International

Business
Critical Analysis of Pakistan Policy
2015-2018
Muhammad Tayyab Javaid

L13-4713

BBA-A

Instructor : Sir Muhammad Ayub

Table of Contents
Introduction:...........................................................................................................................................2
Targets and Key Enablers:.................................................................................................................2
Initiatives under the policy:...............................................................................................................3
Product Sophistication and Diversification:.................................................................................3
Product and Brand development:...................................................................................................4
Relaxation from local Taxes and Levies to Exporters:.............................................................4
Agricultural Plants and Machinery for SME’s:.............................................................................5
Market access:.......................................................................................................................................5
Enhancing the share of the market:...............................................................................................5
Exploring New Markets:......................................................................................................................5
Trade Diplomacy:..................................................................................................................................6
Institutions strengthening and development:.............................................................................6
Trade Facilitation:.................................................................................................................................7
Short Term Export Enhancement Measures................................................................................7
Focus Product:.......................................................................................................................................7
Focus Market:.........................................................................................................................................8
Conclusion:..............................................................................................................................................8
APPENDIX.................................................................................................................................................9

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Critical Analysis of Pakistan Trade
Policy 2015 – 2018

Introduction:

The trade policy 2015 – 2018 is designed by the consent of all the related
government departments and private businesses and by considering the fact that
how can this be beneficial for Pakistan in accordance with global trade. All the major
exporters were invited in the meeting to discuss their business strategies and their
profitability in accordance with the trade policies so that they might not get
affected. Figures of past years were highly considerable due to the decline in the
exports so that this loss can be recovered in the upcoming year. As it was observed
in past that exports were banned so this time export barriers were a bit lenient and
government budgetary support was also provided to increase the exports in the
form of subsidies. Government allocated Rs. 6 Billion in the concerned budget.

Targets and Key Enablers:

Exports were to be increased to $35 Billion so that balance of trade can be

maintained as imports were increasing and exports were decreasing in the
preceding years. This target is to be achieved by 30 th June, 2018. As the export
increase, cash inflow can also increase. This can help the exporters to produce large
quantities and can lower their cost and the local market will also be beneficial from
them. Exporters will become more competitive as producing efficiently on lower
cost as compared to other counties. To be highly competitive exporters will have to
provide good quality which is acceptable in the international market. Some of the

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other factors that can help are that producers have all the utilities accessible, good
technology and on top of that skilled labor with low cost.

Theories of trade were kept in mind and were utilized for the betterment of the
economy. The decision was that rather than using the factor efficient production
strategies, natural efficient production should be adopted and then industry should
move towards innovation. This stage can only be achieved by adopting international
standards, by retaining intellectual minds and by resolving the efficient mechanism
issues.

All the policies should be decided in a such a way that maximum regional trade
should take place by Pakistan which means that the products in which Pakistan has
the edge of efficient production should be exported. The products in which other
countries have a comparative advantage should be imported. Trade barriers should
also be removed, trade free areas should be declared, unions should be formed to
increase trade. Taxes should be lowered or removed so that trade could be done
easily. Policies regarding foreign investment should be at ease so that foreign
investment increases.

Four pillars are derived with the help of key enablers, evaluation of trade policy
2012 – 2015, emerging global trade scenarios and extensive consultation with
private and public sector stake holders. In short pillars of this trade policy have
been decided by looking at past so that precautionary measures can be taken.
Research centers should be established for innovative product designs and diverse
range of products should be provided along with that brands should be established
by proper marketing strategies.

Market access should be increased by increasing the market share, entering the
new markets, creating demand and increasing the emergence of markets.

Guidance through different institutes should be given and their strength should be
increases by restructuring them and building competitive institutions to educate
about trade and helpful policies. Along with that facilities for people should be
planned, like cost of startups should be low, this can be done by government
subsidies and lowering taxes and tariffs, allowing more quotas. Quality assurance

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teams should be checking the production units that whether they are meeting the
standards or not.

Initiatives under the policy:

Product Sophistication and Diversification:

In this portion of the policy this has been explained that majority of the industry
was to be moved towards the innovative production from efficient driven economy
followed by factor driven economy. Which means that first according to the trade
theory of factor proportion, goods were produced by the country from the resources
in which they had less cost in factors of production then they moved towards the
natural efficient production by following a new theory and now the policy decides to
compete the world parallel by innovative production which is a good part.

Obviously innovative and different things require advance technology. Researchers

and the involved traders have observed the reason for the decline in exports is that
while being efficient in some sectors we are behind due to the outdated technology.
Up gradation of technology was required to meet the export completion. In the
developed economies there is very advanced working environment and to meet
their standards this was a good step.

As technology needs to be improved so government started giving loans on fewer

markups and subsides to import plants and equipment's. This can be helpful for
those who are capable of producing a good quantity.

Product and Brand development:

Government realized the capability of low cost production in some sectors so they
granted Rs. 5 Million's for the improvement of machinery. They know that if exports
of leather, fisheries, surgical instruments and pharmaceuticals are increased they

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could cover more than half of the share of the Pakistan’s exports. Our policies
currently don’t provide such facilities but in future are planning to and that will be
beneficial as majority of international brands utilize the labor of our country in
pharmaceuticals, sports and cutlery industry and they are exported. The companies
enjoy the benefit of lower cost but as they have brand name government wish to
have our own brands by private people in international market. So in future brand
certification and development facilities will be provided and directly exported that
will increase the export share of our country. These sectors contribute majorly in
Pakistan’s exports.

Relaxation from local Taxes and Levies to Exporters:

Steps taken in past proved to be beneficial so they were continued in the current
years as well that local taxes were removed and levies were provided on a
particular quantity to exporters so that exports can be increased of particular
sectors. This is actually a motivation to exporters and for attracting investments to
meet the expected export targets. Many industries are included in this list like
leather, electric appliances, pharmaceutical, surgical instruments, sports and
furniture etc.

Agricultural Plants and Machinery for SME’s:

To avoid the wastage of semi processed raw material which resulted in the wastage
of production and ultimately a reason for the decrease in the exports from
agriculture sector government decided two facilities for this sector as well. This
could save the raw material and used for production too. Some areas were
identified which were being ignored that for those areas if machinery is imported
then half of the cost will be paid by government. Zero markup schemes were also
introduced for the import of machinery in textile sector. This can be very beneficial
that the production will increase; labor of this sector will also get rewards and a
motivation to produce more. And the ignored sector will develop again.

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Market access:

Enhancing the share of the market:

This clause of the policy shows the intension to capture the market in both ways but
in this point the focus is on exports majorly. Like explained previously that trade
promotions provided by government are quite helpful to increase the exports.
Talking about the imports is also enhancement of market share as this helps in
gaining a benefit from other countries efficient production along with building good
trade relations with them like China and Pakistan.GSP plus also known as GATT is
very helpful in maintaining the market share in the European market.

Exploring New Markets:

To enter new markets successfully there is some homework which is to be done

before. Analyze the market potential and observe the trends in those markets which
you want to enter. Also look that is there a demand of the product you are planning
to export. Then exploration also includes that you should identify the market which
is better for imports and capacity of that market. Export import bank can be helpful.
Some of the exhibitions and delegations can increase your exports. This clause also
guides about a new way that find out which product has high demand in the
particular market and if you can export that product.

Trade Diplomacy:

This was basically a step which is in complete benefit for Pakistan to build a trade
free zone and form unions with other countries. Agreements should be signed
between countries. Some agreements like these agreements can give access to
different markets with respect to imports and exports as well. Some agreements are

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aligned for transit trade agreements as there is a lot of opportunity in south and
central Asia but due to trade barriers they are unable to achieve those. So the
policy shows that agreements are a way to unlock those opportunities which will be
beneficial for Pakistan. Regions of world will be connected in such a way that they
could freely trade with each other. In this effort mostly transit trade agreement are
to be established.

Institutions strengthening and development:

For the development of trading sector, Ministry of commerce and all the trade
related organizations they need highly competitive people to handle such serious
matters so there should be training institutes for their grooming and education.
Professionally skilled officers should be hired for a particular post and efficient in
their work. Intellectual retained staff is an important source and asset. Development
of such institutions will identify the needs and demands of market. The services that
do not exist and then proper strategies will be adopted to fill those missing gaps.
SME and other departments will be setup and highly trained and skilled workers will
be hired to serve the trade council. Their actual job will be to resolve the daily
problems whether major or minor. Along with that already existing development
centers regarding trade require improvement and need to make them strong
enough so that they can serve in a better way and become competitive globally.
This proved to be helpful in the existing market to meet the modern needs of fan,
cutlery and leather industry.

Trade Facilitation:

Policies to cut the cost of transportation along with some precautionary standards
to assure the quality of the products are designed in this section. It’s a good
approach as existing resources which are efficient like railway and inland water

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navigation are utilized to transport the exports so that less cost of freight is
incurred. Some benchmarks for the products are set and teams are on it. They will
observe time to time and maintain the quality. Exporters are facilitated by tax
refund policy which will motivate them. Import policies are also observed seriously
considering the environmental and health standards. All the imports are necessarily
to be according to the defined laws that assures the betterment of trade and
ultimately economy.All the product categories are explained in the trade policy
along with their concerned departments so that the experts could better known
rather than a centralized authority. This is much helpful as the concerned person
knows better about the pros and cons of the product and can decide in a much
better way that whether the product fall in the standard measures or not. This also
saves the time of government by delegating few powers to control the export and
imports by defining laws. All the categories that even contains serious product
matters or whether they are normal consumer products, this has been defined
which can make it easy for exporters and importers to decide what to do rather
than breaching without having the knowledge. As few products can affect health
and some are highly restricted products which can be only be imported by special
permission so these all prerequisites of all products are kept in mind which is a good
step towards trade improvement. To facilitate importers some categories are set
free from tariff and taxes.

Short Term Export Enhancement Measures

Focus Product:

Short term export enhancement is a major contributor to exports but the important
thing focused by government is to identify the potential of the markets and the
products. The products selected by the government are those which can be
produced in large quantities and for this supportive measures are taken by
authorities in form of subsidies. This is how the export percentage and market share
can be increased. Not only this but the market selected to export is also of good
potentials in terms of finance and product demand. As some of them are also
Muslim countries and we can establish more strong trade relations with them. All

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the products like meat, basmati rice, horticulture and jewelry are those products in
which Pakistan has a comparative advantage and government subsidies can be
helpful too. This can cover a major portion of exports and increase the market
share. As some of the industries have faced loss in past years which can be
recovered now.

Focus Market:

Iran can be a very good opportunity as we have a road access and it's also a
developing economy. Trade barriers on Iran have also been removed and they have
a high demand of our products which can resultantly increase our exports. Although
China is very efficient in producing anything due to the cheap factor of productions
but they have a demand of some products from our country and we have a
comparative advantage. As we have developed good relations with China and the
ongoing project CPEC will strengthen it further. So cotton, garments and rice can
raise the export share from china. Afghanistan as being under developed country is
not in a good state currently. Pakistan identifies a good scope in Afghanistan for its
efficiently produced products and can capture a good market share from them. Last
but not the least, European Union is a strong body and has a lot of trade
agreements and Pakistan has entered in those countries with the help of GATT.
Fruits are approved to be exported by Pakistan and this part of world is a good
catch for us. European Union comprises of many strong countries which are efficient
in producing many products and with a strong currency they can be beneficial for
Pakistan. If Pakistan exports products like fruits and efficiently produced different
other commodities, we can get benefit from their strength of currency in the
market.

Conclusion:

Overall trade policies of Pakistan for this time frame are theoretically very beneficial
and appropriate but there are some flaws on realistic grounds. Sometimes there are
some external factors that don’t let the targets to be achieved and situational

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constraints are also a barrier. Policies that are designed by government regarding
exports and imports are ongoing but some are not being implemented properly.

Increase in exports can also can beneficial in terms of exchange rate. And these
policies are also a way to bring foreign direct investment in your own country.
Resources are widely available in some sectors but they are not being properly
utilized.

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