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2. What is Domestic Commerce?
-Domestic Commerce covers all aspects of
pricing, packaging, marketing, SPS/TBT compliance of WTO
agreement, improving competitiveness, sophistication, product
diversification, improving doing business environment etc.
(PIDE Working Papers 2006:11)
-A vibrant domestic commerce sector is the core of the economy
facilitating intermediation between supply and
demand, entrepreneurship development, risk-taking
innovation, and competitive markets. Such an economy moves
beyond commodity exports to brand name, process, and capital
exports, all of which command a higher rate of return.
“Policy in Pakistan has been fairly path-dependant, placing a
higher weight on export promotion and domestic industrializations
development than on
domestic commerce”.
3. What is Domestic Commerce?
• With technological advancement and globalization under
WTO, domestic and international markets are more
dependant on competition than ever before.
• Competitiveness is the biggest challenge that our firms
facing today. To achieve competitiveness, there is a need
for producing goods as per laid down technical
regulations and standards under WTO regime.
• Achieving competitiveness requires an overall policy
shift to produce highly sophisticated and value added
products both for the domestic and foreign markets.
• Pakistan has a reasonably large domestic market size
which can attract local and foreign investors. To exploit
the potential of domestic market, promotion of Domestic
Commerce needs a diversification from export promotion
to promoting Domestic markets which in turn should
prepare domestic industry to produce qualitative and
competitive goods.
4. What is Domestic Commerce?
• Pakistan’s economy in recent past has been hit with a
series of economic shocks.
• Pakistan has been fighting as a frontline state on War
on Terror and now the devastating floods have again
adversely affected the lives and livelihood of about 17
million people.
• To face the current economic challenges, there is a
need to mobilize domestic resources in
investments, enhance rural financing facilities
especially in housing and construction
sector, livestock, health care etc.
5. Importance of Domestic Commerce
An efficient domestic commerce is important, inter
alia, for following reasons:
o Generate exports
o Employment
o Market integration
o Quality and standardization
o Competitiveness, value addition and sophistication
o Promotion of modern business practices
o Improving market access, etc (from farm to market)
o Improving regulations, cost of doing business
o Improving contract reinforcement
6. Importance of Domestic Commerce
• Our domestic consumer lives with substandard consumer goods
• We export basic commodities and simple manufacturing goods
such as basic textile and clothing items
• An emphasis on export promotion and import substitution industry
is supposed to help our foreign exchange earnings.
• Export promotion and import substitution can be followed at the
cost of domestic markets and consumers
• For example, exports are subsidized to provide the foreign
consumer a Pakistani subsidy while imports are heavily taxed for
impost substitution to make Pakistani consumer goods very
expensive.
• It is in domestic markets that all manner of innovation and
entrepreneurship can take place which later will move out and lead
to higher exports and foreign exchange earnings.
7. Importance of Domestic Commerce
Brand names are developed in competitive
domestic markets and then exports.
Even today, Sony releases many new products
in Japan first before exporting them.
We have many examples in front of us:
Coke, Pepsi, McDonalds,
and Marks & Spencer etc.
8. Can you name any Pakistani brands
recognized internationally ??
9. Importance of Domestic Commerce
• Domestic commerce in Pakistan is an
important sector
• Labour force survey says that services which
reside in this sector employs about 34 % of
the labour force
• It contributes to more than half of our GDP.
11. Three concept papers by the Wing
Following three concept papers were presented by the Wing
to the Secretary Commerce:
1) Review of Market Access and Tariff Bindings /
Position of Domestically Produced Products
2) Concept Paper on the Formulation and
Announcement of a Long Term Tariff Policy
3) Increasing the Competitiveness of the Domestic
Industry
(papers were converted into working papers and were
submitted to FODP as per direction of the Secretary
Commerce for “Aid for Trade” worth US$ 100
million)
12. Focus areas in 3 concept papers, inter
alia, included:
• Considering the current international market
conditions, foreseeing the future market trends and
the global economy, market access for Pakistani
products abroad and grant of foreign products to
Pakistani markets both at multilateral and bilateral
basis should be negotiated considering the strengths
and weaknesses of Pakistan’s industry.
• A full-fledged market access plan needs to be
drawn based on product and target market
criteria, keeping in mind the GATT provisions of
“reciprocity” and “mutually advantageous basis.”
13. (i) Product Criteria
a) Capacity of the industry to produce highly competitive goods for
the international markets;
b) The ability to supply goods that conform to the provisions of
WTO Agreement on SPS (Sanitary and Phyto-sanitary Measures)
and TBT (Technical Barriers to Trade);
C) Indigenous availability of the raw material as per the necessary
standard and specifications required to produce the product;
d) Dependence of the production on foreign raw materials;
e) Measuring the electricity input cost in the manufacturing
process so that preference could be given to seeking market
access for products with less electricity input;
f) The ability to produce more value added and sophisticated
products
g) Availability of requisite skills to produce the product;
h) The ability of the industry to sell the product in the international
market without governmental assistance,
i) Ranking in world exports.
14. ii) Target Market Criteria
a. Identification and level of impact of global economic
crises on the major economic indicators of the markets to
which Pakistan intends to seek market access both on
multilateral or bilateral trade basis.
b. Some of the indicators in this regard on the basis of
which required market access could be based are:-
- The size of the economy (GDP);
- The Purchasing Power Parity (PPP);
- The per capita income;
- World ranking in imports of the products in
question;
- Country / regions major manufacturing industry in
case of export of raw materials;
- Market size of the product;
- Income spending on the products in question in the
target country or market;
15. Target Market Criteria ….. Continued
Trade remedy laws, regulatory burden, tariff
protection levels and non tariff barriers in the
importing country;
Logistic ease and geographical location from Pakistan
and from other countries in close competition.
Identification of the affects of FTA with other
countries of the target market on Pakistani products.
The wing proposed that the Ministry of Commerce
(The Domestic Commerce Wing) and the NTC should
prepare short term and long term tariff policies.
17. Future work, inter alia, includes:
• Detailed analysis of the regulatory framework
• Identify linkages between Domestic Commerce and services sector, with
special focus on retail and wholesale sectors
• Review firm level competitiveness issues
• Undertake following two pilot projects/studies:
i) Quality of the goods supplied to the domestic markets:
a) Study on “State of the supply of branded/non-branded goods to the
consumers in domestic markets, ensure quality related issues etc.”
b) Study on “State of transport/handling/storage infrastructure and
regulatory framework in the country to improve quality of goods and
create efficiencies”
ii) Improving real estate (RE) sector:
a) Survey of the determinants of growth and impediments
in RE sector – buyers’ perspective
b) Survey of the determinants of growth and impediments
in RE sector–developers / builders (suppliers) perspective
18. Way Forward
It is always a vibrant domestic market that drives economic growth and
exports, so both internal and external trade should get equal treatment
as they represent two sides of the same coin:
• Streamlining regulatory issues, such as:
– State of market regulations and laws
– Do they lower or raise the cost of doing business
– How well do they perform their function
– How regulator enforce consumer protection
– How competent and independent are they
• Promoting Branding & Labeling
• Establishing strong backward and forward linkages
• Changes in the zoning law
• Urban zoning and availability of land and space
• Improved infrastructure, etc
• Improve diversification, value addition and sophistication levels
• Standardization in domestic market
• Product development, Innovation
• Establishing economies of scale
• The state of consumer protection.
– Product quality
– Warranties and returns
– After-sales service
19. Doing Business 2010
Doing Business in Pakistan 2010 provides a quantitative
measure of
the national, and local regulations for:
– Starting a business
– Dealing with construction permits
– Registering property
– Enforcing contracts
– Trading across borders
– Paying taxes
Two types of data
– Pursuing laws and regulations
– Time and motion
20. Pakistan’s unresolved problems
• The labor supply of Pakistan is
growing fast and is unskilled
• Rural population is still rising very fast
• High levels of poverty
21. Policy Implications
• Pakistan needs to reduce poverty and
provide employment to its growing
labor force
• It needs to create employment
outside farming
• If this is not done, Pakistan will fail to
achieve inclusive growth and to
develop. Serious implications…
22. Facts about development
• Economic development requires diversification, not
specialization
• Rapidly growing countries are those with large
manufacturing sectors
• Growth accelerations are associated with structural
change in the direction of manufacturing
• Specialization patterns are not pinned down by factor
endowments
• Countries that export more “sophisticated”
goods, given their level of income, grow faster
23. Growth and Change: The two sides of a coin
Structural change is (a constant process) of:
(i) Transferring resources to higher
productivity activities
(ii) Diversifying production while upgrading
it
(iii) Producing and exporting a more
sophisticated range of products
24. Export Sophistication at the country
level
20000
17500
15000
12500
10000
7500
5000
Pakistan
1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
PRC India Indonesia Malaysia
Pakistan Philippines Sri Lanka Thailand
25. Study on RE Sector
• Real estate market is crucial for promoting commerce &
industry, generating employment, and poverty alleviation.
• The mortgage of real estate sector (land, houses, commercial etc.)
is also very important for financial market.
• Moreover, the real estate sector consists of a conglomerate of
industrial and service sector including, inter alia, construction
services, construction of housing and commercial areas, industrial
and large infrastructural projects such as roads, bridges, dams, etc.
Property consultants, dealers, mortgage banking
departments/divisions in banks, real estate investment trusts;
architects, urban planners etc. are also important components of
the RE sector.
• One of the estimates of 2006 on the housing sector reported that
present stock of houses in Pakistan is 21.7 million units with a
backlog of 7.90 million units and with a recurring annual backlog
of 320,000 units.
• There is a wide gap in demand and supply of housing sector.
Focusing housing sector will improve many economic indicators
and will contribute to GDP of the country, growth of ancillary
industries and generating employment etc.
26. Study on RE Sector
• The laws and regulations governing development and
investment in real estate sector are outdated.
• Impediments to efficient RE sector growth (specially
houses, commercial offices, shops, stores etc.) and urban land
utilization, inter alia, include excessive public land
ownership, inadequate infrastructure services, weak property
rights, poor urban planning policies and regulations, poor
zoning laws, problems in construction laws and
regulations, limited financing facilities for property
development and acquisition, ineffective Alternative Dispute
Resolution (ADR) mechanism, high land prices, high interest
rates and price of construction material.
• To improve the real estate sector in Pakistan a study/pilot
project has been initiated in the Domestic Commerce Wing of
Ministry of Commerce, Islamabad.
• The aim of the study/pilot project was to address above
mentioned issues, define determinants of growth and
impediments, improve overall regulatory framework, find out
problems being faced by the builders/developers and buyers and
give policy input.
27. Study on RE Sector
• Laws and regulations related to:
– Building and Zoning laws/codes,
– Urban planning,
– Compliance to environmental issues,
– Registration of builders/developers etc.,
– Laws to protect buyers of land/housing/commercial units,
– Development of housing/commercial units/societies by the
private sector,
– Role of agents in RE sector, their registration etc.
• List of private builders/developers of housing
societies/plazas/commercial centers etc.,
• List of Standards for building materials (input), design,
• List of material testing labs,
• Duties/fee, taxes and
28. Some Questions
• How can we launch domestic brands internationally ?
• What needs to be done to produce and export value added
and sophisticated products in the country?
• How can we make firms competitive globally ?
• In your opinion, which factors need to be focused to
improve doing business environment in Pakistan ?
• What are the linkages between storage, warehousing and
transport sector? And why this linkage is important ?
• How can real estate sector contribute in improving
economy?
• How global financial crises, WoT, floods etc have affected
domestic commerce and exports?
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