Report

I NTRODUCTION 21
Fig 1.10 Share of Agriculture, Manufacturing and Services in
GDP in Pakistan: 2000–03 (%)
Source: Federal Bureau of Statistics.
countries, has changed over time. In the initial phase
after independence in 1947, import substitution policies
were adopted to expand limited industrial base and
establish non-existent consumer goods industries.
However, industrial base remained weak, inefficient,
and concentrated, and it increased the vulnerability of
economy to external shocks. The policy focus changed
to export expansion. Imports licensing, foreign
exchange controls and bilateral trade agreements were
used to regulate imports.
In recent years, the trade policy has changed significantly.
The emphasis is on import liberalisation and
opening of the domestic market. Also, with a view to
diversify exports of goods and of trading partners, to
generate exportable surplus and with focus on exportoriented
industries, various measures were undertaken.
The measures included compensatory rebates on
various items, standardisation of tariff rates, excise and
sales tax rebates, export financing scheme, duty-free
imports of machinery for balancing, moderanization,
and replacement (BMR) for export units and setting
up export processing zone (EPZ) in Karachi and
Lahore. Trade regime later changed and exports of high
value-added products were again priority. Pakistan’s
long-term growth depends on export diversification but
limited success has been achieved in this direction.
Textile and clothing still accounts for around 60% of
its exports.
Many trade policy initiatives and related measures
have been adopted like rise in availability of finances
for exporters, trade facilitation services, and simplification
of duty draw back system and rationalisation
of tariff rates with lowering of the tariff slabs to four
with maximum tariff rate of 25%. Pakistan is a
founding WTO member. The government has reduced
tariff rates across the board. Quantitative restrictions,
exchange controls, and other direct state interventions
into trade have been largely eliminated. Many special
regulatory orders that provided discretionary exemptions
to firms or industries have been eliminated, thus
leveling the playing field and making the trade regime
less complex.
Trade is an important part of Pakistan’s development
and poverty reduction strategy. Trade policy has
been focused on reducing protection, achieving a more
outward oriented trade regime, obtaining better market
access for Pakistan’ exports, and promoting greater
integration into the global economy through increased
economic efficiency, and thus international competitiveness
, which would contribute to export led growth.
The trade policy of 2007–08 with a view to facilitate
imports, focused on improving the registration and
standardisation of imports, facilitation of trade fairs,
provision for imports of used machinery and pharmaceuticals
and chemical products for domestic industry.
Despite various efforts, the gains in terms of import-
GDP ratio remain modest. The ratio declined from
18.6% in 1989–90 to 13.7% in 2002–03 and increased
to 17.1% in 2004–05. However, the composition has
changed over time. The share of consumer goods in
total imports witnessed a decline. However, the share
of capital goods in total imports saw upward trend.
Despite fluctuations in the export-GDP and import-
GDP ratios, the overall trade-GDP remained stagnant
around 30% indicating no significant openness of
economy despite liberalisation of trade and reduction
in quantitative and qualitative trade barriers. Pakistan
has participated actively in the Doha round and
attaches high priority to an effective rule based trading
system. Nevertheless, its trade policy has focused
recently on regional trade liberalisation by deepening
and expanding existing plurilateral commitments, e.g.
with SAFTA, Organisation of the Islamic Conference
(OIC), the Developing 8 (D8) and Economic
Cooperation Organisation (ECO). At the same time,
it has been expanding its network of bilateral FTAs,
including with the People’s Republic of China, Iran,
Malaysia, Mauritius and Sri Lanka.
Sri Lanka
With an economy of $27.4 billion and a per capita GDP
of about $4,700, Sri Lanka has enjoyed strong growth
rates in the post-2000 period. The main economic
sectors of the country are tourism, tea export, apparel,
textile, rice production and other agricultural products.