Research Analyst, PAGE
Dec 7 - 13, 2009
Lack of diversification in exportable products and export markets punctuate Pakistan's export growth. Traditionally, 50% of Pakistan's exports are destined only to seven countries namely USA, Germany, China, UK, Hong Kong, UAE, and Saudi Arabia.
All trade policies have tried to promote diversification on both counts through a variety of measures.
Pakistan's exports are limited to a few categories such as cotton manufactures and synthetic textiles, leather, rice and sports goods, and they collectively account for around 72% of country's total exports.
PAKISTAN'S EXPORT DESTINATIONS
U.S.A. 3,339,453 18.88 3,719,360 19.52 (379,907) (10.21) U.A.E. 1,469,990 8.31 2,070,953 10.87 (600,963) (29.02) Afghanistan 1,397,518 7.90 1,143,663 6.00 253,855 22.20 UK 874,588 4.94 1,030,028 5.41 (155,440) (15.09) Germany 737,988 4.17 816,615 4.29 (78,627) (9.63) China 701,043 3.96 684,793 3.59 16,250 2.37 Italy 579,749 3.28 723,631 3.80 (143,882) (19.88) Netherlands 464,755 2.63 514,859 2.70 (50,104) (9.73) Saudi Arabia 455,634 2.58 380,080 1.99 75,554 19.88 Spain 404,496 2.29 542,099 2.85 (137,603) (25.38)
Pakistan's top 200 exported products account for 91% of its exports but these products have only 19% share in the world market. This means that Pakistan does not have share at all in 81% of products traded in the world.
In 2006, 5085 products were traded worldwide of which Pakistan only traded in 1365 products. It is encouraging however that the products Pakistan trades in have large world market shares. For example, in cotton yarn and woven cotton fabrics, Pakistanis No. 1, while in cotton bed linen, toilet & kitchen linen and cotton knitted shirts it is No. 2 and in rice, it is No. 3.
A good trend is the growth in the non- traditional category of exports. Some of the non-textile items whose exports have increased include the petroleum group $286mn, cement $226mn, chemicals and pharmaceuticals $210mn, jewelry $140mn, leather products $188mn, and surgical and medical instruments $57mn.
In the category of "others" the increase in exports during last fiscal year was US$337 million. Some of the items included in this category are marble, matches, plastic items, wood items, ceramics, tiles and sanitary fixtures, and various household commodities.
Increase in this category is good evidence of progress in diversification and movement towards export of value added items.
In 1998-99, the seven markets accounted for 53.4% of Pakistan's exports whereas in 2007-08 this reduced to around 44.4%. The three regional groupings that are significant from our growth point of view are Latin American countries such as Brazil, Chile, Colombia, Mexico and Nicaragua African countries including South Africa, Kenya, Madagascar and Mozambique, non traditional European markets including those belonging to the former Soviet bloc such as Scandinavian countries, Poland and Greece.
Looking at the trend from 2003-04 to 2006-07 one may see that the growth of exports during this period was around 114% in Latin America, 81% in Africa, and 60% in this European group of countries.
This diversification trend is healthy and needs to be sustained, but in the immediate future, we cannot afford to shift our focus from textile exports since they constitute around 57% of our total exports. It is noteworthy however that the share of textile and clothing exports in global trade is 4.5% and Pakistan's share in global exports of this sector is a mere 2.15%. This indicates that Pakistan is facing fierce competition in this sector from a number of countries.
New opportunities are emerging since some of our competitors like China are losing their competitive edge due to high input costs.
Therefore, our textile producers need to exploit this opportunity by entering into joint ventures with Chinese companies and setting up production facilities in the China Specific Industrial Zones being established in Pakistan.
Pakistan enjoys competitive advantage in several products, which are fast growing in the global markets and have high demand. The main plank of the strategy should be to concentrate in production and exports on dynamic products with respect to their global demand potential and productivity. Pakistan will and should remain engaged in the low-skill, labor intensive dynamic products such as textiles, leather products etc. In order to increase the global market share, the government officials and business community should participate in trade fairs arranged by foreign countries. Similarly, booklets, brochures, pamphlets about Pakistani products and economy of Pakistan should also be distributed to foreign business community.