Saad Amanullah KhanPresidentAmerican Business Council

EXPORTS IMPORTS+

DO YOUKNOW

WORLD TRADE STATISTICS

Total GlobalMerchandise

Trade$35.4 Trillion

Total Global Services

Trade$3.7 Trillion

Total Merchandise + Service Trade

is 56%Global GDP

is 32% Pakistan

Pakistan Trade is 0.1% of Global

Pakistan GDP is0.3% of Global GDP

Trade (Current)

Trade (Potential)

0 20 40 60 80 100 120 140 160 180

60

180

Pakistan Trade should be3 x times LARGER

In US$ Billions

DO YOUKNOW

PAKISTAN’sTRADE

HISTORY

CY 70CY 72

CY 74CY 76

CY 78CY 80

CY 82CY 84

CY 86CY 88

CY 90CY 92

CY 94CY 96

CY 98CY 00

CY 02CY 04

CY 06CY 08

CY 100

5

10

15

20

25

30

35

40

45

0 20 40 60 80 100 120 140 160 180 200

24

33

177 Exports Imports Pakistan GDP US$

Pakistan Trade Data ($ Billions)Export fall way below

Imports

CY 70CY 72

CY 74CY 76

CY 78CY 80

CY 82CY 84

CY 86CY 88

CY 90CY 92

CY 94CY 96

CY 98CY 00

CY 02CY 04

CY 06CY 08

CY 10

(20)

(15)

(10)

(5)

0

5

(18)

Current Account US$

1970 1990 20100%

5%

10%

15%

20%

25%

30%

8%

14%

8%

18%

14%

28%

4%

23%

Pakistan Bangladesh World India

EXPORT as % of GDP (1970 – 2010)

6.0%

3.7%

14.4%

24

40

Pakistan Bangladesh World India South Korea Malaysia Thailand0%

10%

20%

30%

40%

50%

60%

6%10%

14%19%

39%

56% 56%

Export (% of GDP) 2010 vs. 1970

Pakistan Bangladesh World India South Korea Malaysia Thailand-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

-2%

12%9%

16%

24%23%

37%

Export (% of GDP) 2010 vs. 1990

Over the Last 40 Years

Even WORSE overThe last 20 Years period

Increase in Export (% of GDP)

DISMAL PERFORMANCE

Based onCurrent GDPGrowth rates

HYPOTHESISGLOBAL TRADE

IN ALLSUCCESSFUL

ECONOMIES ….

“GDP GROWTH” HAS A DIRECTCORRELATION

WITH“TRADE GROWTH”

16

Based onCurrent GDPGrowth rates

HYPOTHESISLET US TEST THIS

All Data used is from:

GLOBAL DATAGoods & Services

CY 1990

CY 1992

CY 1994

CY 1996

CY 1998

CY 2000

CY 2002

CY 2004

CY 2006

CY 2008

CY 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

GDP: $22 Trillion $63 Trillion

TRADE: $8.5 Trillion $35 Trillion

Co-relation Coefficient = 1.0

INDIA FACTS

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

0

300

600

900

1,200

1,500

1,800

GDP: $0.3 Trillion $1.6 Trillio

n

TRADE: $50 Billion $837 Billion

Co-relation Coefficient = 1.0

PAKISTAN FACTS

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

0

40

80

120

160

200

GDP: $40 Billion $177 Billion

TRADE: $16 Billion $57 Billion

Co-relation Coefficient = 0.9

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

20,000

30,000

40,000

50,000

60,000

70,000

35%

40%

45%

50%

55%

60%

65%World GDP (Size) Trade as % of GDP

TRADE as % of GDP (1990 – 2010)

Co-relation Coefficient = 0.9

35%

40%

45%

50%

55%

60%

65%

20,000

30,000

40,000

50,000

60,000

70,000

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

World GDP (Size) Trade as % of GDP

0%

10%

20%

30%

40%

50%

60%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

India GDP (Size) Trade as % of GDP

15%

20%

25%

30%

35%

40%

45%

50%

55%

30

40

50

60

70

80

90

100

110

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

Bangladesh GDP (Size) Trade as % of GDP

25%

27%

29%

31%

33%

35%

37%

39%

40

60

80

100

120

140

160

180

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

Pakistan GDP (Size) Trade as % of GDP

0.9 0.9

0.9

PAKISTANTRADE DATA IS

NOT CORRELATEDWITH

GDP GROWTH

(0.4)

(0.2)

(0.0)

0.2

0.4

0.6

0.8

1.0 1.0

0.4

0.9 0.9

0.7 0.7 0.9 0.9

(0.2)

0.9 0.9 0.8 0.7

0.6

40 Yrs 20 Yrs

Correlation Co-efficient of GDP with TRADE as % of GDP

TRADE as % of GDP (1970 – 1990)

and review last 40 years1970 – 2010

trend in 2 chunks

Let us focus onSOUTH ASIAN

countries

TRADE as % of GDP (1970 – 1990)

CY 70

CY 71

CY 72

CY 73

CY 74

CY 75

CY 76

CY 77

CY 78

CY 79

CY 80

CY 81

CY 82

CY 83

CY 84

CY 85

CY 86

CY 87

CY 88

CY 89

0%

5%

10%

15%

20%

25%

30%

35%

40%

8%

15%

21%

19%

22%

36%

India Bangladesh Pakistan

TRADE as % of GDP (1990 – 2010)

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

15%

20%

25%

30%

35%

40%

45%

50%

55%

15%

50%

20%

43%39%

32%

India Bangladesh Pakistan

TRADE as % of GDP (1990 – 2010)

TRADE % of GDP 1990 2010 ChangePakistan 39% 32% -7%India 15% 50% 34%Bangladesh 20% 43% 24%World 39% 56% 17%

CY 90

CY 91

CY 92

CY 93

CY 94

CY 95

CY 96

CY 97

CY 98

CY 99

CY 00

CY 01

CY 02

CY 03

CY 04

CY 05

CY 06

CY 07

CY 08

CY 09

CY 10

27%

29%

31%

33%

35%

37%

39%

41%39%

32%

VERYERRATIC

RECOVERY 2000 - 2006

DOWNWARD SPIRAL

NUCLEARBLAST &

SANCTIONS

TRADE as % of GDP (1990 – 2010)

TRADE ORGANIC GROWTH

Example:

Organic Trade Growth: 4.3%

Period: 1990 - 2010

GDP Growth: 6.2%Trade Growth: 10.5%

Pakistan India Bangladesh World-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

-1.0%

6.6%

4.3%

2.0%

Trade “Organic Growth”(Trade Growth – GDP Growth)

Period: 1990 to 2010

CONCLUSION:PAKISTAN TRADE IS

WITH GDP GROWTHNOT CORRELATED

QED

WHY !

Some Key Symptoms Impact of decades of Protectionists policies

Protectionist Policies

Effective Levies on import as high as 90% until early 1990’s !!

1. Made local industries INEFFICIENT

2. Cost structure UNCOMPETITIVE

Export Performance2000 to 2010

CY 2000 CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 201012

14

16

18

20

22

24

26

13

Exports as % of GDP

14%13%

Despite Export doubling from $10 Billion to $24 Billion, the “% of GDP”

remained FLAT

CY 2000 CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008 CY 2009 CY 201012

14

16

18

20

22

24

26

13 13

14

Exports as % of GDP

14%

23%

18%

Exports as % of GDP

1990 2010 1990 -- 2010 $ Billion $ Billion CAGR %

Pakistan 6 24 7%Bangladesh 2 18 12%India 23 384 15%

Export Data

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones

Type of Trade Agreements

FTA Free Trade Agreements

RTS Regional Trade Agreements

PTA Preferential Trade Agreements

BIT Bilateral Investment Treaty

Others (Transit Agreements)

3

1

1

-

-

Pakistan Trade Agreements1. Afghan Transit Trade Agreement Mar

19652. Pakistan-Sri Lanka FTA Aug 20023. South Asia FTA (SAFTA) Jan 20044. Pakistan-China FTA Nov 20065. Pakistan-Malaysia FTA Nov 2007 Potential

1. Pakistan-UAE2. BIT with USA

Regional Trade Agreements (RTA) are proliferating…

0

5

10

15

20

25

30

1958 1969 1976 1984 1989 1994 1999 2004

New Agreements Annually

Annual number

+300 RTA’s in Operation+2500 IIT’s in Operation

Canada

USA Mexico

Chile

Uruguay

Paraguay Brazil Argentina

Mercosur

Bolivia

Colombia Venezuela

Peru Ecuador

Costa Rica

Nicaragua

El Salvador

Honduras Guatemala

CACM

Trinidad & Tobago

Antigua & Barbuda Barbados

Belize

Dominica Grenada

Guyana Jamaica

Suriname

St. Lucia

St. Vincent & Grenadines St. Kitts & Nevis

CARICOM

Panama

Dominican Republic

“ American and Asian Spaghetti Bowl

-

Andean Community

Bahamas

Haiti

Brunei Cambodia Thailand

Laos

Malaysia Philippines

Myanmar

Singapore

Indonesia Vietnam

Japan

New Zealand

Australia

ASEAN

Korea

PR China Hong Kong

Taiwan

Russia

Papua New Guinea APEC

Intra - Asia - Pacific in force Intra - Asia - Pacific signed

FTAA

Intra - Americas in force

Trans - Pacific signed

APEC

FTAA

Source: Devlin and Estevadeordal (2004)

Complex global trading system

AlgeriaLibyaMorocco MauritaniaTunisia

AMU

GhanaNigeria Cape Verde

Gambia

ECOWAS

Benin NigerTogo Burkina FasoCote d’Ivoire

Conseil de L’Entente

Guinea-Bissau Mali Senegal

WAEMU

Liberia Sierra Leaone Guinea

Mano River Union CLISS

CameroonCentral African Rep.GabonEquat. GuineaRep.Congo

Chad

Sao Tomé & Principe

ECCAS

CEMAC

Angola

Burundi*Rwanda*

Egypt

DR Congo

DjiboutiEthiopiaEritreaSudan

Kenya*Uganda*

Somalia

Tanzania*

EAC

South AfricaBotswanaLesotho

Namibia*Swaziland*

Mozambique

SACU

Malawi*Zambia*Zimbabwe*

Mauritius*Syechelles*

Comoros*Madagascar*

Reunion

IOC

*CBI

SADC

COMESA Nile River Basin IGAD

AMU: Arab Maghreb UnionCBI: Cross Border InitiativeCEMAC: Economic & Monetary Community of Central AfricaCILSS: Permanent Interstate Committee on Drought Control in the SahelCOMESA: Common Market for Eastern and Southern AfricaEAC: East African CooperationECOWAS: Economic Community of Western African StudiesIGAD: Inter-Governmental Authority for GovernmentIOC: Indian Ocean CommissionSACU: Southern African Customs UnionSADC: Southern African Development CommunityWAEMU: West African Economic & Monetary Union

Overlapping African agreements…

SAFTA TRACK RECORD

Bangladesh India Pakistan Sri Lanka0

50

100

150

200

250

300

350

2007200820092010

GAP

43% 47% 10%

0.1%

= 90%

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Lack of progressive Trade policies.

TRADE POLICES• Need long term (min 5 year) trade polices

locked by sector– Awaiting launching of “Strategic Trade Policy

Framework” for 2012-15 • Desperately need polices to BOOST exports• Heavily promote Service Sector & Agro Exports• Promote Regional Trade (India case in point)• Close coordination with Private Sector

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Lack of progressive Trade policies. Is hurdle “Trade Policy” or “Global Politics” ?

Global Politics: Trade Barriers

TariffsNon-tariff barriers to trade

Import licensesImport quotasSubsidiesLocal content requirementsEmbargoTrade restrictionProtection of local industry

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Lack of progressive Trade policies. Key hurdle “Trade Policy” or “Global Politics” ? Weak Intellectual protection legislature

Weak IPO Legislation • Copyright protection is a major economic,

political and diplomatic issue.• Pakistan has been on the US “Special 301

Watch List” since 1989• Being a signatory of WTO (1995) we must

conform to all laws including TRIPS (which covers intellectual property laws)

• Intellectual Property Organisation (IPO) Ordinance 2012 promulgated on 24 Apr 2012.

17 Years

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Lack of consistency in key Trade policies. Key hurdle “Trade Policy” or “Global Politics” ? Weak Intellectual protection legislature Poor in-country logistics

Logistics Challenges

• Lacking efficient “in-land” logistic :– Railways– Water-ways– Indigenous Truck manufacturing

• Major investment to convert from archaic ‘Adda System’ to ‘On-line Tracking’ and quality delivery system.

• Need exponential growth in Road Network.

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Low utilization of existing FTA’s Lack of consistency in key Trade policies. Key hurdle “Trade Policy” or “Global Politics” ? Weak Intellectual protection legislature Poor in-country logistics High cost of Airport and Port charges

Karachi Port

Port Qasim

Jawahar Lal NehruSri Lanka

SingaporeDubai

0

5,000

10,000

15,000

20,000

25,000

30,000

Port Charges (US$)

11,900

10,500

2,800

1,940 50

KPT Port Charges Breakdown (US$)

Port DuesPilotageBerth Fee (per day)Tug ChargesMooring

Some Key Symptoms Impact of decades of Protectionists policies Lack of FTA and low utilization of existing ones Lack of consistency in key Trade policies. Key hurdle “Trade Policy” or “Global Politics” ? Weak Intellectual protection legislature Poor in-country logistics High cost of Airport and Port charges Lack of streamlined systems in Customs and

border controls

Efficient Customs More Trade

R2 = 0.1354

0

50

100

150

200

0 5 10 15 20 25 30 35Days through customs, imports

Ratio of total trade to GDP, 90 countries%

For clearance in 2.5 days, Trade to GDP ratio goes

beyond 100%

CUSTOMS• Trade facilitation: as “crossing border” and

“shipments cost” are considered more significant barrier than “tariff rates”.

• Key functions: Revenue collection, protection of IPR and, increasingly, national security

• Ensure all trade and border related agencies work together to simplify and harmonize systems and procedures.

FTA’s

CUSTOMS

IMPORT EXPORT

Pakistan needs to take active role in

the Trade discussion

including the “DOHA

Development Round”

WE NEED TO ….

Elevate “Trade” to a prominent role in Country Policy Dialogue

Focus on Exports, Logistics, Governance & Customs

NOW YOU

KNOW

Disproportional GDP Growth

TRADE GROWTHCAN Drive

SUBMIT FOCUS: 4 issues1. What policies are needed to drive

disproportional TRADE growth? 2. What are the key barriers which

hamper TRADE and how can we eliminate them?

3. What role private sector can play to increase EXPORTS?

4. How can international partners help Pakistan improve our TRADE performance?

THANK YOU