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Trade & Investment

Esther Perez Ruiz Remarks on Trade Connectivity Book Launch

by PRIME Institute PRIME Institute No Comments

Perspectives on the Trade’s Impact on Economic Transformation and People’s Wellbeing

IMF Resident Representative to Pakistan, Esther Pérez Ruiz


Good morning everyone. Thank you very much to the Economic Advisory Group, PRIME, and the
Friedrich Naumann Foundation, for the opportunity to be part of today’s launch of the report on
Trade and Connectivity. I am very honored to participate in this panel with the Honorable
Minister for Commerce, your Excellency the Ambassador of the Republic of Indonesia,
Chairperson Economic Advisory Group, and Dr. Aadil Nakhoda from IBA Karachi.


Today’s theme greatly appeals to me as I have seen, in my life experience and as a professional,
how trade can really make a difference for people’s wellbeing.

Let me start with some family memories around trade that go back to my great-grandfather,
who at the turn of 20th century, lost in a wolf attack his most valuable asset, a horse carriage he
used to provide essential goods to isolated villages scattered around a remote valley in Spain.
Deprived of his livelihood, he migrated to Bilbao, which was at the time one the most the
prosperous and export-oriented cities in Spain. So, after many years of hard work, he managed
to set up a company to export tiles, on a small scale, to the rest of Spain, Portugal and France… 

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Remarks by Ms. Esther Perez Ruiz on Trade Connectivity Event

For inquiries, please contact info@primeinstitute.org or call at 03330588885.

Pakistan and the European Union under GSP+

by PRIME Institute PRIME Institute No Comments

Pakistan and the European Union under GSP+

Pakistan was awarded the GSP+ status on 1st of January 2014 that aimed at promoting economic stability and good governance in the country. The status, which expires in December 2023, provides full removal of duties on most of the European Union’s tariff lines and is subject to compliance with 27 International Conventions. Although Pakistan’s exports to the EU since 2013 have increased by almost 46.6% (FY 13’ to FY 22’) which stand at USD 7.6 billion (10 months) in 2022 and are projected to increase to USD 8.3 billion by the end of FY 22’ (excluding the UK), the country’s compliance with and performance of the 27 mandatory conventions remain inconsistent.

The analysis in this report disaggregates Pakistan’s bilateral trade with the EU in two periods– 2007-2013 and 2014-2022. The findings indicate that Pakistan’s exports to the EU have increased from an aggregate USD 37 billion (2007-13) to an aggregate USD 66 billion (2014-2022); compared to its exports to the world i.e. from an aggregate USD 150 billion to USD 217 billion in the same period. 

Although cumulative exports to EU between these two periods have increased by almost 78.4% (as compared to growth in exports to the world in same period i.e. by almost 44.7%), Pakistan’s exports to the EU since FY13’ (before the start of GSP+) have risen at a relatively slow pace i.e. by approximately 46.6% (FY22’).

The proportion of Pakistan’s exports to the EU in total exports has also increased from 24.6% (2007-13’) to 30.1% (2014-22’) as compared to other major export destinations including China (6.4% to 8.6%) and USA (17.8% to 17.9%) in same eras.

Moreover, Pakistan faces immense competition from its regional competitors like Bangladesh, which enjoyed a 25% share in EU’s imports among GSP beneficiaries in 2018 followed by India (24%), Vietnam (14%), and Indonesia (10%). Although Pakistan had a 9% share in EU’s imports among GSP beneficiaries in the same year, Bangladesh has a higher Revealed Comparative Advantage in textiles – a major sector under GSP+ status.

This report provides an overview of Pakistan’s trade performance under the GSP+ status and implementation of International Conventions. Pakistan’s GSP+ utilization rate has been high i.e. 96.5%. With that, proportion of EU’s total trade with Pakistan among other GSP+ beneficiaries is comparatively better i.e. 0.3%. However, the GSP+ utilization rate could be further increased through exhausting tariff lines that constitute a higher proportion of EU’s imports including Chapters 42, 61, 62 and 63.

In the absence of this preferential status, Pakistan would have to bear an MFN tariff of 12% under most traded chapters (42 and 61 to 63). For Pakistan to remain in the scheme for 10 more years, it must ratify and implement 5 new conventions in addition to the previous 27. Additionally, for a better approach, it should start negotiating with the EU on tariff lines not falling under the GSP+  preferential status for the next GSP+ agreement.

Click below to read full report:

Pakistan and the European Union under GSP+

For inquiries, please contact info@primeinstitute.org or call at 03330588885.

Customs Tariff Reforms: One Step Forward, Two Steps Back

by PRIME Institute PRIME Institute No Comments

Customs Tariff Reforms remain lackluster to augment country’s exports

PRIME’s new report, “Customs Tariff Reforms: one step forward, two steps back” finds that country is lagging to diversify its produce, markets and our domestic industries remained inefficient on the back of insignificant tariff reforms. Pakistan Tehreek-e-Insaf (PTI) government came to power with the reformative agenda to augment industrialization and exports of the country but “Make in Pakistan” remained a slogan because contemporary tariff structure restricts innovation and efficiency.

“Customs Tariffs are often used as a tool for protection of domestic industries and revenue maximization. Effectively, they work against domestic industry by shielding them from innovation and competitiveness. While the government may compensate for its revenue targets from import taxation, it stunts economic growth, and hence future revenues”, said Ali Salman, Executive Director PRIME

Government took a policy change in 2019 by assigning responsibility of customs tariff determination to Ministry of Commerce by establishing tariff policy board and tariff policy center in National Tariff Commission (NTC) to put forth proposals on the back of research and consultation with stakeholders. Subsequently, National Tariff Policy 2019-24 was formulated and customs duty on raw materials were slashed for some sectors. However, the impact remained insignificant from the raise in regulatory duties by Federal Board of Revenue (FBR).

The report highlights that imports in country are subjected to myriad duties for protection of domestic industries from international competition and revenue generation to manage budgetary requirements. In trade policy, revenue generation has taken precedence over long-term sustainability and industrial competitiveness, which can be illustrated by the fact that revenue collection at the import stage has stood above 40% of the total FBR collection, i.e. Rs 2,129 billion was collected at the import stage out of total FBR’s collection of Rs 4,732 billion in FY21.

Contemporary tariff setting is based on a principle of cascading i.e. tariffs on raw materials are low, on intermediate and final goods are high. Resultantly, consumers have to buy domestically produced low quality products at high prices and local firms do not innovate to become competitive internationally because of their focus on domestic sales. Therefore, import substitution policy actually becomes export substitution policy.

Moreover, the government has promulgated 43 SROs in the last three years while the PML-N government had promulgated 53 SROs in five years, which created uncertainty and difficulty in the implementation of tariff policy along with making the system more complex.

The report highlights that PTI government has managed to sign China Pakistan Free Trade Agreement phase II but progress on other bilateral and multilateral trade agreements with Asian tigers, Central Asian States, and decision on joining Regional Comprehensive Economic Partnership (RCEP) has been lagging, which has restricted exports to conventional destinations

It has been globally acknowledged that higher the number and amount of taxes, higher will be the tax avoidance. Similarly, high tariffs have contributed to under-invoicing, mis-declaration of quality and quantity of goods and more importantly smuggling, which is a signal that tariffs are priced too high for customers.

Report suggests that country’s trade policy needs reforms such as formulation of comprehensive trade policy, tariff restructuring, rescinding import substitution policy and moving away from using tariffs as revenue generation tool to augment competitiveness of domestic industries and exports of the country.

Click below to read full report:

Customs Tariff Report - one step forward, two step back

For inquiries, please contact afzal@primeinstitute.org or call at 03330588885.

Barriers for SMEs to export at regional and international level

by PRIME Institute PRIME Institute No Comments

Setting the Scene

Setting the Scene

SMEs in Pakistan are widely reported to represent 30 percent of national GDP, 25 percent of exports of manufactured goods, and 35 percent of manufacturing value added. Other estimates put the number of SMEs contribution to exports at 70 percent. The reality is that these estimates are outdated and unreliable, based on an economic census conducted thirteen years ago, a time frame during which Pakistan’s economy has changed significantly. 

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The WTO Trade Facilitation Agreement: Main Issues Faced by SMEs in S&SE Asian Countries and Their Solution

by PRIME Institute PRIME Institute No Comments

Bed, table, toilet and kitchen linens
Exports to the US Market: Technical
Barriers to Trade faced by exporters in
Pakistan

Setting the Scene

Setting the Scene

This study was carried out from the 3rd to 24th June 2016 by PRIME (Policy Research Institute of Market Economy), Islamabad as a part of a CUTS International and Australia Aid Project entitled “Geneva Trade and Business Connation: South and South East Asia”.

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Trading with China: Challenges and Policy Issues faced by Micro, Small and Medium Enterprises in South and South East Asia

by PRIME Institute PRIME Institute No Comments

Setting the Scene

Setting the Scene

This Country Update Note examines the constraints faced by Pakistan’s micro, small and medium-sized firms in exporting to Chinese market. It informs on the composition of Pakistan’s exports to China, distribution along firm size and across sectors, tariffs and non-tariff barriers and the use of trade preferences under Pak-China Free Trade Agreement (FTA) signed in 2007. The study uses a mix methodology. It analyses firmlevel export data for the recent period (from 1-1-2017 to 31-12-2018).

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Women Exporters: What are their Special Challenges?

by PRIME Institute PRIME Institute No Comments

Setting the Scene

Setting the Scene

Globally, Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in the socioeconomic development of a country. Pakistan is no exception, where the MSMEs contribute 40 percent[1] in national GDP, 25 percent in export earnings, 35 percent in manufacturing value added and 80 percent in the employment of non-agricultural labor force. The MSMEs are mainly concentrated in the trade, manufacturing and service sector. As far as women-run MSMEs are concerned, Pakistan has the lowest rate of female entrepreneurship in the world standing at 1 percent.

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Mapping of Land and Maritime Transport: Key Figures, Structure and the Current National Regulations

by PRIME Institute PRIME Institute No Comments

It is a well-established fact that an efficient transport system plays a pivotal role in enhancing economic growth, reducing poverty and attaining Millennium Development Goals (MDGs). Globally, investments in transport sector have significantly enhanced trade volume and human development through increased mobility. As far as Pakistan is concerned, the transport system generally comprises of roads, railway, aviation, ports and shipping services.

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