Trade Pattern of Pakistan Essay Example

Trade Pattern of Pakistan Paper TRADE PATTERN OF PAKISTAN TRADE At the international level, trade means both export and import. The word Export can be defined as commercial sale of goods, services and financial assets in the international market. Export refers to the value of goods and non-factor services that one country produces and sells to the rest of the world. It includes merchandise, freight, insurance, travel, and other non-factor services whereas the repetition of the same phenomena with the intention of purchasing from the international market is declared as imports International Trade of Pakistan (an overview): The nature of foreign trade gives a fairly good indication of pattern and nature of  economies. As this sector has proved itself as a driving force in the development, we can distinguish developing countries from developed ones based upon their volume of  trade. Pakistan emerged on the map of the world on August 14, 1947. In the beginning, it was a poor and agricultural based economy but now the conditions are different and Pakistan is on the track of development. According to the most recent statistics, Pakistans GDP is US$161. 9 billion and the share of Pakistan in international trade0. 22%, hence Pakistan is considered a small country in international market. In the early years, potential of available resources could not be exploited in a better  way, which later on, proved a major factor for slowing down the pace of development. That sluggish development resulted in small exportable surpluses, which delayed the stage of quantum development in Pakistan. In 1950-51 Pakistan exported products worth of 1343 million rupees whereas during the decade of 1950s, exports decreased by 43. 18%. We will write a custom essay sample on Trade Pattern of Pakistan specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Trade Pattern of Pakistan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Trade Pattern of Pakistan specifically for you FOR ONLY $16.38 $13.9/page Hire Writer However, in the decade of development under Ayub Khans regime, industry was established and nature of production changed, so did that of trade. In 1960-61exports were recorded as Rs. 763 million, showing a declining trend earlier on but shortly regained the momentum and during the decade of 1960s exports increased by 161. 88% The pattern of trade took a different shape after 1971, when Bangladesh was created, because the contribution of East Pakistan in Pakistans trade and foreign exchange had been quite substantial. In the decade of 1970s exports increased from Rs. 1. 99 billion to Rs. 29. 28 billion and reached at Rs. 138. 8 billion in the 1990-91. The figure rose up toRs. 560. 94 billion in the year 2001-02 whereas according to the most recent statistics, in the year 2003-04, Pakistans exports are recorded as $10 billion showing an increase of  13. 1% from the last fiscal year. PAKISTANS PATTERN OF INTERNATIONAL TRADE If we look back at the trade of Pakistan, we find that except for first decade, our exports have ever increased, but Alas! We could not cut down our imports; hence the result is negative trade balance. Except for 1950-51 and 1972-73, the balance of trade has been negative, implying that Pakistan always imported more than its exports. Even then exports have made a large contribution to the economy of Pakistan and have proved to be the backbone of the economy. The composition of Pakistani exports has changed significantly over the years. The principal changes have been the steep fall in the shares of primary and semi manufactured exports and equally sharp increase in the share of manufactured exports. In the early years, share of primary goods was more than semi manufactured and manufactured goods. In the very beginning, 99% of Pakistani exports were made up of  just five primary commodities i. . raw jute, raw cotton, raw wool, hides and tea. So, Pakistan fits the classical case of an unindustrialized, undeveloped country, in the very early years producing and exporting only primary products and mainly dependent on climatic conditions. Over the time, the pattern of trade changes as countries move from primary products to finished manufactured goods and their imports change from consumer goods to capital goods. Si milarly, changes began to occur in the pattern of exports from Pakistan as economic policies shifted towards industrialization. By 1951-52, the five main primary commodities contributed 93% in export earnings, which by 1958-59 had fallen to 75% and further to 45% in 1971-72. It continued decreasing and it was recorded as 19% in1991-92 and according to the most recent statistics, the share of primary commodities, semi manufactured and manufactured goods in the year 2003-04 is 10%, 12% and78%, respectively CRITICAL REVIEW OF PAKISTANS TRADE PATTERN Although, we have made much progress in our exports but even yet we have to walk for  a long distance on the way of progress. Our exports, like other eveloping countries, are facing several hurdles in the way of development. For instance, production efficiency of  Pakistani industry is low and per unit cost is very high, hence our goods are not being efficiently demanded at local market as well as in international market because of their  high prices. Stagnation in the economy and recession in production activity cause fewer  exports. There is a great dearth of foreign direct investment in Pakistan due to which new industries cant be established and flourished. Pakistan is facing the problem of export concentration both in terms of products and markets. This situation can be explained with the fact that Pakistani exports are highly concentrated in 5 commodities and to 7countries only. Moreover, lesser value addition and exports of traditional items caused trade deficit. Exchange rate also affects the quality of exports. Continuous devaluation in the era of 90s caused an increase in exports but at the same time, no attention was paid to developing and flourishing the industry, hence the result was increase in imports. Furthermore, the devaluation of rupee has inflated production cost of export commodities. Political instability, religious fanaticism with kidnapping and murder of foreign personnel in Pakistan, has caused threats to foreign investment. Now with the efforts of present government, we have almost regained the confidence of foreign investor, which was shattered when we seized the foreign currency accounts in June 1998. After that FDI became more difficult and bumpy due to 9/11 and murder of some Chinese engineers On the other side, Pakistani exports are highly concentrated in a few items namely cotton, leather, rice, and synthetic textiles and sports goods. These five categories of  exports accounted for about 79. 8% of total exports during 2003-04. Among these categories cotton group alone contributed 62. 5%, followed by leather 5. 3%, rice 5. 2%,synthetic textile 4. 2% and sports goods 2. 6%. The degree of concentration of these items during 2003-04 remained closed to the last years level. Furthermore, concentration of exports in a few items is a major source of instability in export earnings. A poor cotton crop seriously affects total export proceeds, as it has been observed several times in the past. Cotton always has been a major export of Pakistan with62. 5% share in total exports in 2003-04, while in 1990-91 it was 61. 0%. Pakistan is trading with large number of countries but its exports and imports are highly concentrated in few countries slightly above one half of exports went to seven countries namely: USA, Hong Kong, Dubai, Japan, Germany, UK and Saudi Arabia. Among these countries the share of Pakistani exports to USA has been rising while that of Japan has exhibited a continuous decline, mainly on account of a protected recession in the Japanese economy. In 1990-91, major markets of Pakistani exports like USA contributed 10. 8%share in total exports and Germany, Japan, UK, Hong Kong, Dubai and Saudi Arabia contributed 8. 9, 8. 3, 7. 3, 6. 0, 2. 8, and 3. 6% respectively. These seven markets contributed a total share of 47. 7%. By and large, the same trend continued during 2003-04, having total share of 52. 8% by these countries including 23. 6% by US,5. 0 by Germany, 1. 1 by Japan, 7. 5 by UK, 4. 9 by Hong Kong, 7. 7 by Dubai and 3% by Saudi Arabia