Importance of Export to Pak

1. Preparedby:ArmanYousaf
Why Export is important to Economy
Export plays an important role in every country’s economy, influencing the level of economic growth,
employment and the balance of payments. Lower transport costs, globalisation, economies of scale
and reduced tariff barriers have all helped exports become a bigger share of Pakistan’s national
income. In 2015, exports of goods and services accounted for 13% of GDP.
Importance of exports can be better explained as follows:
 Employment: Growth in exports can create employment. For example, the growth in textile sector
exports have created many job in the past, such as Azguard9 factory in Lahore, and Sitara Group in
Faisalabad. Traditionally export jobs have been in manufacturing industries – an important source of
full-time employment, especially in industrial regions. In recent years, exports have become more
diversified with a greater reliance on service sector based exports.
 Economic growth: Exports are a component of aggregate demand (AD). Rising exports will help
increase AD and cause higher economic growth. Growth in exports can also have a knock on effect
to related ‘service industries’. For example, the success of commodoties like Leather goods &
Surgical items will help the local economy to grow. Similarly a fall in exports, during a global
economic downturn can have a big negative impact on Pak economy.
 Current account deficit: The strength of exports has a large role in determining the current account
deficit. In the past few decades, Pakistan has had a persistent current account deficit, which many
attribute to the Pakistan’s relative poor export performance.
Pakistan's exports increased more than 4 Times from $7.5 billion in 1999 to stand at $32 billion in
the financial year 2013–14 (Includes 26 Billion in Goods & $6 Billion in Services).
Pakistan is one of the highly ranked Muslim countries in the world Due to atomic power and some
other reasons. Currently Pakistan economical situation facing ups and downs due to war situation
with TTP in KPK and BLA in Balochistan.

2. Preparedby:ArmanYousaf
List of Major Exports of Pakistan in 2014:
 Raw cotton
 Leather and leather products.
 Carpets and rugs, Tents.
 Synthetic textiles.
 Surgical instruments.
 Sports goods.
 Readymade garments.
 Vegetable, fruit and fish.
 Engineering goods.
 Chemicals and Pharmaceutical products.
P
Major Countries
Pakistan exports to
Export
Contribution
China 11.1
European Union 18.2
United Arab
Emirates 8.5
Saudi Arabia 8.5
United States 13.6
Kuwait 0.07
India 2.1
Malaysia 0.9
Japan 1.6
Iran 1.8
Afghanistan 7.6
Singapore 0.3

3. Preparedby:ArmanYousaf
Table 1, Pakistan’s export for the last 12 months
An apple to apple comparison with the neighbouring, Bangladesh
Bangladesh earned $21 billion of revenues in 2013 by exporting garments to the West while
Pakistan earned $2.6 billion. This brought 90% of Bangladesh’s foreign exchange earnings. The
industry currently employs 13 million people. That’s almost 10% of its population and 20% of its
labour force. What’s even more impressive is Bangladesh’s continuous growth. In 2002, Pakistan
and Bangladesh had identical export earnings from garments at $2.5 billion each. A 2011 Deloitte -
Touche study predicts that Bangladesh’s garment industry shall rise to $40 billion by 2018.
At present the West spends $200 Billion on sourcing cheap garments where:
1. China holds $80 billion share while the next two contenders

4. Preparedby:ArmanYousaf
2. Turkey and Bangladesh hold $30 and $21 billion apiece while
3. India, Vietnam, Indonesia, Philippines, Sri Lanka and Pakistan jointly account for another $50
billion.
Due to the ageing population of China, its wage rates has crossed $1/hour and is climbing.
Consequently, manufacturing garments at this wage rate is untenable. Therefore its an $80-billion
market share up for grabs and the only countries that can pitch a matching labour capacity are
India, Bangladesh and Pakistan. They have millions of uneducated, unskilled and out of work
labour force. Surprisingly, this industry thrives on them. With mundane tasks like pressing, folding
or packing taking days to master and more skilled task like operating sewing machines a few
weeks; the uneducated and unskilled workforce becomes productive quickly. As for the Indians,
their labour laws have always had a socialist bent and have favoured unionised labour. To
circumvent labour unions Indian garment factories keep their sizes small; making them less
attractive for garment manufacturing. This leaves Bangladesh and Pakistan the only places that
can absorb the giant capacity China is shedding.
Unfortunately, this $80 billion export boom would not touch us. Pakistan’s security situation has
kept most western visitors out of our country. Without their prolonged stay and intense interactions
with our factories to develop fashion products each season, there is very little hope that we would
touch anything beyond a couple of billion dollars. Security remains the single most important factor
for stalling our apparel industry. Tragically, on all other factors of production we hold a clear
competitive advantage over Bangladesh.
With our inability to fix security, stop wanton killings and kidnappings for ransom for westerners
and stemming the tide of religious militancy, most Chinese spoils would continue going to
Bangladesh. Apparently, nothing will stop its march. Ever escalating wages, horrific industrial
accidents and politics of confrontation notwithstanding; Bangladesh shall keep growing its share of
the global apparel market for decades more.

5. Preparedby:ArmanYousaf
Recommendations for improving Pakistan’s current trade deficit of $14.1 Billion
(as of March 2015) :
 Focusing on regional trade, including ECO countries, as suggested by the public-private
dialogue on trade with ECO countries;
 Upgrading infrastructure facilities, where needed;
 Establishing a Services Trade Development Council;
 Setting up a task force to facilitate the development of e-commerce;
 Strengthening training and product development institutes;
 Overhauling trade offices abroad, including updating a trade officers’ manual
 Encouraging the opening of retail outlets;
 Marketing development assistance for regional countries, including market research, support
for non-traditional exports and support for marketing efforts of the private sector;
 Strengthening research and out-reach capacity of women within chambers of commerce.
The above factors which can lead to a decrease in trade deficit will significantly contribute to
macroeconomy of pakistan, hence improving the GDP.