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1- BUMPER COTTON CROP
2- WHOLE SCENE BEHIND THE NEWS... WTO
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DEPENDENCY AFFECTED PAKISTAN INTERNATIONAL TRADE
4- PAKISTAN'S IMAGE ABROAD
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CONTAMINATED COTTON

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HOW DEPENDENCY AFFECTED PAKISTAN INTERNATIONAL TRADE

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Foreign trade was liberalized to that extent where it is expected to function smoothly

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By MUHAMMAD ARIF

Oct 25 - 31, 2004
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Pakistan being primarily an agriculture country is dependent internally on capital goods. The most noticeable dependency situation of Pakistan international trade is that there exist imbalance between the nature of exports and imports. Exports mainly consist of primary commodities like raw cotton, cotton yarn, cotton waste, leather and its products, hides and skins, cotton thread, cotton cloth, footwear, petroleum and its products, synthetic textiles, animal casing, fish and fish preparations, rice, oil cakes, paints and varnishes, tobacco raw and manufactured, ready-made garments and hosiery, carpets and rugs, sports goods and surgical instruments etc. Whereas, imports comprises of high valued capital goods, industrial-raw material for consumer goods and capital electrical goods, machinery (non-electrical) transport equipment, paper, board and stationary, tea, sugar refined, art silk yarn, iron, steel and manufactured thereof, non-ferrous metals, petroleum and products, edible oils and grains, pulses and flours etc. There is a great difference between the total value of imports and exports. Every year, therefore, the balance of trade remains in deficit. Thus dependency of Pakistan on import of foreign resources will remain the same until efforts are made to overcome dependency by exceeding exports over import.

The following table shows the dependency situation of Pakistan International trade:

(US Million Dollars)

YEAR

EXPORT (FOB)

IMPORT (FOB)

BALANCE

1980-81

2799

5563

2764

1981-82

2319

5769

3450

1982-83

2627

5616

2989

1983-84

2669

5993

3324

1984-85

2457

6009

3552

1985-86

2942

5984

3042

1986-87

3498

5792

-2294

1987-88

4362

6919

-2557

1988-89

4634

7207

-2573

1989-90

4926

7411

2485

1990-91

5902

8385

-2483

1991-92

6762

8998

-2236

1992-93

6782

10049

-3267

1993-94

6685

8685

-2000

1994-95

7759

10296

-2537

1995-96

8311

12015

-3704

1996-97

8096

11241

-3145

1997-98

8434

10301

-1867

1998-99

7528

9613

-2085

1999-2000

8190

9602

-1412

2000-01

6582

7759

-1177

2001-2002

6628

6914

-286

 

 

The dependency on certain exports commodities; Pakistan could not divert its exports because of the heavy dependency for imports of foreign capital goods that adversely affected the Pakistan international trade. Thus, Pakistan being an agriculture country is compelled to export the formal agriculture and its allied sub-sectors products. Since 1970s, Pakistan started exporting semi-manufactured good but their percentage share in total exports hardly comes to 20% so far. The percentage share of export items relating to manufactured goods though is on increasing but they, being few in number and non-compatible to advanced countries exports cannot vie and also are not playing decisive rule.

A continuous deterioration of term of trade is a peculiar dependency situation of Pakistan's foreign trade. The index of terms of trade, with the base year 1980-81=100, since 1981-82 to 1999-2000 stood at the average of 90 per annum. It has also been swinging from 77.95 to 82.73 in the early of nineteen. The index of terms of trade indicates that the prices of our exports have been on decreasing while that of our imports on increasing that affected the Pakistan's International trade leading toward heavy dependency on foreign resources.

Pakistan's balance of trade has been in deficit since long. The reason for such depressed situation is not far to seek. The basic nature of the economy, its ever increasing requirements of huge imports, insufficient exportable surplus, gradually expanding industrialization requirement of raw-material for consumer goods and capital goods, technology and expertise are some important reasons to be worth mentioning.

An other peculiar feature of foreign trade of Pakistan is its persistent deteriorated balance of payments. The current account deficit which was US $ 1037 million in 1980-81 mounted to $ 4575 million at the end of 1995-96. It however, declined to $ 1143 in 1999-2000. Among many other reasons, nearly 400% devaluation and depreciation of Pakistan's rupee so far and persistent political instability are playing their negative role.

Pakistan was dependent at the time of independent; in the early few years established its trade relations mainly with India, the UK, USA and Japan. After sixties, a significant shift took place in this direction. At the beginning of 2001 though a good number of countries, including Socialist, Islamic, Latin America, African and East European are included in trade list, yet still the situation requires to be improved to a large extent to avoid deterioration of Pakistan International Trade.

Pakistan's main trade is sea-born. But Pakistan Merchant Navy is capable to handle only 20% of entire export capacity. For the remaining, dependency of foreign shipping companies is sought. This sort of dependency is also proving one of the main causes to worsen the balance of payments situation of the country. Besides, land-bore and air-born trade is not playing any significant role in foreign trade that really affects Pakistan international trade due to dependency on foreign sources.

Pakistan is also dependent on workers' remittances that are contributing as the second most important sources of foreign exchange earnings in foreign trade sector. The share of workers' remittances increased tremendously from US $36.0 million in 1972-73 to $ 2885.67 million in 1982-83, but after that peak point it began to decrease gradually. But after the disaster of 9/11 in USA, due to uncertainly, the remittances increased to $ 4.2 billion in 2003-2004.

At the beginning of nineties, foreign trade of Pakistan, remained under the strict control policy of the government. But, in the end of nineties, foreign trade was liberalized to that extent where it is expected to function smoothly and help the economy in its revival.

The major portion of Pakistan exports is made by private sector and the foreign exchange so earned is devoted to public sector to import necessary items and to pay for foreign debt. Imports by private sectors are also allowed according to government commercial policy, which is announced almost every year.

The most noticeable dependencies of Pakistan international trade are tariff, quotes and other restriction from developed countries like USA and European union, which adversely affect Pakistan's trade with these countries. The main share of export goes to USA and European union. These advanced economies in the shape of anti-dumping duties, tariff and quotas restrict Pakistan main export like textile, clothing and bed linen etc. Therefore, Pakistan's trade with these nations adversely affected because Pakistan is dependent upon their market for export. This dependency may be overcome if new markets for Pakistanis exports are searched out.

In short, it can be said that Pakistan is dependent on advanced economies for transfer of resources like new technology, expertise, managerial skill, human development etc for her rapid industrialization to boost the trade with other nation to meet the challenges of 21st century. During the process of industrialization Pakistan international trade is badly affected due to high cost of production.

Now, Pakistan is showing resilience and this dependency, however, may be avoided if sincere efforts are excelled to stabilize the economic and political policies at national level to exploit the country's resources by indigenous as well as foreign investors to boost exports and substitute imports of capital goods which are huge burden on the national exchequer.