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WEEKLY NEWSLETTER
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Pakistan
Index
Foreign trade is important to the economy because of
the
country's need to import a variety of products. Imports
have
exceeded exports in almost every year since 1950, and
Pakistan
had a deficit on its balance of trade each year from FY
1973
through FY 1992 (see
table 5, Appendix). In FY 1991,
exports were
US$5.9 billion, compared with imports of US$8.4 billion,
which
resulted in a deficit of US$2.5 billion. In FY 1992,
exports rose
to an estimated US$6.9 billion, but imports reached an
estimated
US$9.3 billion, resulting in a trade deficit of US$2.4
billion.
Economists forecast a trade deficit of around US$2.5
billion for
FY 1993. Pakistan's terms of trade (see Glossary),
expressed in
an index set at 100 in FY 1981, were 78.0 in FY 1991 and
82.7 in
FY 1992.
Crude oil and refined products are significant imports
(see
table 6, Appendix). Their value varies with internal
demand and
changes in the world oil price. In FY 1982, oil products
accounted for around 30 percent of Pakistan's imports,
falling to
an annual average of 15 percent in FY 1987 to FY 1990,
rising to
over 21 percent in FY 1991, but dropping back to 15
percent in FY
1992. Other important categories of imports in FY 1992
included
nonelectrical machinery (24 percent), chemicals (10
percent),
transportation equipment (9 percent), and edible oils (4
percent).
Although
import-substitution industrialization (see Glossary)
policies favored domestic manufacturing of substitutes for
imports, officials also encouraged manufactured exports in
the
1950s and 1960s. In the early 1980s, incentives were again
provided to industrialists to increase manufactured
exports.
Nonetheless, in the early 1990s the export base remained
primarily dependent on two agricultural products, cotton
and
rice, which are subject to great variations in output and
demand.
In FY 1992, raw cotton, cotton yarn, cotton cloth, and
cotton
waste accounted for 37 percent of all exports (see
table 7,
Appendix). Other important exports were ready made
garments (15
percent), synthetic textiles (6 percent), and rice (6
percent).
There was some diversification during the late 1980s as
the share
of manufactured goods rose. The share of primary goods
fell from
35 percent to 16 percent between FY 1986 and FY 1993.
During the
same period, the share of semimanufactures rose from 16
percent
to 20 percent, and that of manufactured goods rose from 49
percent to 64 percent.
In the early 1990s, Pakistan's balance of trade
remained
particularly vulnerable to changes in the world economy
and bad
weather. Sharp increases in crude oil prices, such as
those of
1979-81 and 1990, raised the nation's import bill
significantly.
Total exports, on the other hand, are more sensitive to
agricultural production. The decline in cotton production
in FY
1993, for instance, seriously affected the export level.
Sources for imports and markets for exports are widely
scattered, and they fluctuate from year to year. In the
early
1990s, the United States and Japan were Pakistan's most
important
trading partners. In FY 1993, the United States accounted
for
13.7 percent of Pakistan's exports and 11.2 percent of its
imports. Japan accounted for 6.6 percent of exports and
14.2
percent of imports. Germany, Britain, and Saudi Arabia are
also
important trading partners. Hong Kong is an important
export
market and China a significant supplier of imports. Trade
with
the Republic of Korea (South Korea) and Malaysia is small
but not
unimportant. Trade with India is negligible.
Because of Pakistani fears of protectionism in
developed
countries and the increasing importance of regional blocs
in
international trade, the government in the 1980s and early
1990s
placed new importance on developing trade links with
nearby
nations. In the early 1990s, new trading initiatives were
being
pursued through membership in two regional organizations,
the
Economic Co-operation Organization (ECO) and the South
Asian
Association for Regional Cooperation
(SAARC--see Glossary).
The ECO was formed in 1985 with Pakistan, Iran, and
Turkey as
its only members, but Afghanistan, Azerbaijan, Kyrgyzstan,
Tajikistan, Turkmenistan, and Uzbekistan joined in 1992.
Some
politicians in the member nations see the ECO as a
potential
Muslim common market, but political rivalries, especially
between
Iran and Turkey, limit its effectiveness. In 1994 most of
the
concrete measures being taken by the ECO concerned the
improvement of transportation and communications among the
member
nations, including the construction of a highway from
Turkey to
Pakistan through Iran.
SAARC was founded in the mid-1980s primarily as a
vehicle to
increase trade within South Asia by delinking the region's
political conflicts from economic cooperation. Its seven
member
states--Bangladesh, Bhutan, India, Maldives, Nepal,
Pakistan, and
Sri Lanka--adopted the principle of unanimity in selecting
multilateral questions for debate. Despite frequent
consultative
committee meetings, progress toward increased trade
remained
limited in 1994. Pakistan's trade with India, for
instance, is
extremely limited. At the annual SAARC summit in April
1993,
members agreed to negotiate a South Asian Preferential
Trade
Agreement by 1996 that would lower or abolish tariffs
among
members.
During the first four decades after independence,
controls on
imports were used to ensure priority use of foreign
exchange and
to assist industrialization. In the 1980s, the government
maintained lists of permissible imports and also used
quantitative restrictions and regulations on foreign
exchange to
control imports. The most extensive list covers consumer
goods as
well as raw materials and capital goods that can be
imported by
commercial and industrial users. A second list, mostly of
raw
materials, can only be imported by industrial users. A
third list
covers commodities only the public sector can import.
In 1991 and 1992, the government announced various
measures
to liberalize trade. Import licensing was ended for most
goods,
many products were removed from the lists of restricted
imports,
and import duties were cut. In addition, foreign companies
were
allowed into the export trade. The government also
promised to
convert the remaining nontariff barriers into tariffs,
incorporate various ad hoc import taxes into customs
duties, and
reduce the numerous exemptions and concessions on duties.
Data as of April 1994
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