Learn about the key characteristics of foreign trade in Pakistan, including major industries, trading partners, and challenges faced by the country.
Characteristics of Foreign Trade of Pakistan.
Foreign trade of Pakistan may be attributed to following main characteristics.
Existence of long lasting imbalance between exports and imports:
The most outstanding feature of Pakistan’s foreign trade is the existence of imbalance between the nature of exports and imports. Exports mainly consist of primary commodities like raw cotton, cotton yarn, cotton waste, leather and its products, hides and skins, cotton thread, cotton cloth,, footwears, petroleum &. its products, synthetic textiles animal casing, fish and fish preparations, rice, oil cakes, paints and varnishes, tobacco raw and manufactured, ready-made garments and hosiery, carpets and rugs, sports goods and surgical instruments etc.
Contrary to exports, imports comprise of high valued capital goods, industrial-raw material for consumer goods and capital goods like chemicals, drugs and medicines, dyes and colours, chemical fertilizers, electrical goods, machinery (nonelectrical) transport equipment, paper, board and stationary, tea, sugar refined, art silk yarn, iron, steel and manufactured thereof, non-feffbus metals, petroleum and products, edible oils and grains, pulses and flours etc. There is a great difference between the total value of imports and exports. Every year, therefore, the balance of trade remains M deficit.
Lack of diversification In experts:
Lack of diversification in exports is another peculiar feature of foreign trade of Pakistan. Pakistan, being primary an agriculture country, is sheeted to include In her export list formal agricultural and us allied sub-sectors products. Though from seventies, Pakistan has started to export semi-manufactured good but their percentage share In total exports hardly comes to 20% so far. The per outage share of export Items -“elating to manufactured goods through is on Increasing but they, being* few In number and non-compatlable to adduced countries exports, are not playing decisive rule.
Unfavorable terms of trade.
A persistent unfavourable terms of trade is an other peculiar feature Pakistan’s foreign trade. The Index of terms of trade is used as a standard in measuring relevant gains from foreign trade. The terms of trade, with the base year 1980- 81 = 100, since 1981 – 82 to 1999 – 2000 stood at the average of 90 per annum It has been swinging from 77.95 to 82.73 in the early of nineteen.
‘ The index of terms of trade Indicates that the prices of our exports have been on decreasing while that of our Imports on Increasing since long.
Persistent deficit in balance of trade.
Pakistan’s balance of trade has been in deficit since long. The reasons for such depressed situation are not far to seek the basic nature ot the economy, Its ever Increasing requirements of huge Imports, Insufficient exportable surplus, gradually expanding industrialization requirements of raw-materials for consumer goods and capital goods, technology and expertise are some Important reasons to be worthmentioning.
Persistent deteriorated balance of payments:
An other peculiar feature of foreign trade of Pakistan Is its persistent deteriorated balance of payments. The current account deficit which was US $ 1037 million in 1980-81 mounted to $ 4575
million at the end of 1995-96. It however, declined to $ 1143 in 1999-2000. Among many other reasons, nearly 400% devaluation and deprecation of Pakistan’s rupee so far and persistent political Instability are playing their negative role.
Concentration of foreign trade to a few countries.
Pakistan, In the early few years established her trade relations mainly with India, the UK, the USA and Japan. After sixties, a significant shift took place In this direction. At the beginning of 2001 though a good number of countries, including Socialist, Islamic, Latin American, African and East European are Included in trade list, yet still the situation requires to be improved to a large extent.
Sea-borne trade exceeding the airborne and land-borne trade:
Bulk of foreign trade of Pakistan Is sea-borne. But country’s Merchant Navy is capable to handle at the most 20% of entire export capacity. For the remaining, dependency of foreign shipping companies is sought. This sort of dependency /s also proving one of the main causes to worsen the balance of payments situation of the country. Besides, land – borne and air air-borne ijrade is not playing any significant role In foreign trade.
Workers’ Remittances are the Principal Contributor to Foreign Exchange:
After mechandise exports, workers remittances are contributing as the second most important source of foreign exchange earnings in foreign trade sector. The share of workers’ remittances increased tremendously from US $ 360 million in 1972 – 73 to $ 2885.67 million in 1982 – 83, but after the peak point it began to decrease gradually. In1999 – 2000 only $ 983 million could be received.
Strict control on exports and Imports:
Till the beginning of nineties, foreign trade of Pakistan remained under the strict control policy of the government. But, .In the end of nineties, foreign trade was libralised to that extent where It Is expected to function smoothly and help the economy In Its revival.
Private sector and Public sector are functioning side by side.
The bulk of exports are made by private sector but the foreign exchange so earned Is diverted to Public sector to imports necessary Items and to retire foreign debt burden. Imports by private sectors are also allowed according to government commercial policy, which is announced almost every year.