Pak Eco FInal

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By : Fahad AhmedSyed Salman Abbas

M.Omer MukhtarZaid Farhan Kardar

SAARC and Pakistan


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Introduction

The South Asian Association forRegional Cooperation (SAARC) is anorganization of South Asian nations,founded in December 1985 by Ziaur

Rahman.

Dedicated to improve the economic,technological, social, and culturaldevelopment emphasising collective self-reliance in the region.


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Countries In SAARC

Bangladesh

Bhutan

India

Maldives

Nepal

Pakistan

Sri Lanka

Afghanistan


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Pakistan and Afghanistan


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Overview

Both are Islamic countries and culture is sameto a great extent,

Governance issues have been conflicting inpast

Afghanistan is a landlocked country

Pakistan has the resource of water transit

A very long border

Strategic interests of both

physical location of Afghanistan providesPakistan with opportunity to send its goods to

central Asian sates


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US $1 billion trade annually, but it is veryasymmetric

Most part by imports from Pakistan, ascompared to very little formal Afghan exports

Transit to Afghanistan through Pakistan iscurrently broadly governed by the 1965 Afghan

Transit Trade Agreement (ATTA)

Investments from both sides in infrastructureNational Trade and Transport Facilitation

Committee (NTTFC) under the Trade andTransport Facilitation Project (TTFP)

National Trade and Transport Facilitation


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Problems in trade

Poorly designed and managed borders andport stations,

Long waiting times at the borders whichgenerates unofficial payment transactions,

Smuggling

Insecurity in Pakistan and Afghanistan,

Strong lobby that does not want the tradeto happen freely,

Lack of skilled Human Resource,


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Low poverty rates on both sides,

American presence in Afghanistan,

Indian interference in both regions,

Lack of formal financial and insurancesystems,

Lack of infrastructure

High resistance to immigration


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Risks

There is no free economic zone inAfghanistan to support foreign investorsin establishing their business

Governments and investors from bothcountries have to face double taxationon their revenues while operating fromother country

Pakistan has no Bilateral InvestmentTreaties with Afghanistan


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Pakistan has signed an agreement withTurkmenistan and Afghanistan to construct a

pipeline for the supply of natural gas to Pakistanfrom Turkmenistan

If smuggling is controlled, the trade volume willincrease more than 50%

Indian interference should be controlled

Double taxation should be abrogated


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NGLADESH


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Pakistan and Bangladesh

Five Pakistani heads of government made officialvisits to Bangladesh since the 1980s and numeroustrade and cultural agreements have been signed

Trade between the two countries currently standsat $340 million

'negligible when taking into account the combinedpopulation' (of both countries).


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Rationales of Pak-BangladeshTradeCultural homogeneity and mutual

acquaintance

Economic complementarities

Huge market of about 300 million people

Homogenous consumer behavior andbuying pattern

Existence of similar distribution systemand selling strategy

Almost symmetric economic developmentstate

Similarity in life style and standard of living


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Year Export to Pakistan Import from Pakistan Trade Balance

2000-2001 32.08 95.22 (-) 63.14

2001-2002 28.60 67.32 (-) 38.72

2002-2003 31.50 68.68 (-) 37.18

2003-2004 45.11 112.70 (-) 67.59

2004-2005 63.12 138.92 (-) 75.80

2005-2006 57.74 150.11 (-) 92.37

2006-2007 61.06 181.40 (-)120.34


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Most prospective sectors for JointVenture

IT

Textile

Leather Goods

Agro-based Industry

Light Engineering


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Deterrents to accelerated bilateraltrade and economic cooperation

Perceived political uncertainties

Absence of direct shipping links

Lack of frequent interaction and exchange of

required information between ourbusinessmen

Absence of cargo flights and passenger flights

Lack of exchange of frequent private sectordelegations

Failure to participate in each others tradefairs


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Suggestions

Recognition of Special and Deferential Treatmentfor Bangladesh

Tariff reduction schedule under SAFTA

Simplification and harmonization of customsprocedure.

Mutual recognition of certifying and testinginstitutes.


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MALDIVES


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Maldives

Pakistan and Maldives agreed to expandtheir bilateral relations especially in trade,communication and manpower training.

Pakistan and Maldives have a very smalltrade link

Maldives imports from Pakistan were $6million that could be further enhancedby increasing bilateral trade and exploringdifferent trade areas.


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Opportunities Between twoCountriesPakistan can continue PIA flights to

Maldives regularly which would improveconnectivity.

Maldives has a vast scope for import ofvegetable, fruit and other products fromPakistan.

Maldives has a high demand for mangoes

from Pakistan which can also be traded.


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Tourism is the main industryof Maldivess economy as about 700,000visitors annually visit islands of this countryand added that both countries could reap

benefits by increasing bilateralcooperation in this area.


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SRILANKA


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Relations between the Islamic Republic ofPakistan and the Democratic SocialistRepublic of Sri Lanka are generally warm.

Pakistan assisted the Government of SriLanka in supplying High-Tech military

equipment to the Sri Lankan army inthe civil war against the Liberation Tigersof Tamil Eelam.


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TRADE

Pakistan is the second largest tradingpartner of Sri Lanka in South Asia.

Sri Lanka was the first country to signa Free Trade Agreement with Pakistan,which became operational from June 12,2005. 4,000 items can be imported

to Pakistan from Sri Lanka.

The total turnover of bilateral tradebetween Sri Lanka and Pakistan in 2005recorded US $ 150 million, which grew up


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FUTURE PROSPECTS

The need for exchange of visits by gemand stone cutting experts of the twocountries can be done .

Increasing the import of tea from Sri Lankaand bilateral trade should be done in localcurrency.

Pakistan could train officers of Sri Lankanpolice and intelligence agencies.


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NEPAL


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NEPAL

The relation between Pakistan and Nepalfully established between 1962 and 1963

Ayub Khan, the president of Pakistan madea special visit to Nepal.

Both nations have since sought to expandtrade, strategic and military cooperation.


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Pakistan agreed to establish an air link withNepal.

In 1963 Pakistan agreed to provide Nepalwith free trade access and transportfacilities.

Pakistan assisted Nepal by offering USdollars 5 million of credit


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Trade

The two countries although do not havequite huge amount of trade.

The total amount of trade between the twois almost US dollars 4.8 million.

Pakistans total export = US$ 1.631 million

Nepals total export = US$ 3.166 million

Nepal exports mostly tea and spices to


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The Efforts

Nepal-Pakistan Chamber of Commerce andIndustry was established on February,2007.

Efforts to promote bilateral trade especiallyin textile, oil seeds, extraction of oil andtourism to be carried out.

Recently Nepal has started importing armsfrom Pakistan.


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Prospects

Pakistan should transfer technology andenhance trade with Nepal.

Duty-free exportsTrade exhibitions

Exchanges of visits by business

delegations.


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BHUTAN


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BHUTAN

GDP Composition :

Agriculture = 24.7

Industry = 37.2

Services =38.1

Major Industries :

Cement

Wood products

Processed fruit


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Trade With Pakistan

Most of the trade is done with India.

Only 0.01 of their total exports are linked to

Pakistan.

Only 0.07 of their total imports are linked to

Pakistan.


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Comparison Of Trade

Year 2002:

Exports = US$ 0.319 million

Imports = US$ 0.387 million

Year 2008:

Exports = US$ 0.021 million

Imports = US$ 0.117 million


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EXPORTS

Major items of export from Pakistan toBhutan(Year 05) :

Cotton yarn and fabrics (US$ 0.1 million)

Pharmaceutical products (US$ 0.005

million)

Salt (US$ 0.002 million)


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IMPORTS

Major items of imports from Bhutan toPakistan(Year 04) :

Organic chemicals (US$ 0.107 million)

Articles of apparel (US$ 0.103 million)

Man made filament and yarn (US$0.071million)


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Prospects

Involvement of government officials.

Organizations and committees to be

formed.

Exports of food items.

Imports of wooden products


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IA


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India and Pakistan are the two largesteconomies in South Asia that have very lowlevels of bilateral trade.

This had been the result of border disputes

and political tensions.

Trade (including official and unofficial)between the two countries stood at around

US$ 2.5-2.6 billion in 2007-08it could potentially be as much as US$ 5-10

billion or 2 to 4 times its current levels.


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A large part of this trade happens throughDubai, increasing costs of transportationand time taken for goods to reach theirdestinations.

While Indias tariffs are now far lower at anaverage of 13 per cent that they used to betwo decades ago, they are still high atabout 40% for most agricultural goods.

And Pakistans export interests will be inagriculture, textiles, sporting equipmentand leather goods.

In addition to these high tariffs which


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Indias unofficial and smuggled exports toPakistan are estimated at US$2 billion,while the official figures are a mere US$ 94million.

Though officially only around 700 items areunder the list of imports to Pakistan, amuch larger number find their way intoPakistan, from India to Bandar-e-Abbas in

Iran, to Kabul and later to Peshawar.

The selling price of these goods inPakistans markets is substantially inflateddue to this circuitous trading route.


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Pakistan is the second-largest consumer oftea in the world, a market that can beexploited by India.

Indian drugs are 30 per cent cheaper.

Pakistan has banned the import of textilemachinery from India and manufacturersimport the machinery mostly from

Germany. Pakistans annual demand for tyres stands

at 10, 00,000, whereas it produces only200,000. Yet, it has imposed a 46.6 per

cent duty on popular Indian truck tyres.

T til d Cl thi


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Textiles and Clothing

The textile and apparel sector continues tobe the driving force for economic growth inBoth India and Pakistan. This sectorcontributed 18.8 percent in India and 65.6

percent in Pakistan, of the total value ofexports in FY04.

Pakistan, although a supplier of limitedrange of products is considered a

competitive supplier of cotton goods.

Presently trade in textile and clothingbetween India and Pakistan is almostnonexistent.

I d St l


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Iron and Steel

India was the major source of raw material(iron ore) to this vital industry andaccounted for 69.2 percent of the totalimports of iron ore in FY04 followed by

Australia (19.9 percent) and Iran (10.9percent).

Unlike Pakistan, India has a wellestablished steel industry and is a net

exporter of steel and steel products.

Pakistans iron & steel product importsfrom India were just a small fraction of itstotal imports.

Ch i l


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Chemicals

During FY04, imports of chemicals stood at$2.8 billion, an increase of 29.5 percentover the last year.

Compared to Pakistan, the Indian

chemical industry is well established andhas Shown impressive growth over theyears contributing about 6.7 percent in theIndian GDP.

In terms of volume, it is the twelfth largestin the world, and third largest in Asia.

With a current turnover of about $30.8

billion, it accounts for 14 percent of the


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Pharmaceuticals

There are about 316 pharmaceuticalmanufacturing companies including 30multinationals (47 percent share), whichare meeting around 80 percent of the

countrys requirement.Almost 95 percent of the basic raw

materials used for manufacturing ofmedicines are imported from China, India,

Japan, United Kingdom, Germany,Netherlands and others.

During FY03 and FY04, Pakistan imported4.3 percent and 6.8 percent of its totalimports of chemicals and pharmaceutical

A t bil


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Automobiles

Compared with Pakistan, India has a strongengineering base and has successfullycreated a sizable capacity for production ofvehicles.

Pakistan can import automotivecomponents and spare parts from India at alower price as presently these items arebeing imported from the Far East at higher

prices.


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The potential advantages of tradeliberalization for Pakistan appear to belarge.

the advantages of dismantling tariff and

non-tariff barriers include the potential forboosting productivity and economic growth,and can also extend to promoting regionalcooperation in all areas.

Trade liberalization will unambiguouslybenefit Pakistani consumers, since productprices fall and consumer choice increaseswith reduced trade barriers.


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Given the large and growing size of itseffective market the economic losses toIndia would be minute while political goodwill and returns would be substantial over

time.Pakistan, Bangladesh, Sri Lanka will be

much better off economically if they areable to penetrate the buoyant Indian

market.

Friendly, peaceful and irritant-freeneighbors would aid rather than hinderIndia in moving towards its long term goals.

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Pak Eco FInal