff
Pakistan Tariff
Tobacco*
16% CD
25% CD + 16% ST +
4% WHT + ED
Auto Parts*
5% CD
35% CD + 16% ST
10% CD + 16% ST +
1% ED
*On the negative list prior to signing of the new APTTA
Tea
2.5% CD
By staying out of the formal sector, smugglers are able
to avoid Customs Duty as well as other taxes.
Avoidance of Sales Tax and Excise Duty is a major
source of advantage to smugglers.
Page 51
Top 10 Imported Commodities under
the ATTA by Afghanistan
$298
$321
$350
$300
2001
2005
2009
$4
$11
$41
$44
$0
$0
$23
$0
$10
$1
$8
$11
$22
$0
$2
$50
$31
$34
$100
$61
$94
$96
$103
$150
$115
$127
$200
$33
$25
$43
$250
$0
$21
Millions
Keeping in mind the limited resources of Afghanistan, the large
amounts of imports of the highlighted items suggests misuse of ATTA
$0
Source: Pakistan Customs
Slide 52
Limited Potential of CAR
Though major concessions were given in the new APTTA in
exchange for transit access to CAR for Pakistani goods, the
realistic potential of the markets in that region needs assessed
Country
Tajikistan
GDP (billion $)
Per Capita Income
Population (millions)
$4.98
$716
7.0
Kazakhstan
$109.16
$6,870
15.9
Kyrgyzstan
$4.58
$860
5.3
Uzbekistan
$32.82
$1,182
27.8
Turkmenistan
$19.94
$3,904
5.1
$166.54
$981
170.0
Pakistan
Source: World Bank – World Development Indicators (http://data.worldbank.org/indicator)
Total
Population:
61.1 million
Furthermore:
• The CAR markets have already been penetrated by Chinese, Iranian
and Turkish goods.
• It will be many years before Afghanistan has stabilized to the point
that transit is possible to CAR without significant risks
Slide 53
Problems of Under
Invoicing and Misreporting
Variance in data as reported by the
Governments’ of Pakistan and its
trading partners for imports and
exports of Pakistan
Page 54
Comparison of Official 2009 data
From Top 10 Import Partners
The high variance in reported figures occurs mainly for China & UAE. For China,
the imports reported by Pakistan are much less than the exports reported by
China. For UAE the phenomenon is opposite. Imports reported by Pakistan are
much higher than the exports reported by UAE
Exported to Pakistan - rep Trading Partner
$5.5
Imported from Trading Partner - rep Pak
$6
Note: The figure
reported by the
importing country
should be slightly higher
because of the
difference between CIF
and FOB valuation
Kuwait
Japan
Germany
India
Iran
$0.8
$0.7
Malaysia
$1.0
Not Reported by Iran
USA
$1.1
$1.5
$3.3
UAE
$1.3
$1.0
Saudi
Arabia
$1.3
Not Reported by Japan
China
$1.6
$1.6
$0
$1.8
$1.6
$1
$1.8
Not Reported by Kuwait
$2
$1.1
$3
$3.5
Not Reported by Saudia Arabia
$4
$3.8
Billions
$5
UK
Source: United Nations Commodity Trade Statistics Database
Page 55
Pakistan – China: Difference in
Reported Import/Export Figures
Pakistani Imports from China
$8.0
Billions
$6.0
$5.79
$4.24
$4.0
$3.43
$2.47
$2.0
$1.85
$1.24
$0.70
$0.0
2002
$5.52
$1.74 B
$3.78
$2.91
$1.49
$0.96
2003
$2.35
$4.16
$5.98
$4.74
2004
2005
Exports to Pak - rep by CHN
2006
2007
2008
2009
Imports from China - rep by PAK
Pakistani Exports to China
$1.5
$1.26
$0.26 B
Billions
$1.10
$1.0
$1.01
$1.01
$1.00
$0.83
$0.5
$0.56
$0.24
$0.57
$0.26
$0.59
$0.44
$0.73
$0.51
$0.61
$0.30
$0.0
2002
2003
2004
2005
Imports from PAK - rep by China
2006
2007
2008
Exports to CHN - rep by Pak
Page 56
2009
Source: United Nations
Commodity Trade Statistics
Database
Note: The figure reported by
the importing country should
be slightly higher because of
the difference between CIF
and FOB valuation
Pakistan – China: Discrepancy in Import
Figures for Selected Commodities - 2009
The large amounts of under declared imports of textiles, footwear and
auto-parts has hurt the domestic industry
$882
Rep by Pak
Rep by CHN
$77
$127
$52
$101
$34
$95
$87
$148
$76
$154
$8
$104
$169
$11
$31
$121
$608
$581
$1,000
$900
$800
$700
$600
$500
$400
$300
$200
$100
$0
$190
Millions
Pakistan Imports from China in 2009
Source: United Nations Commodity Trade Statistics Database
Page 57
Pakistan – UAE: Difference in
Reported Import/Export Figures
Billions
Pakistani Imports from UAE
$4.0
$3.0
$2.0
$3.35
$2.77
$2.48
$2.29 B
$1.79
$1.46
$1.0
$0.0
$3.78
$3.41
$1.06
$0.53
2003
$0.74
2004
$0.92
2005
$1.12
2006
Imports from UAE - rep by Pak
$0.82
2007
$0.82
2008
2009
Exports to Pak - rep by UAE
Billions
Pakistani Exports to UAE
$2.5
$2.11
$2.01
$2.0
$1.54
$1.5
$1.26
$1.12
$1.0
$0.5
$1.06
$1.24
$1.41
$1.57
$0.78
$0.42
$0.45
$0.52
$0.0
2003
2004
2005
Exports to UAE - rep by Pak
$0.52
2006
2007
2008
Imports from Pak - rep by UAE
Page 58
2009
Source: United Nations
Commodity Trade Statistics
Database
Note: The figure reported by
the importing country should
be slightly higher because of
the difference between CIF
and FOB valuation