Import & Export of Pakistan during 04-08

OVERVIEW of PAKISTAN’S IMPORTS & EXPORTS

GROUP MEMBERS Salma Bashir 126 Sana Khalid 127 Nasiba Waris 139 Sobia Akhlaq 1548 Sameera Dar 1542 Kiran Zahra 1550

Samira Dar 1542 Composition of Imports and Exports of Pakistan

Facts and Figures For the last 5 years it has averaged 6-7 % growth. Pakistan had the narrow export base but due to govt. efforts it has been increased in the last five years. During the last five years, inflation has increased to a great extent. Currently the inflation rate is 25%. Pakistan earns a major portion of foreign exchange from the export of its products such as cotton products, scientific, medical & hospital equipment, Toys, bicycles and other sporting goods, etc. Civilian aircraft, Computer accessories, Telecommunications equipment, Tanks, artillery, missiles, rockets, guns & ammunition, etc are the major imports.

Types of industries Agriculture Automobile Industry Cement Industry IT Industry Cotton &Textile Industry Electronics Aviation Livestock Machinery Pharmaceutical Products Public administration and defense Food Items Sports Goods Miscellaneous

Major Exports of Pakistan Over 80% of Pakistani exports are cotton products. Cotton apparel & household furnishings US$2.6 billion (70.6% of Pakistani to U.S. exports, up 18.6% from 2005) Cotton cloth & fabrics (threads, cordage) $351 million (9.6%, down 5.6%) Other textiles apparel & household furnishings $138.3 million (3.8%, down 11.6%) Textile floor coverings including rugs $122.1 million (3.3%, down 2.1%) Non-textile apparel & household furnishings $81.4 million (2.2%, up 7.2%)

Sporting & camping apparel, footwear & gear $61.2 million (1.7%, up 4.7%) Other scientific, medical & hospital equipment $37.9 million (1%, up 10.4%) Toys, bicycles and other sporting goods $34.4 million (0.9%, up 16.5%) Synthetic cloth & fabrics (threads, cordage) $23.7 million (0.6%, down 39.1%) Cookware, cutlery, house & garden wares including tools $21.4 million (0.6%, up 10.2%)

Major Imports of Pakistan Civilian aircraft (complete) US$753.1 million (37.9% of Pakistani to U.S. exports, up 1,739% from 2005) Generators & accessories $132.3 million (6.6%, up 135.7%) Computer accessories $308.4 million (4.5%, up 7.2%) Chemical fertilizers $87.3 million (4.4%, down 51.6%) Engines & turbines for military aircraft $40.9 million (2.1%, up 2,186.4%).

Civil aircraft (parts) $53.2 million (2.7%, up 5.5%) Military parts $43 million (2.2%, up 27.3%) Telecommunications equipment $64.1 million (3.2%, down 24.6%) Tanks, artillery, missiles, rockets, guns & ammunition $61.7 million (3.1%, up 150,368%)

Fastest-Growing Pakistani Exports Industrial organic chemicals US$13.6 million (up 339,100% from 2005) Bakery & confectionary products $5.3 million (up 197%) Miscellaneous items (e.g. tobacco, waxes, non-food oils) $18.8 million (up 119%) Other automotive parts & accessories $2.8 million (up 115%) Fruits & preparations (e.g. frozen juices) $4.4 million (up 104%).

Fastest-Growing Pakistani Imports Tanks, artillery, missiles, rockets, guns & ammunition US $61.7 million (up 150,368% from 2005) Engines & turbines for military aircraft $40.9 million (up 2,186.4%) Civilian aircraft (complete) $753.1 million (up 1,739%) Sports apparel & gear $3.4 million (up 917%)

Sana Khalid - 127 SUBSTITUTE FOR IMPORT & EXPORT

Substitutes for Imports and Exports in Pakistan Ethanol a viable substitute for oil in motor vehicles World food prices have risen sharply in recent months Trend is likely to continue as more and more agricultural land is converted from the growing of food crops to crops like sugar cane and maize It can be turned into ethanol – for use as a substitute for petrol in automobiles This change is being driven by high oil prices, which have made ethanol a cheaper substitute The surging import bill on oil can be reduced through the promotion of this new initiative as substitute for motor vehicles oil It can save the foreign exchange of estimated 500 million dollars Substitutes for Imports

Coal as Substitute for Gas There is an acute gas shortage all over the country besides power We have to use our coal reserves to convert into natural gas To overcome the shortage instead of importing gas at very high rates. Coal gasification and coal-to-liquid are some proven technologies Which can be successfully employed in Pakistan to reduce dependence on imported oil and natural gas. Coal gasification offers one of the most versatile and cleanest ways Convert the energy content of coal into electricity, hydrogen, and other energy forms.

Biodiesel commercialization in Pakistan The majority of the worlds energy needs are supplied through petrochemical sources, coal and natural gas. All of these sources are finite and at certain usage rate will be consumed by the end of the next century. The depletion of the world petroleum reserves and increased environmental concerns has stimulated recent interest in alternative sources for petroleum based fuels. Biodiesel defined as “a substitute for, or an additive to Diesel fuel that is derived from the oils and fats of plants and animals” Monoalkyl esters of long chain fatty acids derived from a renewable lipid feedstock, Such as vegetable oil or animal fat, is becoming popular in developing countries as well as developed ones.

Compressed Natural Gas (CNG) as Inter Fuel Substitution Hydrocarbon Development Institute of Pakistan (HDIP) has pioneered the use of environment friendly Compressed Natural Gas (CNG) in road transport As an economically viable inter-fuel import substitution in petroleum sector. The commercial application of CNG technology now forms an important element of Government’s petroleum policy. HDIP’s CNG stations also act as Advanced Fuel Resource Centres to advise the Government on safety and regulatory aspects To conduct inspection, training and human resource development.

Canola Oil, a better substitute for Palm Oil Biomedical research shows that palm oil is high in saturated fat and develops heart diseases. The National Health Heart, Lung and Blood Institutes, World Health Organization have advised less consumption of palm oil. On the other hand, Canola is considered by GRAS (Generally recognized as Safe) oil by the USFDA. Canola oil diet was found to have immense health benefits for the bonding and reorganization of tissues in the body. Researchers have discovered Regular average use of canola oil reduces the chances of heart stroke Benefits on cholesterol and on lowering blood pressure.

Substitutes for Exports There is no possible substitute for exports in Pakistan. If Pakistan has to export something it has to export only that thing. Any substitute will not be accepted. For example if Pakistan has to export rice,cotton,vegetables or fruits, There is no possible substitute for cotton,rice,vegetables or fruits and for any other exports.

a target of $ 13.7 billion. Our exports at the close of the year amounted to $ 14.41 billion, an increase of 17% over last years export level.

Textiles and Garment s export Textile and Garments contributed 25.2%. It is encouraging to note that five of the sub sectors namely cotton cloth, knitwear, bed wear, readymade garments and cotton yarn achieved exports in excess of US$ one billion each during 2004-2005.

Export of rice During 2004-2005, export of rice, at US$ 933 million, was 47.1% higher over the corresponding period of last year, Exports of engineering goods Exports of engineering goods during this period increased by US$ 101 million, accounting for a 5% increase

Export Performance 2005-06 PROBLEMS To begin with, on 8th October 2005 The rapid increase in the international oil prices

The services sector Pakistan’s economy for a host of reasons including employment, contribution to GDP, and as a driver of economic growth. Merchandise exports last year we had set for ourselves an export target of $ 17 billion our merchandise exports were around 16.5 billion

In terms of sectors, during the period July 2005- May 2006, Textile exports increased by $ 1.39 billion, Rice by $ 178 million, Leather products by $ 152.5 million, Petroleum products by $ 242 million, Chemicals by $ 23.1 million And other miscellaneous items by $ 888 million.

Export Performance 2006-07 During the first 11 months of 2006-07, for example The Petroleum Group Imports increased by 11.1% as compared to the same period of 2005-06. Despite the challenges that our exports have had to face during last year, they have still continued to grow.

The exports of Textiles Group During the first 11 months of 2006-07, the exports of Textiles Group increased by 6%. Among these, Art Silk & Synthetic textiles have grown by 122%, Tents and Canvas by 99%, and Yarn other than cotton yarn by 82.7%.

The services sector Transportation Travel Communication Construction Insurance Financial Computer information Royalties and License fees other Business services Personal Cultural Recreational services Government services.

Textile exports During the first 11 months of 2006-07 growth rate of textile exports increased to 6.0% from 14% during the corresponding period of 2005-06. Within he textiles group, The export of bed wear declined by 3.1%, Cotton cloth by 4.1% Export of raw cotton decreased by 21.7%.

Other factors affecting our export growth Stiff international competition in Textile products from China, India, Vietnam and Bangladesh in our major markets of the US and the EU; NAFTA (North American Free Trade Area), CAFTA (Central American Free Trade Area) the setting up of U.S. sponsored Qualified Industrial Zones (QIZs) in Jordan and Egypt fall in unit prices in the textile sector, The 5.8% average antidumping duties in the European market on our bed-linen exports.

Services sector & Investments Our fast growing Services sector has been a boon for the economy which now Comprises 53.3% of our GDP. Electronics and electrical goods One of the product groups showing dynamic export growth during the last 20 yearsis Electronics and electrical goods. Pakistan is now well-placed to make use of newOpportunities in these areas since a good domestic base has been set-up in the last5 years via tariff rationalization and elimination of import substitution programmes.

Nasiba Waris- 139 REASONS FOR DEFICIT IN BALANCE OF TRADE

TRADE DEFICITE The negative difference of the value of goods and services exported out of a country less the value of goods and services imported into the country

REASONS FOR TRADE DEFICITE IN PAK ELECTRICITY SHORTFALL POLITICAL INSTABILITY BUISNESS OPPORTUNITIES RISING OIL PRICES COUNTRY CROP SMUGGLING LOE RETURN ON CAPITAL LABOR FORCE

Electricity shortfall Pakistan now faces a huge electricity shortfall. Recently in southern Punjab and the port city of Karachi, traders and businessmen burned tyres and marched in the streets to protest power cuts.

Political instability : Continuing political instability in Islamabad has also weakened investor confidence in Pakistan, putting downwards pressure on the stock exchange, which recently recorded its lowest day of trading in terms of volume.

Business Opportunities it is a matter of great concern that despite the enormous potential and attractive business opportunities in Pakistan, the potential investors did not come out with money at the desired level due to various reasons, especially the unpredictable policies and law and order situation in the country.

Rising oil prices: Rising oil prices and the import of machinery have severely burdened the balance of trade as the trade deficit reached $3.5 billion in just nine months in the previous years.

labor force There exists surplus labor force in Pakistan, the quality of such a labor is relatively poor in terms of productivity. A good quality labor with technological, and managerial competencies is considered to be significant in improving the competitiveness of countries for inward FDI. But there appears to be a lack of such qualities and skills in labor force in Pakistan.

Low Return on Capital: Low return on capital, low productivity of labor and high rate of bank interest, increased wastage of inputs are the other factors which have made Pakistani products more expensive than those from neighboring countries

Country crop smuggling: Much of the country’s crop was smuggled to the country’s neighbour, Afghanistan, where so much farming land is dedicated to growing a $3bn poppy crop that severe food shortages caused such a brisk smuggling trade that the Pakistani army had to seal the border on occasions.

Government Programs to Help Finance Exports

Government Programs to Help Finance Exports There are three important factors in Finance exports are as given below services Manufactures Trading

Services Pakistan Export Finance Guarantee The Agency plans to offer a spectrum of 14 separate guarantee products and service at the pre-shipment stage, to the export, indirect export and finance communities.

14 separate guarantee services are given below Specific Transaction Guarantees: Whole Turnover Guarantees, Open Account Sales Only: Group-Wide Guarantees: Facilities Upgrade: Counter trade/Barter: Bid Bonding: Performance Guarantees: Inventory Replenishment: Agency Sales: Future Receivables: EDI Post-Shipment: Advisory:

Separate Guarantee services Specific Transaction Guarantees: “ Guarantee repayment for a specific pre-shipment credit, on a single occasion” cost of up to 4% of transaction within the same 12 month period (rolling-basis) and without claims experience, 'would be discounted by one-quarter, on each occasion, with a reduction to 1% of transaction value commencing the fourth and any subsequent transactions (12 month rolling-basis ).

Group-Wide Guarantees: “ Repayment guarantees for an entire category of supplier, sector or geography-based. Premiums would be based on group membership, remitted annually at start of 12-month period” Guarantee cover would be customized, reflecting industry or geographic specifics range of US$750-US$1,000, per group member US$25000 (maximum exposure, at any one point in time) per group member 80% underwriting ratio, with proviso for a 90% option (with a supplementary premium, best practices), with no limit on total value of export shipments per 12 month period.

Counter trade/Barter: “ Pre-shipment finance and working capital guarantees for exports structured on the basis of counter trade/barter and other forms of non-monetary payments settlement.” Transaction support will be either transaction-specific or limited whole turnover Premium will set case- by-case.

Whole Turnover Guarantees, Open Account Sales Only: Repayment guarantees, covering sales made on Open Account or Net Terms basis . Premium would vary with an estimated average of 2%, depending of types of products to be exported and other conditions per above. The Agency will provide up to US$2,5 Million cover, in any 1 month period (rolling basis), with maximum underwriting liability, at any point in time, of U100,000

EDI Guarantees processed on the basis of EDI (Electronic Document Interchange) and /or B2B Business-to-Business E-Commerce, using pre-approved customer lists; Shipping companies; inspection services; trade intermediaries; and terms and maximum per transaction limits. Premiums will be based on an annual registration fee and a per transaction premium, tentatively set at 0.5% -1% of transaction value.

Manufacturing: Engineering Development Board (EDB ) State bank of Pakistan credit incentive schemes Short Term Financing Export Finance Scheme Long Term Financing Long Term Financing-Export Oriented Projects. Locally Manufactured Machinery.

Export Finance Scheme (EFS): Part-I Transaction based facility Coverage to the extent of 100% of export order/LC/contract. Facility is available at both Pre & Post shipment stages to DE Facility available to IE at Pre-shipment stage only Facility available to - Direct Exporters : 180 days - Indirect Exporters: 120 days Performance required against every transaction. Part-II Performance based facility Facility is available to Direct Exporters only but not to Indirect Exporters Exporters are allowed a revolving cash credit limit equivalent to 50% of their total value of goods exported in the previous year. The exporter can avail facility for the maximum period of 180 days.

Mark-up Rate under EFS Mark up rate under EFS is fixed on monthly basis. Current Mark up rate is 7.5% plus Spread of banks ,which is 1%

Mark up Rates under LTF-EOP: 7% p.a. 5% p.a. on 5 Years PIBs Over 3 and up to 7-1/2 Years 6% p.a. 4% p.a. on 3 Years PIBs Over 2 but up to 3 Years 6% p.a. 4% p.a. Weighted Avg. Yields on 12 month T-bills Up to 2 Years *Rates for Borrowers *Rates for PFIs Linked with Tenure (inclusive of grace period)

Banks/DFIs Eligible to Grant Finances: All banks/DFIs are eligible to grant finance under the Scheme subject to their approval as Participating Financial Institutions (PFIs) by SBP. Repayment of Finance/Refinance: Loan is repayable in half-yearly or quarterly installments. Scheme provides multiple options of repayments: Upto 2 years (without any graces period) Over 2-3 years (including grace period of 6 months) Over 3-5 years (including a grace period of 1 year) Over 5-7½ years (including a grace period of 1½ years)

Trading: Trade Development Authority of Pakistan Scheme for Freight Subsidy on Exports “ The scheme will be called “Scheme for Freight Subsidy on Exports”, hereinafter referred to as “the scheme”. Admissibility of Freight Subsidy: 25% freight subsidy on exports of Eligible Products Freight subsidy will be available on C&F/CIF shipments No individual exporter / firm / company will be entitled to freight subsidy exceeding Rs. 5 million in a year

Export Finance Scheme: “ The Export Finance Scheme of the State Bank of Pakistan has been in operation since 1973 and has been a major source of banks’ credit to the exporters” Incentives : Lending banks/DFIs.Clean Exposure: No Banks / DFIs shall provide unsecured / clean financing facility, in any form, of a sum exceeding Rs 500,000/- (Rupees five hundred thousand only)

Salma Bashir - 126 CURRENT TRADE POLICY & SUGGESTIONS

Export Measures Temporary Importation for Exports Plant, machinery and equipment imported to setup a unit in DTRE scheme will be exempt from duty and taxes. Inputs in DTRE will also be allowed to be imported from India, even if these are not included in the importable items from India, or manufactured locally. Zero Rating of Exports zero rating’ to exports by refunding of indirect taxes on input cost incurred on manufacturing of merchandise, which is exported.

Pharmaceuticals providing it with the incentive of having an accelerated depreciation allowance facility of 90% in the first year on investment decided to allow exporting companies to send free samples to the extent of 10% of the commercial quantity exported this sector would also be allowed to retain 15% of their export proceeds.

Seafood Consultancy services will be arranged through INFOFISH for aquaculture Peeling shed at Karachi Fish Harbor will be set up. Training programme for fishermen in catching of fish will be arranged. Leather 6% mark up subsidy on loans to setup in-house effluent treatment plants was provided. Furniture Ministry of Industries would set up a wood seasoning plant and NAVTEC will set up a couple of vocational training centres on modern lines to meet these deficiencies.

Rice Ministry of Food and Agriculture may focus on evolving new varieties & increasing area under cultivation Paddy harvesters & Paddy dryers may be provided on matching grant basis in rice growing areas. Furthermore rice farm machinery namely paddy harvesters and dryers will be importable from India through Wahga by road HHandicrafts Consultants of international repute would be engaged to suggest improvements in the development of handicrafts. Arrangements will be made to expose master craftsmen to international designs and trends

Export of halal food products- established a halal certification board Automobile sector allow to send us$ 50,000 worth of samples to foreign buyers northern areas

Import Measures Import of Used Buses (TR Scheme) buses not older than 3 years are permissible for import under the TR scheme allow import of buses which are not more than 05 years old under the same scheme. Secondhand / used cement bulkers- allowed but they will not be older than 10 years. Reducing Cost of Doing Business In order to reduce cost of raw material imports and thereby make our export products more competitive the import of Job lot & Stock lots of raw material, which attracts duty up to 5%, would now be allowed

Import of CNG Buses from India Customs Duty on the import CNG Buses was brought from 15% to zero . In case any Indian manufacturer of CNG buses makes a firm commitment to establish manufacturing of such buses in Pakistan, the Ministry of Commerce may provide special dispensation for import of 10 buses by road via Wahga from each possible investor as test consignments. Stainless Steel and Cotton Yarn- import by train & also by trucks through Wahga . Academic, Scientific and Professional Books - allowed from india

SUGGESTIONS to IMPROVE IMPORT & EXPORT Promotion of labor-intensive industrie Diversification of exports Development of industries having low capital output ratio: Decrease in consumption: Restoration of sick industries: Reduction in export duties: Joint ventures: Improve access to credit: Improvement of physical infrastructure: Joint Venture with China: Development of Power-loom Sector

Import & Export of Pakistan during 04-08

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Import & Export of Pakistan during 04-08