Junaid-Pakistan Case Study

WTO AND PAKISTAN
\Pakistan was one of the 23 founders of GATT in 1947. It actively participated in all the
subsequent GATT negotiations and was involved in the Uruguay Round that resulted in
the creation of the WTO. Pakistan was thus also one of the founding members of WTO
that was established in 1995. There is a considerable impact of WTO on all sectors of
Pakistan's economy, particularly, its industry, textile, agriculture and services. The nature
of impact is predictable for some sectors, whereas, it is difficult for others in view of
global developments in trade and degree of complexity involved.
As far as the industrial sector is concerned, Pakistan’s main exports are textile and related
products. The non-textile exports of Pakistan are negligible but have a potential to grow
tremendously under the WTO regime. On the import side, Pakistan has been rationalizing
its tariff structure to a large extent under the trade liberalization principle as envisaged by
WTO. The average tariff in Pakistan is around 17 percent however, there is a need to
ensure that there are no adverse affects of trade liberalization on the domestic producers.
This calls for a need to make adjustments in the policies for the domestic industry, so that
they may be able to face the increased competition from global market.
The complete integration of all textile and clothing products into the free trade
environment under the Agreement on Textile and Clothing (ATC) on 1st January 2005
was one of the most significant changes for Pakistan under the world trade regime.
Pakistan’s economy finds itself heavily dependent on the textile and clothing (T&C)
sector. It is because of the nature of textile industry being labor intensive and requiring
less capital and technical skills. However, a quota-free trade era calls for structural and
operational adjustments in the textile sector, to enable Pakistan's exporters to be globally
competitive. China is the biggest challenge to Pakistan T&C exports in this post ATC
regime.
As regards agriculture, Pakistan being an agrarian economy is still a net importer of food
items. The Agreement on Agriculture (AOA) of WTO has been significant in molding
agricultural policies of Pakistan. The Agreement on Agriculture provides rules regarding
export subsidies, domestic support and market access. Furthermore, the WTO Agreement
on the application of Sanitary and Phytosanitary Measures (SPS) with regard to food
safety and protection of human and animal life, and health from agricultural imports has
considerable impact on Pakistan.
Apart from the major crops, Pakistan needs to exploit its comparative advantage in the
production and exports of meat, dairy products, fruits, vegetables, horticulture, etc. The
developing countries and the developed world are at loggerheads over agriculture. With
regard to agricultural negotiations in the WTO, Pakistan along with the other developing
countries, insists on a world trading system that is fair.
Moreover, Pakistan has a comparative advantage in many primary commodities. But in
order to fully utilize its comparative advantage, it needs to focus on and solve the
problems in supply side (domestic requirements). Pertaining to the Agreement on trade
related aspects of intellectual property rights (TRIPS), Pakistan needs to ensure that the
industry is encouraged to provide intellectual property protection for its products and also
make certain that there is effective protection of the intellectual property rights attached to
imported products.
Services are the largest and most dynamic component of both developed and developing
country. It is impossible for any country to prosper today under the burden of an
inefficient and expensive services infrastructure. In Pakistan, the services sector
contributes more than half of the GDP. Workers’ remittances account for the largest
component of services and the country has a large number of expatriates throughout the
world. Being a developing country, Pakistan has adopted a cautious approach while
making commitments in trade in services. However, the actual policy of the government is
far liberal as compared to the binding commitments scheduled in the General Agreement
on Trade in Services (GATS). Pakistan has made some horizontal commitments that apply
across the board, while in six sectors specific commitments have been made. These
include Business services, Construction and related engineering services, Tourism and
travel related services, Health and related social services, Telecommunication services,
and Financial services.
Pakistan’s domestic industry also faces problems of increased imports and unfair practices
under the global trade regime. WTO Agreements have an in-built mechanism providing
for trade remedial measures to counteract the effect of dumping, subsidies and surge of
imports. Accordingly, Pakistan through national legislation has come up with anti-
dumping laws against dumping, countervailing duties laws against subsidies and
safeguard action laws against surge of imports in order to protect its domestic industry.
In a nutshell, at present Pakistan maintains a fairly liberal trade regime, where all
quantitative restrictions on imports have either been removed or converted into tariffs. It
is noteworthy that the applied tariffs in Pakistan are well below the bound tariffs under
WTO, translating into market access. However, quality control is integral to
competitiveness of Pakistan's exports. Low quality products fetch low price in the
international market. The obvious problems of quality for Pakistan are those of technical
precision, grading and specialization. The WTO Agreement on Technical Barriers to
Trade is relevant in this regard. Proper support and prudent policies for the industry, along
with intelligent balancing of imports and exports is vital for the sustainability and growth
of Pakistan's economy and is likely to lead towards a bright future and trade enhancement
under the WTO regime.
Pakistan
BASIC INDICATORS
Population (thousands, 2008) 166 037 Rank in world trade, 2008 Exports Imports
GDP (million current US$, 2008) 168 276 Merchandise 69 52
GDP (million current PPP US$, 2008) 439 036 excluding intra-EU trade 47 34
Current account balance (million US$, 2008) - 15 402 Commercial services 84 56
Trade per capita (US$, 2006-2008) 375 excluding intra-EU trade 58 37
Trade to GDP ratio (2006-2008) 41.6
Annual percentage change
2008 2000-2008 2007 2008
Real GDP (2000=100) 152 5 6 6
Exports of goods and services (volume,
2000=100) 175 7 2 -9
Imports of goods and services (volume,
2000=100) 170 7 -3 -2
TRADE POLICY
Contribution to WTO budget (%, 2010) 0.179
WTO accession date 1 January 1995 Import duties collected (%, 2003-2005)
Trade Policy Review date 16, 18 January 2008 in total tax revenue 15.8
Tariffs and duty free imports to total imports 7.1
Tariff binding coverage (%) 98.7 Number of notifications to WTO and measures in force
Outstanding notifications in WTO Central
MFN tariffs Final bound Applied 2008 Registry 13
Simple average of import duties Goods RTAs - services EIAs notified to WTO 8-1
All goods 59.9 13.5 Anti-dumping (30 June 2009) 25
Agricultural goods (AOA) 95.6 15.4 Countervailing duties (30 June 2009) ...
Non-agricultural goods 54.6 13.2 Safeguards (19 October 2009) 0
Non ad-valorem duties (% total
tariff lines) 0.0 0.7 Number of disputes (complainant - defendant)
MFN duty free imports (%, 2007) Requests for consultation 3-2
in agricultural goods (AOA) 44.0 Original panel / Appellate Body (AB) reports 2-0
in non-agricultural goods 33.9 Compliance panel / AB reports (Article 21.5 DSU) 0-0
Services sectors with GATS commitments 45 Arbitration awards (Article 22.6 DSU) 0-0
MERCHANDISE TRADE
Value Annual percentage change
2008 2000-2008 2007 2008

Merchandise exports, f.o.b. (million US$) 20 323 11 5 14
Merchandise imports, c.i.f. (million US$) 42 329 19 9 30
2008 2008
Share in world total exports 0.13 Share in world total imports 0.26
Breakdown in economy's total exports Breakdown in economy's total imports
By main commodity group (ITS) By main commodity group (ITS)
Agricultural products 19.2 Agricultural products 16.8
Fuels and mining products 7.3 Fuels and mining products 36.3
Manufactures 73.2 Manufactures 46.9
By main destination By main origin
1. European Union (27) 25.7 1. Saudi Arabia 14.1
2. United States 18.0 2. European Union (27) 13.6
3. United Arab Emirates 9.9 3. China 11.2
4. Afghanistan 7.1 4. United Arab Emirates 8.9
5. China 3.6 5. Kuwait 8.1
COMMERCIAL SERVICES TRADE

Value Annual percentage change
2008 2000-2008 2007 2008

GEOGRAPHIC LOCATION
Pakistan covers 340,403 square miles (881,640 km2), approximately equaling the
combined land areas of France and the United Kingdom. Its eastern regions are
located on the Indian tectonic plate and the western and northern regions on the
Iranian plateau and Eurasian landplate. Apart from the 1,046-kilometre (650 mi)
Arabian Sea coastline, Pakistan's land borders total 6,774 kilometers
2,430 kilometers (1,509 mi) with Afghanistan to the northwest, 523 kilometers (325 mi) with
China to the northeast, 2,912 kilometers (1,809 mi) with India to the east and 909 kilometers
(565 mi) with Iran to the southwest. http://en.wikipedia.org/wiki/Geography_of_Pakistan
The northern and western highlands of Pakistan contain the towering

Karakoram and Pamir mountain ranges, which incorporate some of the
world's highest peaks, including K2 (28,250 ft; 8,611 m) and Nanga
Parbat (26,660 ft; 8,126 m). The Balochistan Plateau lies to the west,
and the Thar Desert and an expanse of alluvial plains, the Punjab and Sind, lie to the east. The
1,000-mile-long (1,609-km) Indus River and its tributaries flow through the country from the
Kashmir region to the Arabian Sea. http://en.wikipedia.org/wiki/Geography_of_Pakistan
Pakistan has four seasons: a cool, dry winter from December through February; a hot, dry spring
from March through May; the summer rainy season, or southwest monsoon period, from June
through September; and the retreating monsoon period of October and November. The onset and
duration of these seasons vary somewhat according to location. Rainfall can vary radically from
year to year, and successive patterns of flooding and drought are also not uncommon.
http://en.wikipedia.org/wiki/Geography_of_Pakistan
HISTORICAL BACKGROUND:
The first permanent Muslim foothold in the South Asian Sub-continent was achieved with
Muhammad Bin Qasim's conquest of Sind in 711 C.E. An autonomous Muslim state was
established and Arabic was introduced as official language.
http://pakistan786.tripod.com/Historical.html
The question of Muslims identity assumed seriousness during the decline of Muslim power in
South Asia. The British had emerged as the dominant force in South Asia. Their rise to power was
gradual extending over a period of nearly one hundred years. They replaced the Shariah by what
they termed as the Anglo-Muhammadan law. English became the official language.
http://pakistan786.tripod.com/Historical.html
The failure of the 1857 War of Independence had disastrous consequences for the Muslims.
Determined to stop such a recurrence in future, they followed deliberately a repressive policy
against the Muslims. Properties and estates of those even remotely associated with the freedom
fighters were confiscated and conscious efforts were made to close all avenues of honest living for
the Muslims. http://pakistan786.tripod.com/Historical.html
The Muslims kept themselves aloof from western education as well as government service. But
their compatriots, the Hindus, did not do so. They accepted the new rulers without reservation. Sir
Syed Ahmed Khan was averse to the idea of Muslims participation in any organized political
activity which, he feared, might revive British hostility towards the Muslims. He also disliked
Hindu-Muslim collaboration in any joint venture. He, therefore, opposed the Indian National
Congress, when it was founded in 1885, he organized the first significant and purely communal
political body, the Central National Muhammadan Association. It had above fifty branches in
different parts of the subcontinent and it accomplished some solid work for the educational and
political uplift of the Muslims. http://www.southtravels.com/asia/pakistan/welcomepakistan.html
In 20th century, a number of factors convinced the Muslims of the need to have an effective
political organization. Therefore, in October 1906, a deputation comprising 35 Muslim leaders
met the Viceroy at Simla and demanded separate electorates. the All-India Muslim League was
founded at Dhaka mainly with the object of looking after the political rights and interests of the
Muslims. They struggled to bring the Congress and the Muslim League on one platform. Quaid-i-
Azam Mohammad Ali Jinnah (1876-1948) was the leading figure among them.
http://www.southtravels.com/asia/pakistan/welcomepakistan.html
The 1930s saw realization among the Muslims of their separate identity and their anxiety to
preserve it within separate territorial boundaries. he All-India Muslim League on March 23,1940,
in a resolution at its Lahore session, demanded separate homeland for the Muslims in the Muslim
majority regions of the subcontinent. The resolution was commonly referred to as the Pakistan
Resolution.The Pakistan demand was popularized during the Second World War. Every section of
the Muslim community - women, students, Ulema and businessmen - was organized under the
banner of the All-India Muslim
League.http://www.southtravels.com/asia/pakistan/welcomepakistan.html
In October 1946, an Interim Government was formed. The Muslim League sent its representatives
under the leadership of its General Secretary, Mr. Liaquat Ali Khan, with the aim to fight for the
party objective from within the Interim Government. After a short time the situation inside the
Interim Government and outside convinced the Congress leadership to accept Pakistan as the only
solution of the communal problem. The British Government, after a last attempt to save the
Cabinet Mission Plan in December 1946, also moved toward a plan for the partition of India. The
last British Viceroy, Lord Louis Mountbatten, came with a clear mandate to draft a plan for the
transfer of power. After holding talks with political leaders and parties, he prepared a Partition
Plan for the transfer of power which, after its approval by the British Government, was announced
on June 3, 1947. Both the Congress and the Muslim League accepted the plan. Two largest
Muslim Majority provinces, Bengal and Punjab was partitioned. The assemblies of west Punjab,
East Bengal, and Sind; and in Baluchistan, the Quetta Municipality and the Shahi Jirga voted for
Pakistan. Referenda were held in the North-West Frontier Province and the District of Sylhet in
Assam which resulted in an overwhelming vote for Pakistan. On August 14, 1947, the new state of
Pakistan came into existence. http://www.southtravels.com/asia/pakistan/welcomepakistan.html
The separation in 1947 of British India into the Muslim state of Pakistan (with two sections West
and East) and largely Hindu India was never satisfactorily resolved, and India and Pakistan have
fought two wars - in 1947-48 and 1965 - over the disputed Kashmir territory. A third war between
these countries in 1971 - in which India capitalized on Islamabad's marginalization of Bengalis in
Pakistani politics - resulted in East Pakistan becoming the separate nation of Bangladesh. In
response to Indian nuclear weapons testing, Pakistan conducted its own tests in 1998. The dispute
over the state of Kashmir is ongoing, but recent discussions and confidence-building measures
may be a start toward lessened tensions. http://geography.about.com/library/cia/blcpakistan.htm
ETHNIC & RELIGIOUS COMPOSITION:
About 99% of languages spoken in Pakistan are Indo-Iranian (sub-branches: 75% Indo-Aryan and
24% pure Iranian), a branch of Indo-European family of languages. Most languages of Pakistan
are written in the Perso-Arabic script, with significant vocabulary derived from Arabic and
Persian. Punjabi (Shahmukhi), Seraiki, Sindhi, Pashto, Urdu, Balochi, Kashmiri (Koshur), etc. are
the general languages spoken within Pakistan. The majority of Pakistanis belong to various Indo-
Aryan-speaking ethnic groups, while a large minority are various Iranic peoples and Dardic
language groups. In addition, small groups language isolates such as Burusho and Brahui-
speaking peoples also live in the country. The major ethnic groups of Pakistan in numerical size
include: Punjabis, Pashtuns, Sindhis, Seraikis, Muhajirs, Balochis, Hindkowans, Chitralis and
other smaller groups.
http://wpcontent.answers.com/wikipedia/en/thumb/0/0b/Ethnic_Groups_by_Region.jpg/500px-
Ethnic_Groups_by_Region.jpg
According to the last census in late 2008, the population comprises several main ethnic groups:
1. Punjabis (44.15%)
2. Pashtuns (15.42%)
3. Sindhis (14.1%)
4. Seraikis (10.53%)
5. Muhajirs (7.57%)
6. Balochis (3.57%)
7. Others (4.66%)
Smaller ethnic groups, such as Turwalis, Kalash, Burusho, Hindkowans, Brahui, Kashmiris,
Khowar, and Shina, are mainly found in the northern parts of the country. The people of the
Potohar Plateau in Northern Punjab, (Potoharis) are sometimes listed separately from Punjabis.
This would tend to decrease the Punjabs population further.
Pakistan's census does not include the 1.8 million Afghan refugees (registered in Pakistan as
Afghan Citizens) from neighbouring Afghanistan, who are mainly found in the NWFP,
Balochistan and Sindh provinces. A number of refugees from other countries may also be found in
Pakistan.
http://wpcontent.answers.com/wikipedia/en/thumb/0/0b/Ethnic_Groups_by_Region.jpg/500px-
Ethnic_Groups_by_Region.jpg
Islam is the national religion of Pakistan and over 97% of Pakistanis are Muslims. The Muslims
are divided into different sects which are called fiqh or Madhab (Mazhab) i.e., schools of
jurisprudence (also 'Maktab-e-Fikr' (School of Thought) in Urdu). Nearly 70% of Pakistani
Muslims are Sunnis and 30% are Shi'as which is the second major sect off Muslim sects in
Pakistan. Nearly all Pakistani Sunni Muslims belong to Hanafi school with a small group of Ahle
Hadith. The Hanafi school is divided into Barelvis and Deobandis schools. While the majority of
Pakistani Shia Muslims belong to Ithna Asharia branch with significant minority of Ismaili, both
Nizari (Agakhanis) and Mustaali (Bohras). By one estimate, in Pakistan, Muslims are divided into
following schools: the Barelvi 40%, Deobandi 25%, Shia Ithna Asharia 24%, Ahle Hadith 3%,
Ismaili 1%, Bohra 0.25%, and other smaller sects. The Ahle Hadith is part of Hanbali school.
Nearly 60% of the total seminaries (Madrassah) are run by Deobandis , 30 per cent by the Barelvis
while 6 percent by the various Shi'a organizations and 3 percent by Ahle Hadith. Zikris are
considered to be a heretical sect by Muslims. http://en.wikipedia.org/wiki/Religion_in_Pakistan
POLITICAL STRUCTURE & INTEREST GROUPS:
Government type: federal republic
The political history of eventual birth of the country began in the aftermath of the Indian
Rebellion of 1857, which culminated in 90 years of direct rule by the British Crown, and,
subsequently, spawned a successful freedom struggle led by the Indian National Congress and the
All India Muslim League.
 A republic was declared in 1956 but was stalled by Ayub Khan (1958–69), who ruled
during a period of internal instability and a second war with India in 1965.
 Economic grievances and political dissent in East Pakistan led to violent political tensions
and army repression, escalating into civil war followed by the Indo-Pakistani War of
1971Bangladesh. and ultimately the secession of East Pakistan as the independent state of
Civilian rule resumed from 1972 to 1977 under Zulfikar Ali Bhutto
 Zulfikar Ali Bhutto was deposed by General Zia-ul-Haq, who became the country's
third military president.
 With the death of General Zia in a plane crash in 1988, Benazir Bhutto, daughter of
Zulfikar Ali Bhutto, was elected as the first female Prime Minister of Pakistan. Over the
next decade, she alternated power with Nawaz Sharif, as the country's political and
economic situation worsened. Military tensions in the Kargil conflict with India were
followed by a Pakistani military coup in 1999 in which General Pervez Musharraf
assumed executive powers.
 In 2001, Musharraf named himself President after the forced resignation of Rafiq
Tarar.
 After the 2002 parliamentary elections, Musharraf transferred executive powers to newly
elected Prime Minister Zafarullah Khan Jamali, who was succeeded in the 2004 Prime-
Ministerial election by Shaukat Aziz, followed by a temporary period in office by
Chaudhry Shujaat Hussain.
 On 15 November 2007 the National Assembly was appointed Muhammad Mian Soomro
as Prime Minister. The assassination of Benazir Bhutto resulted the general elections were
postponed until 18 February 2008; a coalition government came to power after the
elections; President Musharraf stepped down and a civilian, Asif Ali Zardari, was elected
as the new President. http://www.tafreehmela.com/pakistan-history/59915-pakistan-
uptodate-brief-history-1947-2009-a.html
Political Parties:
Political parties in Pakistan have remained underdeveloped, courtesy the low level of development
of Pakistani society, authoritarian political culture, and an imbalance of power between the
powerful state and weak political institutions. Consequently, political parties have failed to
contribute substantially towards democratizing the Pakistani state and society.
http://www.sdpi.org/help/research_and_news_bulletin/jan_feb_2005/political_parties.htm
Political Parties and the Civil Society:
Long before the emergence of advocacy dominated non-governmental organizations, Pakistani

civil society comprised lawyers, journalists, teachers, trade union activists, social reformers and
religious groups.
Suppression of Democratic Cultural Activities:
The cultural workers (intellectuals, theatre activists, actors and singers) also joined
hands with political parties for a democratic and tolerant society. They, along with
political workers, were subjected to torture, imprisonment, and public humiliation.
Emergence of NGOs:
During the third military regime (1977-88) controls on journalists, constraints on academia,
intelligentsia and students, and efforts to enforce "Sharia" (Islamic law), resulted in the creation of
many non-party based social movements like the Women Action Forum, drama groups Dastak in
Karachi and Ajoka in Lahore along with revival of Progressive Writers Association (PWA). Later,
many more nongovernmental organizations emerged on the country's socio-economic scene.
The Problems of Political Parties
Lack of inner democracy:

All major political parties are accused of democratic malpractices. Their leaders appoint
themselves as life chairpersons. Heirs are groomed to take over their father's mantle. Party
positions are distributed at a price to favorites.
http://www.sdpi.org/help/research_and_news_bulletin/jan_feb_2005/political_partie
s.htm
Lack of building up of leaders:

Both Nawaz Sharif and Benazir Bhutto, the leaders of the two mainstream parties, never
encouraged the growth of alternate leadership in their parties.
http://www.sdpi.org/help/research_and_news_bulletin/jan_feb_2005/political_partie
s.htm
Corruption and lack of transparency:

After the October 1999 military coup, many analysts described the two major political parties of
Pakistan as “corrupt, incompetent, unpopular and highly damaging to the welfare of the people in
Pakistan” and observed that it was plutocracy which was ripping millions of rupees away from the
public exchequer.
The lost vision:
In 1990s the course of political development changed totally. The political direction and vision to
enter the 21st century was lost. Major political parties, particularly the Pakistan People’s Party and
the Muslim League, set their direction for power struggle, floor crossing and corruption
throughout the decade.
Lack of citizen's participation:
The political parties can hope to play a meaningful role only if they succeed in gathering the
masses around them. There are rarely any membership campaigns conducted by the parties. Even
those who joined them on one or the other pretext have been demoralized.
Lack of mutual understanding:
Pakistan’s political parties lack mutual trust and understanding. The culture of political dialogue
has never taken roots in Pakistan. It was only in 1977 that the two competing political parties
entered into process of negotiations.
STATUS AT INTERNATIONAL LEVEL:

Pakistan is developing country and it is member of ADB, ARF, C, CP, ECO, FAO, G-24, G-77,
IAEA, IBRD, ICAO, ICC, ICRM, IDA, IDB, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, IMSO,
Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC, MIGA, MINURCAT, MINURSO, MONUC,
NAM, OAS (observer), OIC, OPCW, PCA, SAARC, SACEP, SCO (observer), UN, UNAMID,
UNCTAD, UNESCO, UNHCR, UNIDO, UNMIL, UNMIS, UNMIT, UNOCI, UNOMIG,
UNWTO, UPU, WCL, WCO, WFTU, WHO, WIPO, WMO, WTO.
http://geography.about.com/library/cia/blcpakistan.htm
THE ECONOMY
Pakistan, an impoverished and underdeveloped country, has suffered from decades of internal
political disputes, low levels of foreign investment, and declining exports of manufactures. Faced
with untenable budgetary deficits, high inflation, and hemorrhaging foreign exchange reserves, the
government agreed to an International Monetary Fund Standby Arrangement in November 2008.
Between 2004-07, GDP growth in the 6-8% range was spurred by gains in the industrial and
service sectors, despite severe electricity shortfalls. Poverty levels decreased by 10% since 2001,
and Islamabad steadily raised development spending in recent years. In 2008 the fiscal deficit - a
result of chronically low tax collection and increased spending. Inflation remains the top concern
among the public, jumping from 7.7% in 2007 to 20.8% in 2008, primarily because of rising
world fuel and commodity prices. In addition, the Pakistani rupee has depreciated significantly as
a result of political and economic instability. https://www.cia.gov/library/publications/the-world-
factbook
AGRICULTURE SECTOR:
Pakistan has a rich and vast natural resource base, covering various ecological and climatic zones;
hence the country has great potential for producing all types of food commodities. Agriculture has
an important direct and indirect role in generating economic growth. The importance of
agriculture to the economy is seen in three ways: first, it provides food to consumers and fibres for
domestic industry; second, it is a source of scarce foreign exchange earnings; and third, it provides
a market for industrial goods.
http://www.pakissan.com/english/agri.overview/fao.agricultural.sector.pakistan1.shtml
Land use, farming systems and institutions:

The total geographical area of Pakistan is 79.6 million hectares. About 27 percent of the area is
currently under cultivation. Of this area, 80 percent is irrigated. In this regard, Pakistan has one of
the highest proportions of irrigated cropped area in the world.
http://www.pakissan.com/english/agri.overview/fao.agricultural.sector.pakistan1.shtml
Agriculture products:
Cotton, wheat, rice, sugarcane, fruits, vegetables; milk, beef, mutton, eggs.
About 28% of Pakistan's total land area is under cultivation and is watered by one of the largest
irrigation systems in the world. Agriculture accounts for about 21% of GDP and employs about
42% of the labor force. The most important crops are cotton, wheat, rice, sugarcane, fruits, and
vegetables, which together account for more than 75% of the value of total crop output. Despite
intensive farming practices, Pakistan remains a net food importer. Pakistan exports rice, fish,
fruits, and vegetables and imports vegetable oil, wheat, cotton (net importer), pulses, and
consumer foods. http://traveldocumentsystems.com/pk/economy.htm
The economic importance of agriculture has declined since independence, when its share of GDP
was around 53%. Following the poor harvest of 1993, the government introduced agriculture
assistance policies, including increased support prices for many agricultural commodities and
expanded availability of agricultural credit. From 1993 to 1997, real growth in the agricultural
sector averaged 5.7% but declined to less than 2% in 2008.
http://traveldocumentsystems.com/pk/economy.htm
the agriculture sector has shown a stellar growth of 4.7 percent as compared to 1.1 per cent
witnessed last year and the target of 3.5 per cent for the year. Major crops accounting for 33.4
percent of agricultural value added registered an impressive growth of 7.7 per cent as against a
negative growth of 6.4 per cent last year and a target of 4.5 per cent.
http://www.opfblog.com/8399/pakistan-economic-survey-2008-09/
The momentum for growth may be ending. Total cultivable land and irrigation cannot increase
significantly. At best, water resources can expand by 10 percent, and only at great cost. Also, there
have been problems with cotton in recent years. Future growth must come mainly from increases
in productivity, achieved by allocating resources to crops for which the country has a comparative
advantage, improving the technical efficiency of inputs for each major crop, and increasing
cropping intensity. But increasing productivity means changing major agricultural systems,
policies, and institution, including:
(a) Poor incentives policies, which have led to inappropriate use of land and hence to problems of
soil erosion and land degradation
(b) Poor distribution of land resources and inadequate systems of land tenure. At one extreme are
very large estates of absentee landlords, and at the other, very small, ill-equipped peasant farms.
Insecurity of tenure creates disincentives for investing in land
(c) Persistent problems with irrigation, essential on more than three-fourths of agricultural land in
Pakistan
(d) Weak human resources and infrastructure and
(e) Direct government intervention in agricultural markets, which, although recently diminished,
still distorts markets. Subsidized imports of wheat and price controls on cotton exports reflect a
persisting bias against cotton and wheat, while sugarcane is heavily protected. The protection of
domestic industry distorts sectoral prices. Government policy also distorts the market for such
vital inputs as seeds and fertilizer. Serious problems in the credit market exacerbate other
problems arising from policy distortions. http://ideas.repec.org/p/wbk/wbrwps/1407.html
INDUSTIRAL SECTOR:
Industry: Types--textiles & apparel, food processing, pharmaceuticals, construction materials,

shrimp, fertilizer, and paper products.
During the 1960s and 1970s, light industry expanded rapidly— especially textiles, sugar refining,
fertilizers, and other manufactures derived from local raw materials. Large government
investments in the 1970s established the country's first large-scale ship-building and steel milling
operations; the production of chemical fertilizers was also given special government support. The
Pakistan Industrial Development Corp., established in the early 1980s with IDA credit, developed
industrial estates for small- and medium-scale industries, assisting their occupants in obtaining
credit, raw materials, technical and managerial assistance, access to production facilities, as well
as marketing support. Despite steady overall industrial growth during the 1980s, the sector
remains concentrated in cotton processing, textiles, food processing and petroleum refining.
Industry - Pakistan http://www.nationsencyclopedia.com/Asia-and-Oceania/Pakistan-
INDUSTRY.html#ixzz0YWCaErXw
The manufacturing sector has contracted by 3.3 per cent in 2008-09 as compared to expansion of
4.8 percent last year. Large-scale manufacturing showed a contraction of 7.7 per cent as against an
expansion of 4.0 per cent in the last year and 5.5 per cent target for the year.
http://www.opfblog.com/8399/pakistan-economic-survey-2008-09/
Pakistan's manufacturing sector accounts for about 19% of GDP. Cotton textile production and
apparel manufacturing are Pakistan's largest industries, accounting for about 51.4 % of total
exports. Other major industries include food processing, beverages, construction materials,
clothing, and paper products. Manufacturing sector growth has slowed in the last two years due to
energy shortages and capacity constraints. In 2007-2008, the manufacturing sector grew by 5.4%.
Despite government efforts to privatize large-scale parastatal units, the public sector continues to
account for a significant proportion of industry. In the face of an increasing trade deficit, the
government seeks to diversify the country's industrial base and bolster export industries. Net
foreign investment in Pakistani industries is only 0.5% of GDP.
Automobile industry:
Pakistan is an emerging market for automobiles and automotive parts offers immense business and
investment opportunities. The total contribution of Auto industry to GDP in 2007 is 2.8% which is
likely to increase up to 5.6% in the next 5 years. Auto sector presently, contributes 16% to the
manufacturing sector which also is expected to increase 25% in the next 7 years.
http://en.wikipedia.org/wiki/Economy_of_Pakistan
CNG industry:
As of 2009, Pakistan is one of the largest users of CNG (compressed natural gas) in the world.
Presently, more than 2,900 CNG stations are operating in the country in 85 cities and towns, and
1000 more would be set up in the next three years. It has provided employment to over 50,000
people in Pakistan. http://en.wikipedia.org/wiki/Economy_of_Pakistan
Cement industry:
In 1947, Pakistan had inherited four cement plants with a total capacity of 0.5 million tons. Some
expansion took place in 1956–66 but could not keep pace with the economic development and the
country had to resort to imports of cement in 1976-77 and continued to do so till 1994-95. The
cement sector comprising of 27 plants is contributing above Rs 30 billion to the national
exchequer in the form of taxes. http://en.wikipedia.org/wiki/Economy_of_Pakistan
IT industry:
Pakistan’s IT industry has been rising steadily since the last three years. A marked increase in
software export figures are an indication of this booming industry’s potential. The total number of
IT companies increased to 1306 and the total estimated size of IT industry is $2.8 billion.In 2007,
Pakistan was for the first time featured in the Global Services Location Index by A.T. Kearney
and was rated as the 30th best location for offshoring By 2009, Pakistan had improved its rank by
ten places to reach 20th. http://en.wikipedia.org/wiki/Economy_of_Pakistan
Textiles:
The Textile Industry is dominated by Punjab. For example, only 1.5 million people from NWFP
are employed in the Industry. 3% of United States imports regarding clothing and other form of
textiles is covered by Pakistan. Textile exports in 1999 were $5.2 billion and rose to become $10.5
billion by 2007. Textile exports managed to increase at a very decent growth of 16% in 2006. In
the period July 2007 – June 2008, textile exports were US$10.62 billion. Textile exports share in
total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other non-
textile sectors grew. http://en.wikipedia.org/wiki/Economy_of_Pakistan
SERVICE SECTOR:
Pakistan's service sector accounts for about 53.3% of GDP. Transport, storage, communications,
finance, and insurance account for 24% of this sector, and wholesale and retail trade about 30%.
Pakistan is trying to promote the information industry and other modern service industries through
incentives such as long-term tax holidays.The government is acutely conscious of the immense
job growth opportunities in service sector and has launched aggressive
privatization of telecommunications, utilities and banking despite union
unrest. http://en.wikipedia.org/wiki/Economy_of_Pakistan
TeleCommunication:
Pakistan Telecommunication Company Ltd has emerged as a successful
Forbes 2000 conglomerate with over US $1 billion in sales in 2005. The
mobile telephone market has exploded fourteen-fold since 2000 to reach a subscriber base of 91
million users in 2008, one of the highest mobile
teledensities in the entire world. In addition, there are over 6 million landlines in the country with
100% fiber-optic network and coverage via WLL in even the remotest areas. As a result, Pakistan
won the prestigious Government Leadership award
of GSM Association in 2006. http://en.wikipedia.org/wiki/Economy_of_Pakistan
The contribution of telecom sector to the national exchequer increased to Rs 110 billion in the
year 2007-08 on account of general sales tax, activation charges and other steps as compared to Rs
100 billion in the year 2006-07.
The World Bank estimates that it takes about 3 days only to get a phone connection in Pakistan.
In Pakistan, following are the top mobile phone operators:
1. Mobilink (Parent: Orascom Telecom Holding, Egypt)
2. Ufone (Parent: PTCL (Etisalat), Pakistan/UAE)
3. Telenor (Parent: Telenor, Norway)
4. Warid (Parent: Abu Dhabi Group / SingTel, UAE/Singapore)
5. Zong (Parent: China Mobile, China)
By March 2009, Pakistan had 91 million mobile subscribers - 25 million more subscribers than
reported in the same period 2008. In addition to 3.1 million fixed lines, while as many as 2.4
million are using Wireless Local Loop connections. Sony Ericsson, Nokia and Motorola along
with Samsung and LG remain to be the popular brands among customers.
Pakistan is on the verge of a telecom revolutionand it is by far the most attractive sector in
Pakistan in terms of Foreign Direct Investment coming into the country. Since liberalisation, over
the past four years, the Pakistani telecom sector has attracted more than $9 billion in foreign
investments.During 2007-08, the Pakistani communication sector alone received $1.62 billion in
Foreign Direct Investment (FDI) – about 30% of the country’s total foreign direct investment.
Present growth of state-of-the-art infrastructures in telecom sector during the last four years has
been the result of the PTA's vision and implementation of deregulation policy. Paging and mobile
(cellular) telephones were adopted early and freely. Cellular phones and the Internet were adopted
through a rather laissez-faire policy with a proliferation of private service providers that led to fast
adoption. With a rapid increase in the number of Internet users and ISPs, and a large English-
speaking population, Pakistani society has seen an unparalleled revolution in communications.
According to the PC World, a total of 6.37 billion text messages were sent through Acision
messaging systems across Asia Pacific over the 2008/2009 Christmas and New Year period.
Pakistan was amongst the top five ranker with one of the highest SMS traffic with 763 million
messages. http://en.wikipedia.org/wiki/Economy_of_Pakistan
Pakistan is ranked 4th in terms of broadband Internet growth in the world, as the subscriber base
of broadband Internet has been increasing rapidly. The rankings are released by Point Topic
Global broadband analysis, a global research centre.
• Pakistan has more than 17 million Internet users in 2009. The country is said to have a
potential to absorb up to 50 million mobile phone Internet users in the next 5 years thus a
potential of nearly 1 million connections per month.
• Almost all of the main government departments, organisations and institutions have their
own websites.
• The use of search engines and instant messaging services is also booming. Pakistanis are
some of the most ardent chatters on the Internet, communicating with users all over the
world. Recent years have seen a huge increase in the use of online marriage services, for
example, leading to a major re-alignment of the tradition of arranged marriages.
• As of 2007 there were six cell phone companies operating in the country with nearly 90
million mobile phone users in the country.
• Wireless local loop and the landline telephony sector has also been liberalized and private
sector has entered thus increasing the teledensity rate. In mid-2008, the Local Loop
installed capacity reached around 5.5 million.
• Telecom industry created of 80,000 jobs directly and 500,000 jobs indirectly.
The Federal Bureau of Statistics provisionally valued this sector at Rs.982,353 million in 2005
thus registering over 91% growth since 2000. http://en.wikipedia.org/wiki/Economy_of_Pakistan
The services sector grew by 3.6 per cent as against the target of 6.1 per cent and last year’s actual
growth of 6.6 per cent. The finance and insurance sector witnessed a slowdown to 12.9 per cent in
2007-08 but registered negative growth of 1.2 per cent in 2008-09. The Transport, Storage and
Communication sub-sector depicted a sharp deceleration in growth to 2.9 percent in 2008-09 as
compared to 5.7 per cent of last year. Real private consumption rising by 5.2 per cent as against
negative growth of 1.3 percent attained last year. However, gross fixed capital formation could not
maintain its strong growth momentum and real fixed investment growth contracted by 6.9 percent
as against the expansion of 3.8 percent in the last fiscal year.
http://www.opfblog.com/8399/pakistan-economic-survey-2008-09
NATURE OF EXPORTS, IMPORTS BY DESTINATION:
Trade (2007 est.): Exports--$16.31 billion: textiles (garments, bed linen, cotton cloth, and yarn),
rice, leather goods, sports goods, carpets, rugs, chemicals and manufactures. Major partners--U.S.
21%, United Arab Emirates 9%, Afghanistan 7.7%, U.K. 5.1%, China 5.3%. Imports--$30.33
billion: petroleum, petroleum products, machinery, plastics, paper and paper board, transportation
equipment, edible oils, pulses, iron and steel, tea. Major partners--China 13.8%, Saudi Arabia
10.5%, United Arab Emirates 9.7%, Japan 5.7%, U.S. 6.5%, Kuwait 4.7%, Germany 4.1%.
Exports:
Pakistan's exports increased more than 100% from $7.5 billion in 1999 to
stand at $18 billion in the financial year 2007-2008.
Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles,
clothing, leather goods, sports goods (renowned for footballs/soccer balls),
surgical instruments, electrical appliances, software, carpets, and rugs, ice
cream, livestock meat, chicken, powdered milk, wheat, seafood (especially
shrimp/prawns), vegetables, processed food items, Pakistani assembled
Suzukis (to Afghanistan and other countries), defense equipment
(submarines, tanks, radars), salt, marble, onyx, engineering goods, and
many other items. Pakistan now is being very well recognized for producing and exporting
cements in Asia and Mid-East. Starting August 2007, Pakistan will be exporting cement to India
to fill in the shortage there caused by the building boom
Imports:
Pakistan's imports stood at $30.54 billion in the financial year 2006-2007, up by 8.22 percent from
last year's imports of $28.58 billion. http://en.wikipedia.org/wiki/Economy_of_Pakistan
Pakistan's single largest import category is petroleum and petroleum products. Other imports
include: industrial machinery, construction machinery, trucks, automobiles, computers, computer
parts, medicines, pharmaceutical products, food items, civilian aircraft, defense equipment, iron,
steel, toys, electronics, and other consumer items.
Sales tax is levied at 15 percent both on imports and domestically produced products. The income
withholding tax is levied at 6 percent on imports and at 3.5 percent on the sales of domestic
taxpayers. http://en.wikipedia.org/wiki/Economy_of_Pakistan
MEGNITUDE & TRENDS OF ECONOMIC & SOCIAL INDICATORS:
Capital Islamabad
Area 796,095sq km
Population 176242,949 (2009 est.)
Population growth rate 1.949% (2009)
GNI per Capita $ 1046 (2008)
GNI per Capita (PPP) $2570 (2007)
GNP per capita growth rate 2.4 % (2009)
Population living on less than 1$ per day 36.1% (2008)
Agriculture as share of GDP 20.4% (2008)
Exports as share of GDP 14% (2007)
Under age 5 mortality rate(per thousand live 97 (2007)
birth)
Children malnutrition rate(under height for age) 22% (2007)
Illiteracy rate( age 15+) 49.9% (2008)
Human development index 0.572 (2007)
http://newsgroups.derkeiler.com/Archive/Soc/soc.culture.indian/2008-10/msg00419.html
APPLICATION OF GROWTH & DEVELOPMENT THEORIES:
Pakistanis a country in which Rostow’s stages model suits best and there is changes in structural
patterns also happened. These two models are very important in Pakistan. In Pakistan classical
model doesn’t suit because they did not meet the requirement of classical approach. In some
aspects H&D models suits with the condition of Pakistan because in H&D model there is a
concept of dual economy, and Pakistan has dual economical structure like in health system, like
urban biased and classes biased. But in Pakistan there is no full employment equilibrium level of
income maintain in long run, not even in short run, because Pakistan face many problems like
political instability.
STAGES OF GROWTH:
History of Pakistan shows that Pakistan faces so many problems before and after its independence
most of them are related to the economical development. At that time and so many years it lies in
Rostov’s first stage agrarian society. From the birth of Pakistan 1947, it is base on it’s agriculture
sector, all income come from agriculture sector, and they use barter system in their country, they
only produce goods when need arise for it, employment were increased in agriculture sector that
time and all growth occur through agriculture sector, growth at that time was 9% avg in 1950s, at
that time man valued on family bases, according to their status and background. There is no
industrial development in that era; .and Pakistan survives in this stage for a longer period of time.
In that stage MPC=1 and MPS=0.
After that industrialization started in Pakistan people move from rural to urban area and they start
working for economic development of the country, from that time Pakistan came in the stage of
precondition for take off stage, it is the stage where science and technology felt in both agriculture
and industrial sector. They start working on new projects like banks insurance companies, social
works and manufacturing of industrial products and export and import of agriculture and industrial
products started. But there is low productivity in economy because of poverty level in country, 62
(36.1%) millions are living below poverty line based on 1$ and 120 million peoples are living
below poverty line based on 2$. Because of this poverty level there in low productivity in country.
According to the world bank 2008 data Pakistan is LMC, it is LEDC (least economic develop
country) because it has GNI per capita $ 1046, as compare to the MEDC’s per capita income
Pakistan’s per capita income in very low.
Development of mining industries start in a country, and growth of a country in very unstable
1950’s: 9% avg
1960’s: 9% avg
1970’s: 1.5% avg (very unstable because of nationalization and partition)
2000’s: 5.1% avg (2008-2009’s 2.4%)

Now in Pakistan capital use in agriculture on large scale, because it is benefited for the economy
because Pakistan is agrarian country and major share of GDP come from agriculture sector.
Pakistan relay on external funding, it is $35,909 million in 2007, most of the businesses’ run by
100% foreign investment. Now some growth in saving and investment starts in country and
marginal propensity to save become MPS>0.
STRUCTURAL PATTERNS:
There is changes occur in structural patterns of development of a country. Lewis model suits to
the Pakistan economy, now culture of economy has been changed and industrialization start in
country work force start moving from rural to urban and employment level become high in a
country there is high wages in urban’s industrial sector as compare to the agriculture sector, there
is investment or capital formation start in country. In 2007 Pakistan’s Gross capital formation (%
of GDP) was 23 %
Export Competitiveness and Comparative Advantage of Pakistan's Non-Agricultural

Production Sectors:Trends and Analysis
1. Introduction
The composition and volume of global trade has witnessed significant changes during the
last two decades. Trade liberalization, rising income and technological advancements, have been
the main determinants. Against the backdrop of a rapidly changing global export pattern, and the
success of Southeast Asian economies, there is strong case for Pakistan to pursue an export-led
growth strategy that leads ultimately to improve living standards. However, given Pakistan's past
macroeconomic performance and its current export structure, such a turnaround would require a
major structural transformation of the economy and changes in its export specialisation patterns.
Openness in trade and patterns of specialization are, however, interconnected variables. In the
context of on-going multilateral trade negotiations, this paper analyses export specialization and
the comparative advantage/disadvantage of Pakistan's non-agriculture production sectors, by
using the revealed comparative advantage (RCA).approach at HS 4-digit levels. This is to provide
a unique understanding of challenges and opportunities that Pakistan's non-agricultural sector
faces, as it becomes rapidly integrated into global markets.
It is important to note that supply and demand side conditions play a crucial role in changing the
comparative advantage profile of a country. The objective of this exercise is to identify those non-
agricultural export categories, in which Pakistan is losing, gaining or maintaining ~ts
comparative advantage. Following the "stages of comparative advantages" thesis by Balassa,
aQ. attempt is made to examine the extent to which Pakistan's leading non-agriculture product
lines have witnessed a shift in their comparative advantage away from traditional labour-
intensive production to export of teclmology based production activities 1. This insight is
important to envision if past specialization patterns have witnessed any change, or if they are
being reinforced over time, due to internal and external forces. Specifically, the paper investigates
whether Pakistan's has succeeded in moving from low value-added to technology-intensive high-
value manufacturing.
Whilst identifying the dominance of certain sectors and a lack of shift in the revealed
comparative' advantage pattern of an export structure provides a broad picture of country's
export competitive, it falls short of identifying industries that, though exhibit revealed
comparative advantage, are under threat. A comprehensive analysis that examines the relative
competitive strengths and weaknesses of Pakistan's nonagricultural exports is helpful in
identifying product lines that require special attention in trade and industry policy formulation.
Such an investigation has the potential to assist policy
makers to weigh the benefits or costs of trade liberalization and the implications of
IBalassa ( 1965, 1979).
export diversification. The study addresses this question by dividing 978 HS 4-digit product
lines into six distinct groups, based on their competitive position in Pakistan's
export structure. For instance, the study aims at addressing the questions such as: which product
lines can be characterized as genuine "infant industries" that require further protection or
assistance? Which product lines ought to be mad~ contestable through trade liberalization
measures? Which product lines are "strategic" in nature and should be
protected?
While an activity-based analysis has business and public policy implications, it needs to be
complemented with a sectoral analysis. This study gauges the relative position of various non-
agricultural production sectors within Pakistan's revealed comparative advantage profile. The
sectoral analysis may also provide a context to consider "zero- forzero" bindings, during
multilateral trade negotiations The paper is organized into seven sections. Section 2 highlights
the top 25 RCA ranking product lines based upon their technological classification. Section 3
examines the extent to which Pakistan's export specialization in the non-agricultural sector has
shifted away from labor and natural resource intensive products to high value-added knowledge
and technology intensive products during 1990-2000. To assist Pakistan trade and industry
policy formulation, Section 4 provides an in-depth investigation of export specialization and the
comparative advantage/disadvantage of Pakistan's no.n-agriculture production, sectors. This
outcome is achieved, by dividing 978 HS 4-digit product lines into six distinct groups, based
upon their competitive position in Pakistan's export structure. Section 5 analyses the relative
performance of each non-agricultural production sector to gauge its relative position, within
Pakistan's revealed comparative advantage spectrum. Section 6 provides conclusions drawn
from the study and discuses implications for Pakistan's export structure in the context of
changing world demand patte01s. To provide future directions, this section also emphasizes
necessary conditions to achieve international competitiveness both at macro and micro level.
2. Methodology
A country's comparative advantage, at a given point in time, depends on its pre-trade relative
prices that rely on relative production costs. Data on these variables, in the presence of factor
and product market distortions, are difficult to generate. We, however, can approximate the
comparative advantage concept in an indirect way, by using post- trade data that manifests post-
trade relative prices and prevailing factors and
product market distortions. The revealed comparative advantage approach is one of the
few formal methodologies to measure a country's intensity of comparative advantage and
disadvantage in a particular industry.
Revealed comparative advantage is usually used to investigate shifts over time in comparative
advantage of industries. This approach, however, is not meant to capture the potential future
comparative advantage of a country, as RCA indices are based on actual trade data. However,
RCA indices estimated across time can point to the general direction in which the pattern of
comparative advantage is moving2.
The RCA index compares a country's world export share of a commodity, with the country's total
export share in total world exports. If a country's share of world exports of a particular commodity
is greater than its share.of world exports of all commodities, the
RCA will be greater than one. Acountry the.refore has a revealed comparative advant'age only in
those product8 for which its market share of world exports is above its average share of world
exports. In other words, the country is a relatively heavy exporter of a product under
consideration and possesses a revealed comparative advantage in that product line3.
The RCA index categorizes industries, according to their ability to compete within a specific
market. A high value of RCA index would indicate relative inter-industrial export specialization.
The RCAl of country i in industry a, (RCAIi)a, can be presented as:
(RCAIi)a = (Xi a / XW a) / (Xi 1/ XW I) (1)

Where, Xi a = value of exports of commodity a by country i;
XiI = value of total exports by country i;
XW a = value of world exports of commodity a; and
Xw T = value of total world exports
Accordingly, country i exhibits revealed comparative advantage or has a greater specialization

in export of product a, than the world as whole, if (RCAna is greater than one. In general, the
higher the RCA index of a product, the greater a country's comparative advantage in that product
line.
It is important to note that RCA indices are quite robust and insensitive to changes in growth and
business cycle differences across trading partners. These changes influence the numerator and
denominator in the RCA fornmla. Similarly, the indices are not sensitive to the height of market
access barriers, as long as these barriers are across the
board, against all exporters of a particul2.r product line. Yet, they are 1sensitive to
discriminatory market access barriers against exports pf a particular country4 .
The RCA indices can also be used gain further insight to target those industries that currently
exhibit revealed comparative disadvantage, but have potential to achieve export competitiveness
over time. This, can be achieved by categorizing a country's export
structure, based upon HS 4-digit product lines, into six broader product groups based:
upon their relative RCA profile. In the order of their relative comparative advantage
position, these groups are5
a) Competitively Positioned Product Lines:

These product lines have RCA's greater than unity and show..consistent improvement
over time owing to favorable external and internal conditions. The decision criteria used
to select products under this category is:
• RCA index of a product line, "i", is > 1 in 2000, i.e., ; (RCAi hooo> 1
• Difference between RCA index of product line "i" in 2000 and its last three years
average RCA's is positive, i.e., (RCAi)2000 - (RCAi )Averagc (1997-1999) > 0
b) Threatened Products Lines:

These product lines have RCA's greater than unity, but indices are declining over time,
due to an adverse domestic environment and/or global competitive pressures. The
decision principle to select products under this group is as follows:
c) Emerging Products: Tier I & Tier II

These product lines exhibit RCA indices that are less than unity, (rcvealed comparative
disadvantage) but their relative global position in the exports market is improving. These
product lines signal promise for future export potential. To provide a meaningful
analysis, the "Emerging Product Group" is sub-divided into two groups in terms of their
RCA position within this broader group. The selection criterion used to group these
product lines is given as:
Tier I:
• < 1 and equal to or> 0.5 -.

• Difference between RCA of product line "i" in 2000 and its last three years
average RCA is positive, i.e., (RCAi)2000 - ( RCAi )Average (1997-1999) > 0
Tier II:
• RCA of a product line, "i", is < 0.5 in 2000, i.e., ; (RCAi )2000 < 0.5
• Difference between RCA of product line "i" in 2000 and its last three years average
RCA is positive, i.e., (RCAi)2000 - ( RCAi )Average (1997-1999)
>0
5 The central idea from this classification comes from Standard and Poor;s
(1997
d) Weakly Positioned Prodncts: Tier 1 & Tier II
RCA indices of these product lines are less than unity and declining due to non-
conducive global and domestic factors. The "Weakly Positioned Product Group" is sub-
divided into two groups based on their relative level of revealed comparative
disadvantage. The selection criterion used to group these product is as follows:
Tier I:.
• RCA of a product line, "i", is < l but equal to or> 0.5 in 2000, i.e,;(RCN
)2000 < 1 and equal to or > 0.5
• Difference between RCA of product line "i" in. 2000 and its last three years
average RCA is negative, i.e., (RCAihooo - (RCAi )Average (1997-1999)
<0
Tier II:
•
• RCA of a product line, "i", is < 0.5 in 2000, i.e., ; (RCAi )2000< 0.5
Difference between RCA of product line "i" in 2000 and its last three years
average RCA is negative,i.e., (RCAi)2000 - (RCAi )Average (1997-1999) < 0
The above framework has two advantages. First, it identifies the strengths and
weaknesses of Pakistan's exports' profile as at 2000. Second, it allows an evaluation of
the degree of competitiveness of Pakistan's exports in the world markets.
The data set used in this study is exports data (1990-2000) at HS 4-digit drawn from International
Trade Statistics compiled by the Australian National University (AND). The data set comprises 16
product categories made up of978 product lines.
3. Shifting Comparative Advantage of Pakistan's Non-Agricultural Products: The

Leading Products
The pattern of Pakistan's export specialization in non-agricultural production sectors highlights

the failure of Pakistani manufacturing to move into relatively technological, scale-based,
and"differentiated areas. These trends are highlighted in Table 1, that lists the top 25 RCA ranking
product lines in their technological orientation and relative factor intensities such as: (a) Resource-
Intensive; (b) Scale-Intensive/Technological Intensive; (c) Labor-Intensive; and (d) Differentiation-
based6.
6 For more on technological and product classification, see Lall,

1998 and Krause, 1984.
mainly by the textiles and clothing sector. Although the textiles and clothing sector has been at the
forefront of Pakistan's export drive;
it has made the country highly dependent on the buoyancy of this sector. Given that an export
structure is a magnification of the underlying technological base and industry policy, any
industrial reorientation in the Pakistani context, would require a massive effort to move up the
technological ladder.
Analysis of the top 25 product categories leads to interesting observations. The list is dominated
by labour-intensive production activities, operating at the lower end of the technology spectrum
and requiring relatively low technical skills. Table 1 illustrates that
20 out of the top 25 RCA ranking exports in 2000 were labour-.intensive, dominated
Table 1 Technological Classification of Top 25 RCA Ranking Non-Agricultural

Products
Ran 5 H de
k S &
1 Pr
2 C od
3
4 o uct
C 5205 Cotton yam RC Technologica
4106 Leather of goat or kidskin A l
a (2000) Classificatio
5513 Woven fabric of synthetic staple
72.32 n
t fibres
59.47 Labour-
5701 Carpets & other textile floor
e 57.26 Intensive
coverings
g 5202 Cotton waste, including yam & garneted 54.6 Resource-
stock 53.16 Intensive
o Labour-
r Intensive
Labour-
y Intensive
Labour
-Intensive
6 6302 Bed linen, t.able linen, toilet linen & kitchen 50.61 Labour-
7 linen Intensive
6303 Curtains & interior blinds; curtain & bed valances 32.44 Labour-
8 drapes Intensive
9 5802 Woven terry fabrics & towelling, tufted textile fabric 29.19 Labour-
Intensive
4203 Articles of apparel & clothing accessories made of
1 leather or of composition leather gloves, jackets, coats, belts
0 27.27 Labour-
Intensive
1 5210 Woven cotton fabrics, less than 85%
cotton,
1 mixed with or solely manmade 26.94 Labour-
12 fibres Intensive
5206 Cotton yam (not sewing thread) less than
85%cotton 23.99 Labour-
Intensive
18445 Machines for preparing textile fibres 22.71 Teclmology-
& yams Intensive
1 6105 Men's or boys' shirts, knitted or 20.82 Labour-
3 crocheted 20.35 Intensive
1 5209 Woven cotton fabrics, 85% or more 19.59 Labour-
4 cotton, 19.51 Intensive
15 5514 Woven fabric of synthetic staple fibres 16.64 Labour-
1 5208 Woven coon fabrics, .85% o more Intensive
6 cotton Labour-
1 6116 Gloves, nuttens and nutts, knitted or Intensive
7 crocheted Labour - Interisi
8213 Scissors, tailors' shears & similar ve
shearslbiades
18 15.86 Labour-
intensive and base metal parts thereof
1 8214 Other articles of cutlery 15.74 Labour-
9 5203 Cotton, carded or 15.61 intensive
2 combed 15.11 Resource-
0 6307 13.07 Intensive
2 2610 Chromitim ores and 12.32 Labour
1 concentrates / 12. Intensive
2 6310 19 Resource-
2 6304 Other furnishing articles of textile Intensive
2 materials Labour-
3 3202 Synthetic organic or inorganic Intensive
2 tanning Labour-
4 Intensive
25 12.16
Teclmological- substances; tanning preparations; enzymatic Intensive
Notes: This ranking excludes HS 9307 (Arms &
Ammunition) as an outliner.
Source: International Economic Data Bank (IEDB), Australian National University,
and calculations by the author
Changes in the revealed comparative advantage pattern can be examined by analyzing the
list of the top-25 product lines, ranked by their RCA indices (Table 2). With the exception of
1999-2000,20 out of the top-25 high RCA ranking categories were from the textiles and clothing
sector. In 1999, 18 out of the top-25 RCA ranking product groups were from this sector. This
number climbed to 19 in 2000. Other categories included in
the list of top 25 were:
• Base Metals & Articles: 1990 (HS7614, 7904); 1998 (HS8004), 1999 (HS 8002,
8004,8213); and 2000 (8213,8214). "
• Hides & Skin; 1990 (HS 4106); and 2000 (HS 4106,4203). .
• Machinery & Mechani"cal Appliances: 1990 (HS 8445); 1997 (HS 8410); and 2000 (HS
8445)
• Miscellaneous Product: 1990 (HS 9602). •
Chemical Products: 1997,1999 (HS 2917)
• Arms & Ammunition: 1998,1999, and 2000 (HS 9307)
• Plastics & Rubber: 1997 (HS 4014)
• Mineral Products: 1998and 2000(HS 26](~.
Evidence provided by the RCA ranking of the top 25 product lines indicate that there has been
little shift in the comparative advantage pattern of Pakistan's non-agricultural
exports. During the entire period studied, the pattern of revealed comparative advantage
has been relatively stable. in its industry orientation. Dominance of the textiles and
clothing sector is quite consistent with Pakistan's existing natural and human factor endowments.
This analysis reveals Pakistan's failure to catch up with the Southeast Asian economies, by moving
from low value-added to technology-intensive high-value manufacturing.
Table 2 Comparative Advantage of Pakistan's Non-Agricultural Products
RCA H RCA- HS RCA H RCA IH

HS - S 1997 Code - S - s RCA-
Code 2000
1 1990 Cod 87.26 5205 1998 Cod 1999 Cod
2 520 100.3 e 58.68 4106 54.14 e 54.12 e 105.82
5 5 530 51.02 410 53.77 930 72.32
580 88.27 3 6 7
2 520 520 520
5 5 5
3 5202 59.15 4106 49.3 5513 40.42 8002 50.23 4106 59.47
4 5303 54.68 5202 36.72 6302 38.24 6302 43.39 5513 57.26
5 7614 51.71 5513 31.67 5202 35.63 5701 41.87 5701 54.6
6 4106 46.88 6302 31.6 5701 35.05 5513 41.28 5202 53.16
7 5204 39.17 8410 31.33 5210 27.79 5202 31.77 6302 50.61
8 5207 32.72 5701 28.84 5803 25.84 5203 25.62 6303 32.44
9 5701 30.2 4203 22.93 4203 25.75 4203 25.11 5802 29.19
10 5506 25.9 5514 20.91 5504 23.98 5210 25.09 4203 27.27
11 5406 24.44 5206 20.55 5514 19.74 9307 25.06 5210 26.94
12 6309 16 5210 20.29 5209 . 19.23 6303 24.72 5206 23.99
13 5201 15.89 5504 18.27 6105 17.85 5803 23.96 8445 22.71
14 5504 14.92 5209 17.38 5208 16.36 8004 23.88 6105 20.82
15 5;;12 12.64 5208 17.14 6303 16.36 5504 22.44 5209 20.35
16 5403 12.4 6105 15.44 5802 16.27 5209 20.62 5514 19.59
17 5208 12.05 6303 15.23 6116 14.44 5802 18.5 5208 19.51
18 6302 11.79 2917 14.76 9307 12.84 6105 17.69 6116 16.64
19 5203 11. 73 5802 14.2 5509 12.59 5208 17.16 8213 15.86
20 8445 11.08 5803 13.46 2610 12.44 5514 16.1 8214 15.74
21 9602 10.87 6116 12.08 5206 11.96 6116 14.15 5203 15.61
22 5503 9.46 5509 11.09 8004 11.33 8213 12.76 6307 15.11
23 7904 9.21 6309 10.46 6307 11.27 2917 12.33 5504 14.82
24 5513 8.4 6307 9.72 5211 10.89 6307 12.23 2610 13.07
25 5206 7.93 4014 8.92 6309 10.84 5206 11.46 6310. 12.32
Source: International Economic Data Bank (IEDB), Australian National University,
and calculations by the author
With few exceptions, Pakistan's top-ranking exports belong to the textiles and clothing sector.
This pattern of export specialization points to a failure to diversify export structure, by moving
into high value-added, relatively technological and high-skilled labour-intensive product lines.
These findings highlight the vulnerability of Pakistan's textile-dependent external sector. In the
present climate of trade liberalization, Pakistan's textiles and clothing sector will come under
increasing competitive presslire from lower cost producers. Besides, the Uruguay Round
Agreement on Textiles and Clothing will put further competitive pressure on Pakistani textile and
clothing firms.
3. Competitive Positioning of Pakistan's Non-Agricultural Production Sectors: An

Aggregated Analysis
Competitively Positioned Products
Out of the 978 HS 4-digit level product lines, 222 of them (23%) have RCA's greater than unity and
increasing. This places them in the category of "Competitively Positioned Product Group". As
Table 3 illustrates, 34.7 % of Pakistan's non-agricultural Competitively Positioned Products are
from the textiles and clothing sector, followed by the chemical sector (23.9 %).
Given Pakistan's factor endowments, performance of the textiles and clothing sector is hardly
surprising. Pakistan's gradual export specialization in chemical products reflects the structural
change experienced by the manufacturing .sector as it shifts towards relatively high value-added
sectors. Similar trends are also emerging in other relatively skilled-labour and tec1molcgy
industries such as base metals and articles; machi~1ery and mechanical appliances; and measuring
and musical instruments.
Table 3 RCA Profile and Product Grouping: 2000
Industry ategory/Sector
and HS Code C T EP EP(I) WP (Ii (WPli)
P P (TI)
Textile & Textile 9 8 19
Articles: HS 50- 77 1 11 5.9 14.3 6.5
63 34.7 8 9.2 32 10 34
Chemical. Products: 53 36 13.9 17.9 11.6
3
HS 23.9 30.3 43 10 60
2
28:38 18 11 18.7 17.9 20.4
8
Base Metals & 8.1 9.2 41 9 44
1
Articles: 17 4 17 17.8 16.1 15.0
HS 72-83 7.7 14.3. 17 2 21
7
Machinery 10 13 5 7.4 3.6 7.l
&Mechanical 4.5 4.2 3 3 3
4
Appliances:HS 84- 8 7 2 1.3 5.4 1.0
85 3.6 1.7
- 12 2 13
Measuring and 7 8 5.2 3.6 4.4
Musical 3.2 1 6.7 16 1 19
Instruments: HS 7 2 3
9092 7.0 1.8 6.5
3.2 3 2.5 8 4 7
Hides and Skins: 6 5 9 3.5 7.1 2.4
HS 2.7 7.6 8 5 11
41-43 6 - 2 3.5 8.9 3.7
Articles of Stone, 2.7 1.7
8 8 . 13
Plaster 5 3
1 3.5 - 4.4
Cement, Asbestus: HS 68- 2.3 4 2.5
70 11 2 15
4 7 4.8 3.6 5.1
Mineral Products: 1.8 -
5.9
HS. 25:27 4 8
2 3 2 -
Plastic & Rubber: 1.7 2.7
0.9 5 1.7
HS 1 7 8
39:40 1 2 -
2 3.0 2.7
Transportation 0.5 1.7 11 10
Equipment: HS 86- 1 - 4.8 - 3.4
-
89 0.5
- - 4
Miscellaneous 1 1 1.4
Product 0.5 -
0.8
Category: HS 94- 2
96 4
Wood Pulp 1
Products: 2
HS 47-49
Pearls, precious or
Semi-Precious
Stones,
Metals: HS 71
Footwear and
Headgear: HS 64-
67
Wood andW ood
Products: HS 44-
46
Arms and
Ammunition:
HS 93
Source: International Economic Data Bank (IEDB), Australian National University, and
calculations by the
author
Notes: CP=Competitive Positioned Product; TP= Threatened Product; EM (TI) = Emerging
Product Tier I;
EM (TII) = Emerging Product Tier II; WP(TI)= Weakly Positioned Product (TI); WP(TII)=
Weakly
Positioned Product (TII)
The profile of "Competitively Positioned Products" highlights the lack of inroads made
by some unskilled and skilled labor-intensive and rEsource-base industries, which draw their
competitive strength from low wages and the availability of raw material. This includes
industries such as hides and skins, footwear and headgear, wood and wood products, pearls and
precious stones. Lack of headway made by the transportation equipment industry is a reflection
of its narrow production base and cost disadvantage, due to a higher share of imported inputs,
absence of forward and backward linkages and lack of economies of scale and scope.
Threatened Non-Agricultural Products

In the case of the "Threatened Product" group, there are 56 product lin~s (6% of the
total). These products exhibit revealed comparative advantage, but have experienced a declining
share in world markets during 1997-2000 (Table 3). It is important to note, that 32% of the
"Threatened Products" are from the textiles and clothinb sector, which has been the driving force
of Pakistan's export structure; The most significant decline in the revealed comparative advantage
occurred in jute products. This outcome can be attributed to the industry assistance measures
undertaken by the Bangladeshi and the Indian governrnents in support of their jute industry.
Other notable declining sectors include chemical products (14%); plastic and rubber (14%) and
base metal products (14%).
In view of their significance to Pakistan's revealed comparative acivantag~ profile, there
is a need for determined efforts to ensure that Pakistan sustains and enhances its export
competitiveness by reversing the above trends. Although it is difficult to formulate product-
specific policy responses, there is a strong economic rationale for targeting those "Threatener.
Products" that have significant comparative advantage, but ar~ losing their competitiveness. For
instance, one of the "Threatened Product Group" is sports goods, major export eamr.rG for
Pakistan. This product line has witnessed a modest decline in its export compt:titiveness in recent
times. This analysis is by no means designed to draw industry-specific m~asures for every product
line in this group. However, it highlights specific industries that require specific attention. during
trade negotiations and industry policy formulation.
Emerging Products: Tier I
The "Emerging Product Group" is sub-divided into two groups to draw a distinction between
two types of product lines: (a) the product lines that are showing underlying trends to join the
"Competitive Group", but exhibit a comparative disadvantage at
present; and (b) Tier II products
There are- 119 product lines (12% of the total) in Tier 1. Three relatively technology intensive
manufacturing sectors, e.g., chemical, machinery and mechanical appliances, and base metals and
articles, constitute 54 % of the total "Emerging Product Lines-Tier I" (Table 3). This resuit
highlights the comparative advantage dynamics of Pakistan's manufacturing sector, where
momentum is developing to move towards relatively high value-added technology intensive
production activities.
Emerging Productsf Tier II
There are 230 product lines (24% of the total) that show continuous improvement, but their
RCAs are less than 0.5. Table.3 reconfirms the observation that Pakistani manufacturing is
making slow progress towards the export of high-valla; added' non- agricultural products. The
three top product categories in this group belong to relatively technological intensive production
activities. This includes base metals & articles
(18.7%), machinery and mechanical appliances (17.8), and chemical products (13.9%).
In the context of this study, the findings are significant. Industries such as, metals and metal
products, machinery and mechanical appliances exhibit backward linkages. Competitiveness in
these sectors has positive spillover effects on ot1lcr segments of the manufacturing industry.
Given the competitive potential of the "Emerging Product Group", furth,:;r investigation is
required to target the products with the highest potential,
to achif'v:s international competitiveness. Caution will be required to ensure that these product
lines Jo not encounter unfair competition from overseas suppliers in the local
markd
Weakly Positioned Products: Tier 1
"Weakly Positioned" products are categorized i~to Tier I and Tier II sub-groupings. The RCA's
of Ti~r I product lines are less than unity but greater than 0.5 and thus have experienced negative
growtl~.. With 57 product lines, no single industry dominates this prodL' .~t grouping. However,
over 50% of the products belong to three sectors: base metals & articles (17.9%); chemical sector
(17.9%); and machinery and mechanical appliances sector (16.1). Analysis points to inter-industry
and intra-industry variations in the degree of revealed comparative disCl.dvantage in this product
grouping.
Weakly Positioned Products: Tier 11
This group represents 30% of Pakistan's total non-agricultural product lines. With their level of
revealed rJp.lparative disadvantage worsening, there is a need for a careful examination of this
"sun-set" class of product lines, which includes base metals & articles (20.4%), chemical sector
(11.6%), and machinery and mechanical appliances sector (15%) (Table 3). This analysis points
to inter-industry and intra-industry variation in the degree of revealed c0mparative disadvantage .
in this product grouping. While the manufacturing sector is making slow progress to contest the
technology-intensive export markets, there are still a significant number of product lines, which
are "Weakly Positioned" at the lower end of the comp~titive spectrum.
4. Competitive Pos)~ioliing of Pakistan's Non-Agricultural Production Sectors: A

Sectoral Analysis
To fonnulate a set of trade and policy recommendations at the sectoral level, it is imperative to
undertake a sectoral analysis of P~kistan's non-agricultural production sectors. Building upon the
~arlier analysis, this section analyzes the export perfoinuince Qf each sector gallge its relative
positioning ,within Pakistan's revealed comparative advantage profile'.
Chemical Products
The number of chemical product lines (BS 28-38) participating in world trade has risen from 147
to 173 during 1990- 2000. There was also a jump in the number of
products with a comparative advantage from 35 in 1990 to 61 in 2000, an overall increase
of74% (Table 4)
Table 4. Chemical products (HS 28-38)
Descri tion 1990 2000 Change(1990-

Total No. OfRe orted Product 147 173 2000)
Lines 35 61 17%a
Products Lines With Revealed Com 24% (36%) 74%a
arative b b
Advanta e RCA >l)d 112 112 0%a
Products Lines With Revealed Com
arative
Disadvanta e (RCA<l) (76%) c. (64)c
Notes: a % change from 1990 to 2000; PlOduct lines'with RCA> I as a proportion0f total product
lines; C Product lines
with RCA<l as a proportion of total product lines; d International Econonic Data Bank (IEDB),
Australian National
University; and calculations by the
author
Revealed comparative advantage dynamics of the chemical sector shows its transfonnatiori
from an import-competing ser,tor to one that/has successfully positioned itself in the export
markets. In the presence of existing infrastructure bottlenecks, this is an impressive perfonnance.
The sector has only 36~/" of its product lines "Weakly Positioned" in the export markets. This
result indicates Its improving competitiveness during the period studied (Table 5). With the
continuous improv~I~1entof 39% of its product lines (Emerging Products), any trade policy shift
should look at the role of foreign direct investment, industry-specific stimulanis, protec6on
afforded, external competitive environment, and growth trends in the world chemical markets.
Table 5. Renaled Cowllarative Advantage Profile of Chemical Products
Prodact Competitive Products Threatened Emerging- Weakly Positioned

Categories Group Products Products Group Products Group
Chmical Tier I Tier II Tier I Tier
53 II
8 3 3 1 34
Products Group 0
H, 28- (31) 6 2
38
(5) (21) (18) (6) (20)
This sector (petrochemical and pharmaceutical) is relatively technological and capital. intensive,
and relies largely on global production networks. With petrochemicals, there
are strong linkages between this sub-sector and other key industries such as plastics,
textiles, and rubber-based products. These synergies with other export-oriented industries ensure
petrochemicals a key industry in Pakistan's manufacturing.
The revealed compara6ve advantage profile of Pakistan's chemical sector needs to be assessed in
the context of global trends in this sector. With total trade of US $595 billion in 2001, the
chemical sector is one of the fastest growing sectors globally. Share of the chemical sector in
world trade has risen from 8.7% in 1990 to 9.9% in 2001. During
1990-2001, this sector kept an annual average growth rate of 7%, making it the second highest
rapidly growing sector after office and telecom equipment8. Pakistan's increasing export
specialization in the chemical sector, in the context of the above trends, shows its relative success
in contesting the high b growth sector of global trade.
With direct and indirect linkages to the export sector, industries in this sector have the ability to
achieve economies of s'::ale and enh"llce their competitiveness. With continued present trends, this
sector has the potential to emerge as (I major contributor to Pakistan's manufacturing exports. This
outcome depends on tpe level Jf investment in this relatively capital-intensive sector.
Hides & Skins
The number of Bides and Skins product lines (BS 41-43) ill the exports markets has risen during
the 1990' s from 18 to 20. In 1990 44% ,)f the product lines exhibited a comparative advantage.
Although there had been a small increase in the number of product lines contesting the world
markets, only 43% o~ ~hem exhibited a comparative . advantage in 2000. As Table 6 reveals, the
sub-sector has exp~rierlced modest export diversification, but the ratio of products with revealed
comparative advantage has remained almost the same.
Table 6. Hides & Skins (HS 41-43)
Description 1990 2000 Change (1990-2000)

11%'
Total No. OfRe orted Product Lines 18 20 11%a
Product Lines With Revealed 8 9 13%a
Com arativeAdvanta e(RCA>I)d 44% b (43%)b
Product Lines With Revealed 10 11 11%a
Com arative Disadvanta e (RCA<I) (56%) c (55%) c.
Notes:' % change from 1990 to 2000; Product lines with RCA> I as a proportion of total product
lines; C
Product lines with RCA<I as a proportion of total product lines; d International Economic
Data Bank (IEDB),
Australian National University, and calculations by the
author
________________
8WTO,2002
In this inherently low-value added sector, Pakistan enjoys a strong comparative advantage in
some of the product lines. Two of the top 25 RCA ranking products are from this sector. 40% of
the product lines are competitively positioned and 25% are emerging as competitive products.
Table 7. Revealed Comparative Advantage Profile of Hides & Skins
Emergin Weakly
Competitiv Threatene g Positioned
Product e d Products Products Group
Categories Products Products Group
Group Group
Tier I Tier II Tier I Tier II
Hides & Skins 8 1 2 3 3 3
HS 41743 (40) (5) (10) (15) (15) (15)
calculations by the
author
Notes: The figures in the parenthesis are percentage share in that product
category.
The export growth of this sector is limited due to supply-side constraints and competition
from substitutes. Necessary steps at the industry and at the enterprise level should be taken to
improve the overall comparative advantage profile of this. sector. Efforts are
required to move upwards on the value chain.
Textiles & Textile Articles
The textiles and clothing sub-sector (HS 50-63) is the largest contributor to Pakistan's total
exports. This sector has displayed increased export coverage, with the number of product lines
increasing from 127 b. 1990 to 142 in 2000, an increase of12%. During this period there has been
a dramatic rise in the number of products displaying comparative advantage. In 2000, 67~''o of
the total product lines exhibited comparative advantage. These trends confirm the dominant
position of textiles and clothing products in Pakistan's non-agricultural exports (Table. 8).
Table 8. Textiles, & Textile Articles (HS 50-63)
Description 1990 2000 Change (1990-2000)
Total No. Of Reported Product 127 142 12%a

Lines 63 95 51%a
Product Lines With 50%) (67%
Revealed b b -27a
Com arative Advanta e (RCA > 64 47
1) d 50% c 33%)
Product Lines With c
Revealed
Com arative Disadvanta e
(RCA<1
Notes: " % change from] 990 to 2000; Product lines with RCA> I as a proportion of total product
lines; C Product lines with RCA<]
as a proportion of total product lines; d International Economic Data Bank (IEDB), Australian.
National University, and calculations
by the author
The textiles and clothing sector is the most competitively positioned segment. Of Pakistan's
manufacturing. lS'ofthe top 25 top RCA ranking products in 2000 were from
this sector During the period studied, only 19% of its products were "Weakly
Positioned". This is the lowest percentage of "Weakly Positioned" products, observed by any
sector of Pakistan's marmfacturing (Table 9). An important feature of Pakistan's textiles and
clothing sector is that export specialization is not merely in the textiles sub- sector.
Table 9. Revealed Comparative Advantage Profile of Textiles and Clothing

Products
Weakly
Competitiv Threatene Emerging Positioned
Product e d Products Products Group
Products Products Group
Categories Group Group Tier I Tier II
Tier I Tier II
Textiles &Textile 77 18 11 9 8 19
Articles HS Code 50-63 (54) (13) (8) (6) (6) (13)
Source: International Economic DataBank (IEDB), Australian National University, and
calculations by the
author
Notes: The figures in the parenthesis are percentage share in that product
category.
Pakistan's textiles and clothing sector remains at the lower end of the value chain. To move up the
value chain and export high-value added apparels, requires developing capabilities in design,
product planning, distribution channels, and international marketing. Sustainable export
competitiveness of the textiles and clothing industry depends on its global orientation and
building of capacity ahead of demand in key areas. With the global demand patterns shifting
from natural fibre to man-made fibre, a reorientation of the apparel industry is needed to contest
the most dynamic segment of the export markets.
Base Metals & Articles
Performance of this sector can be characterized as a mixed success. Number of product lines
contesting the global markets increased from 122 in 1990 to 149 in 2000. Two of the top 25 RCA
ranking product lines (cutlery items and surgical instruments) in 2000 were from this broader
sector. This period witnessed an increase in the number of product lines with comparative
advantages from 18 to 25, an increase of 39%. Only 11% of product lines exhibited comparative
advantages in 2000, showing that export success is confined to a narrow array of product lines
(Table 10).
Table 10. Base Metals & Articles (HS 72-83)
Descri !ion 1990 2000 Change(1990-2000)

Total No. Of Re orted Product Line$ 122 149 22a
Product Lines With Revealed Comparative 18 25 39a
Advanta e (RCA >1)d (15% b (17% b
Product Lines With Revealed Comparative 104 124 19a
Disadvanta e (RCA<I) 85% c (83% c
Notes:a % change from 1990 to 2000; Product lines with RCA> 1 as a proportion of total product
lines; C Product lines with RCA<1 as a proportion of total product lines; d International
Economic Data Bank (IEDB), Australian National University, and calculations
by the author
While 47% of its product lines are characterized as "Weakly Positioned", this sector has made
noticeable progress in product diversification. This strategy seems to be viable, as 36% of the
product lines form the "Emerging Products Group" in 2000.
Table 11. Revealed Comparative Advantage Profile of Base Metals & Articles
I Competitive Threatened Emerging Weakly

Positioned
IProduct ProducJs Products Products Group Products Group
Categories Group Group Tier I Tier II Tier I Tier II
IBase Metals & 18 7 11 43 10 60
I Articles HS 72-83 (12) (5) (7) (29) (7) (40)
Source: U International Economic Data Bank (IEDB), Australian National University, and
calculations by the author
Notes: The figures in the parenthesis are percentage share in that
product category
"Competitive Products" from this sector cover a broad spectrum of production activities. This
involves a range of product lines with varying degrees of manufacturing
sophistication, indicating the presence of backward and forward linkages within this industrial
cluster.
In the case of "Threatened Products Group", the product lines that are losing their competitive
position at an increasing rate are Tin-related items. There is a need to undertake industry-specific
studies to highlight the issues concerning these product lines. The presence of steel products in the
"Emerging Product Group" points to a need to look at the impact of the current tariff regime on
the cost competitiveness of steel-based exports.
Machinery & Mechanical Appliances
The overall position of the Machinery and Mechanical Appliances sector (HS 84-85) showed no
improvement during 1990-2000. While the total number of product lines has risen from 128 to
132, 84% of these products exhibited a comparative disadvantage in 2000 (Table 12).
Table 12 Machinery & Mechanical Appliances (HS 84-85)

Description 1990 2000 Change(1990-2000)
Total No. of Re octed Product Lines 128 132 3%"
Product Lines With Revealed Comparative 22 21 -5%"
Advanta e (RCA >1 d 17% b 16%)b
Products Lines With Revealed Comparative 106 111 5%"
Disadvanta e (RCA<1 (83% c (84%) c
Notes: a % change from 1990 to 2000; Product lines with RCA> 1 as a proportion of total
product lines; C
Product lines with RCA<I as a proportion of total product lines; d International Economic
Data Bank (IEDB),
author
Table 13 Revealed Comparative Advantage Profile of

Machinery & Mechanical Appliances
Threatene Emerging Weakly

Competitiv Products Positioned
Product d
Categories e Group Products Group
Products
Products
Group
Grou Tier I Tier Tier I Tier II
Machinery and p II
1 17 9 44
Mechanical 41
7 4 (13) (7) (33)
Appliances HS 84- (31)
(13) (3)
85
Source: International Economics Data Bank (IEDB), Australian National University, and
product category.
Pakistan has performed admirably in some of the niche markets within this highly fragmented
industrial sector. The competitive positioning of the textile machinery industry is a defined
example. Other high value-added segments, in which Pakistan is making'steady progress, are
household appliances such as refrigerators and freezers. There are a number of other electrical
and electronics components, which now form the "Emerging Product Group" in this sector. There
are 40% of the product lines that are "Weakly Positioned". In some cases, their international
competitiveness has been in steep decline.
Irrespective of its current level of revealed comparative advantage, development of the machinery
and mechanical appliance sector is vital to the industrial development of the country due to its
backward and forward linkages with all other manufacturing sectors. It is in this context that this
study calls for treating this sector as a "Policy-Driven Sector" with efforts to provide an
investment-friendly environment for its diversification and technological upgrading. This would
require time-bound assistance or protection to those segments that are scale-based and have
positioning to achieve export competitiveness or
industries, which are "Weakly Positioned". Their survival is vital for strategic reasons
Transportation Equipment
There has been a visible improvement in the number of product lines, involved in international
trade during the 1990's (from 19 in 1990 to 30 in 2000, an increase of 58%). There were though
only six product lines that exhibited revealed comparative advantages in 2000. This period was
marred by a worsening competitive position of this sector, with the proportion of product lines
with comparative disadvantages increasing to 81 % in 2000 (Table 14).
Table 14 Transportation Equipment (HS 86-89)
Description 1990 2000 Change(1990-

2000)
Total No. of Reported Product Lines 19 32 68%a
Product Lines With Revealed Comparative 5 6 20%a
Advanta e (RCA >1 d (26%b) (19%)b
Products Lines With Revealed Comparative 14 26 85%a
c c
Disadvanta e (RCA<1 (74%) (81%)
Notes:a % change from 1990 to 2000: b Product lines with RCA>1 as a proportion of total
product lines; c
Product lines with RCA<1 as a proportion of total product lines; d International Economic Data
(IEDB),
author
Product lines that constitute the "Competitive Product Group" include low and relatively
high value-added products. In some instances, exports are the output of assembly
operations. This is valid for product lines in the "Emerging Product Group". A detailed
study of the "Weakly Positioned Group" indicates that Pakistan's position is deteriorating in
railway transport equipments.
Table 15. Revealed Comparative Advantage Profile of

Transportation Equipment
Competitive' Threatened Emerging Weakly
Product Categories Products Products Products Positioned
Group Group Group Products
Group
/ Tier I Tier Tier I Tier II
Transportation 6 2 II 5 11
-
Equipment HS 86-89" (19) (6) 8 (16) (34)
(25)
The transportation sector, in general, and the automobile sector, in particular, is the most protected
sectors in Pakistan. Within in the automobile industry, the effective rate of protection ranges
between 701% to over 5000%9. In the context of the new round of trade
negotiations, it is difficult to envisage the sustainability of this sector, without protection
Measuring and Musical Instruments
Table 15 shows the resilience of instruments, musical, measuring sector (HS 90-92), during the
1990s. This sector registered a 12% growth in the number of product lines and a 25% growth in
the proportion of the product lines with comparative advantage. While there has been an increase
in the number of product lines contesting in intemation~l markets, this development has been
accompanied by a 12% rise in the number of product lines with a comparative disadvantage
(Table 16).
Table 16 Measuring, Musical Instruments (HS 90-92)
Description 1990 2000 Change

(1990-2000)
Total No. of Reported Product Lines 49 55 12%
Product Lines With Revealed Comparative 8 10 a
Advantage (RCA<1)d (16%) (18%)b (25%)a
Product Lines With Revealed Comparative b 45
Disadvantage (RCA<1) 41 c 12%
(84%)
c a
(84%)
calculations by the
This is a relatively high-value added sector, with 18% "Competitively Positioned" product lines,
including medical, surgical, dental and veterinary instruments. The balance of the exports are
divided into "Emerging Products Group-Tier I and Tier II" (9% and 31 %, respectively) and
"Weakly Positioned Products-Tier I and Tier II". While the sector has diversified the export base,
majority of its product lines are clustered around the lower end of the comparative advantage
index
Table 17. Revealed Comparative Advantage Profile of
Measuring. Musical Instrument
Competitive Threatened Emerging Weakly Positioned

Product Products Products Products Products Group
Categories Group Group . Group
Tier I Tier IITier I Tier II
Instruments- 10 - 5 17 2 21
Measuring, Musical (18) (9) (31) (4) (38)
HS 90-92
product category
There is dichotomy within this sector, with Pakistan being more competitive in relatively
less technological and capital-intensive product lines, e.g. surgical instruments, than
those, which require more sophisticated and elaborate manufacturing, such as optical
fibres. While Pakistan has the human capital to move into more advanced manufacturing activities,
it lacks the necessary physical capital to exploit this potential. Inflows or foreign direct
investment in this sector can provide a catalyst for a move towards the
higher end of the value chain.
6: Conclusions and Policy Implications
The composition and volume of world trade has witnessed significant changes during the past two
decades. However, Pakistan's narrow low value-added export base has failed to create a solid
foundation for an export-led growth. The dominance of the textiles and clothing sector is
consistent with Pakistan's existing natural and human factor endowments. However, Pakistan
has failed to move from low value-added to technology- intensive high-value added
manufacturing. In the present climate of trade liberalization, Pakistan's textiles and clothing
sector will come under increasing competitive pressure from lower cost producers.
Pakistan's economic well being depends on the extent to which the non-agricultural sector
remains competitive and contributes to economic growth, exports, investment and employment.
Given the present profile of Pakistan's revealed comparative advantage in non-agricultural
exports, these outc.omes in turn depend on (a) an industrial restructuring of Pakistan's
manufacturing, enabling it to contest high growth sectors of world trade; and (b) the ability of the
manufacturing sector to create, sustain and enhance its export competitiveness.
While Pakistan's non-agricultural sector witnessed competitive positioning of some of its sectors,
these trends have not been uniform across all sectors. Further, a higher revealed comparative
advantage or rapid export growth of a sector does not imply that the sector is displaying high
demand growth in world markets. In an ideal situation, there would be the emergence of an export
structure that has a heavy concentration in those industries that exhibit high growth in world
markets. Such an industrial restructuring would indicate a country's success in contesting the
dynamic segments of world trade. While the chemicai sector comes closer to meet the above
criterion, the same is not true for Pakistan's leading sector of textiles and clothing.
Within PakistaIl's overall export profile, trade liberalization will exert further competitive pressure.
The competitive threat from other low wage economies, such as China, poses new challenges for
Pakistan's labour-intensive manufacturing sector. Trade liberalization and market access is a
necessary, but not a sufficient condition, to achieve competitive advantage at the enterprise and
industry level. Achieving export competitiveness in the rapidly globalized markets would require
efforts at micro and macro levels.
To sustain its cost advantage, non-agricultural sector will need to increase total factor
productivity. This would require improving capital to labor ratio, by encouraging domestic and
foreign direct investment. The importance of changes in trade policy to
generate this outcome cannot be underestimated. At the present level of its development,
changes in Pakistan's import structure are crucial to contest high growth markets of the
world and remain competitive in traditional export markets by moving up the value chain. A
firm's 2.lJiJity to import technology and. key intermediate inputs is critical to contest dynamic
export markets. Trade liberalization is a necessary condition to achieve this resolation.
In some instaDr,~s, industrial restructuring will require moving away from qreas of decreasing
revealed comparative advantage and the allocation of these resources to the segments of
manufacture ::1g with greater export potential. As the analysis indicates, an industrial
reorientation Implies a shift towards high-value added technology intensive activities. This
would require vigorous efforts to develop and upgrade workforce capabilities throug1:!
education, retraining, and skill acquisition programs. In other areas of manufacturing, as in
clothing and textiles, creating or maintaining export. con:~)etitiveness would necessitate adding
more value than the competitors. This would be achieved through non-price measures to offset
high-cost disadvantages that may arise from the Chinese competitive threat. Importantly,
pressure for industrial restructuring would become increasingly important with the full
implementation of Agreement on Textiles and Clothin~ and growing globalization of production.
The extent to. which Pakistan can succeed in its drive to move into high-value added export
industries, in which knowledge and technology intensive industries playa central role, depends
Ut:'0TI an emphasis on research and development, technology capabilities, and pace of
technology transfer. Similarly, the ability of Pakistan's i1!stitutional and socio-ecotiomic
infrastructure to provide helpful conditions for industrial restructuring ought not to be
underestimated. Quality and the type of human capital needed for an industrial transformation
would become an important issue to overcome.
In the case of Pakistan, inter-industrial forward and backward linkages, between small and
medium industries and overseas-hased multinationals, are weak and may not exist. With rapid
globalization of production and markets, there is an urgeilt need to foster these linkages to
integrate Pakistani SMEs into global production networks. It is
important that Pakistan takes a pro-active appro ad: , to encourage the establishment
of upstream and downstream production networks with overseas-basf;d firms.
The slow pace of Pakistan's export growth is a manjf~station of supply and demand side
constraints. While good macroeconomic management is essential, a more important issue is to build
investor confidence, by creating a credible im-estment friendly environment. The "drag factors"
that severely inhibit further deepening and broadening of the manufacturing sector should be
tackled in conjuncticTI Wi1:h further trade liberalization measures. These inhibiting factors
obstruct new start-ups and export ready firms, which are willing to venture into overseas
markets. The 'export promotion" policies are important to help ~build new markets for traditional
and nori-traditional exports. There is a need to confront issues that constrain "export .:re:.ltion" at
the c'Jterprise level.
At the firm level, factors such as worker motivation and skill level, the nature of the product and
technology in use, the scale of production, the internal organization of the firm, strategic alliances
between local and foreign firms, and ownership of other unique
assets of quality, reliability, and service, are instrumental in the value adding process.
These factors, whilst interacting with a given macro environment, play an important role in raising
value-added productivity, by influencing labour productivity and price-cost margins at the
enterprise level, irrespective oftheir industrial orientation.
CONCLUSION AND IMPLICATIONS:
 Pakistan in under develop country and it has unstable economic growth and its political
structure is very uneven, and it is the main reason of Pakistan’s unstable growth, no
country can survive or can become develop country and can achieve high growth if its
political condition is not stable. So there is a need to make efforts to make its political
condition stable and remove corruption from this section and there is needs to focus on
vision of Pakistan which we are forget now a days. There is a need to educate our
politicians through political education.
 Its geographic location is become critical for it some time because of its major rival India
has border with Pakistan. It has suitable land for cultivation and its climate is mostly hot,
dry desert; temperate in northwest; arctic in north.
 It has very struggling history of its birth. 97% population of Pakistan is Muslims and
Pakistan is a member of different unions like IMF and WTO. There is a need to become a
member of other international unions because through this Pakistan has an opportunity to
get foreign investment and also it will known by many countries which do not known us.
 It has GDP growth 2pc; public debt crosses 7 trillion mark; external debt $51 bn; official
inflation 23pc; real poverty 30p, there is a need to think and work to find out the cause of
low level and unstable growth even we are not effected by the world recession and then
make full efforts to remove that causes and get high growth but for it we need to make
correction in our political system because without their involvement we can not achieve
required growth. Government need to make efforts to control the economic condition of
the country and make investment in industrial sector. Government need to control
inflation through control over real prices. And make efforts to remove or decrease the
level of poverty from country.
 Its agriculture sector is very strong but its share in GDP is only 21%, even Pakistan’s land
is suitable for all time of crops’ cultivations, so there is a need to use technology and
capital in this sector and also make technological advancement, use new technologies
which are uses by develop countries, through this we can get maximum growth by this
sector and our GDP will increase tremendously and export will increase then
automatically per capita income will increase
 Industrial sector’s share in GDP is 27% there is need to make technological advancement
in this sector and manufacture more good with high quality then we can generate revenue
from this sector and we can use capital formation for the development of this sector then
automatically economic development of country will increase.
 Service sector’s share in GDP is 53.3% there is need to keep that growth and make efforts
to increase it.
 It has only 14% exports of agriculture and industrial products. When technological
advancement occurs in both the sectors and political conditions become stable then
exports of Pakistan will increase.
 Pakistan is lay in Rostow’s model’s 2nd stage it is still in struggling condition from the
time of its birth it is because of poor economic condition and political instability so there
is a need to stable that conditions and try to make efforts to take Pakistan into take off
stage and then by following develop countries take it in future stages and finally in a age
of high mass consumption
 Its structural patterns changes are very slow and capital formation is low it is only 23%.
There is needed to make lots of efforts to make these changes fast. Because when labors
move toward urban area from rural then employment level increase in urban area and
huge revenue will generate and then capital formation will increase and there be economic
development occurs.
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52

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WTO AND PAKISTAN

2008 2000-2008 2007 2008

COMMERCIAL SERVICES TRADE

2008 2000-2008 2007 2008

The northern and western highlands of Pakistan contain the towering

ETHNIC & RELIGIOUS COMPOSITION:

Political Parties and the Civil Society:

Long before the emergence of advocacy dominated non-governmental organizations, Pakistani

Suppression of Democratic Cultural Activities:

The Problems of Political Parties

Lack of inner democracy:

Lack of building up of leaders:

Corruption and lack of transparency:

STATUS AT INTERNATIONAL LEVEL:

Land use, farming systems and institutions:

Industry: Types--textiles & apparel, food processing, pharmaceuticals, construction materials,

MEGNITUDE & TRENDS OF ECONOMIC & SOCIAL INDICATORS:

APPLICATION OF GROWTH & DEVELOPMENT THEORIES:

1970’s: 1.5% avg (very unstable because of nationalization and partition)

2000’s: 5.1% avg (2008-2009’s 2.4%)

Export Competitiveness and Comparative Advantage of Pakistan's Non-Agricultural

(RCAIi)a = (Xi a / XW a) / (Xi 1/ XW I) (1)

Accordingly, country i exhibits revealed comparative advantage or has a greater specialization

a) Competitively Positioned Product Lines:

b) Threatened Products Lines:

c) Emerging Products: Tier I & Tier II

• < 1 and equal to or> 0.5 -.

3. Shifting Comparative Advantage of Pakistan's Non-Agricultural Products: The

The pattern of Pakistan's export specialization in non-agricultural production sectors highlights

6 For more on technological and product classification, see Lall,

Table 1 Technological Classification of Top 25 RCA Ranking Non-Agricultural

RCA H RCA- HS RCA H RCA IH

3. Competitive Positioning of Pakistan's Non-Agricultural Production Sectors: An

Threatened Non-Agricultural Products

Emerging Products: Tier I

Emerging Productsf Tier II

Weakly Positioned Products: Tier 1

Weakly Positioned Products: Tier 11

4. Competitive Pos)~ioliing of Pakistan's Non-Agricultural Production Sectors: A

Descri tion 1990 2000 Change(1990-

Table 5. Renaled Cowllarative Advantage Profile of Chemical Products

Prodact Competitive Products Threatened Emerging- Weakly Positioned

Table 6. Hides & Skins (HS 41-43)

Description 1990 2000 Change (1990-2000)

Table 7. Revealed Comparative Advantage Profile of Hides & Skins

Description 1990 2000 Change (1990-2000)

Total No. Of Reported Product 127 142 12%a

Table 9. Revealed Comparative Advantage Profile of Textiles and Clothing

Table 10. Base Metals & Articles (HS 72-83)

Descri !ion 1990 2000 Change(1990-2000)

I Competitive Threatened Emerging Weakly

Machinery & Mechanical Appliances

Table 12 Machinery & Mechanical Appliances (HS 84-85)

Table 13 Revealed Comparative Advantage Profile of

Threatene Emerging Weakly

Description 1990 2000 Change(1990-

Table 15. Revealed Comparative Advantage Profile of

Table 16 Measuring, Musical Instruments (HS 90-92)

Description 1990 2000 Change

Competitive Threatened Emerging Weakly Positioned

6: Conclusions and Policy Implications

CONCLUSION AND IMPLICATIONS: