Pakistan’s international trade volume remains significantly below its potential, a concern underscored by the figures from the fiscal year ending June 30, 2023. During this period, Pakistan’s global trade amounted to $82.06 billion, with imports totaling $55.30 billion and exports at $27.73 billion. This represented a notable decrease from the previous year, where total trade stood at $112 billion, with exports at $31.8 billion and imports at $80.2 billion. Import restrictions during this period also adversely affected exports, compounded by the non-availability of imported inputs and other contributing factors.
Pakistan’s international trade volume remains significantly below its potential, a concern underscored by the figures from the fiscal year ending June 30, 2023. During this period, Pakistan’s global trade amounted to $82.06 billion, with imports totaling $55.30 billion and exports at $27.73 billion. This represented a notable decrease from the previous year, where total trade stood at $112 billion, with exports at $31.8 billion and imports at $80.2 billion. Import restrictions during this period also adversely affected exports, compounded by the non-availability of imported inputs and other contributing factors.
Despite its strategic position in global economics, Pakistan’s rankings as an importer (46th) and exporter (61st) among 138 countries reflect its untapped potential. Shockingly, the country sits at the 132nd position globally in terms of trade balance. While Pakistan has entered into numerous bilateral and multilateral agreements aimed at boosting trade, including free trade and concessional trade agreements, it has struggled to fully capitalize on the opportunities presented by these arrangements.
One such organization aiming to harness the trade potential of Islamic countries is the D-8 Organisation for Economic Cooperation (Development-8). Comprising Pakistan, Bangladesh, Indonesia, Turkey, Iran, Malaysia, Egypt, and Nigeria, the D-8 countries collectively boast a GDP of $4.92 trillion, accounting for approximately 14 percent of the global trade volume and 50 percent of trade volume among OIC member countries. Despite its promising composition, Pakistan has not fully leveraged the opportunities presented by the D-8, including the recently implemented D-8 Preferential Trade Agreement (PTA) aimed at promoting trade among member countries.
There is an urgent need to enhance Pakistan’s bilateral trade volume with the D-8 countries, particularly improving its share progressively. Pakistan’s trade with neighboring Iran is of great significance. In 2022, Pakistan imported goods valuing $1,448 million from Iran, whereas Pakistan’s exports were of the size of $843 million. A five-year strategic plan has recently been concluded between the two countries to achieve a trade goal of $5 billion by 2028.
Pakistan’s bilateral trade with Turkiye remains static in the recent past, standing at $822 million in 2022, with Pakistan’s exports to Turkiye amounting to $345 million. In 2021, Pakistani exports to Turkiye were valued at $858 million, with the trade balance mostly in favor of Turkiye. It is expected that trade would grow with the recent coming into force of the Pakistan-Turkiye Trade in Goods Agreement 2023. Similarly, Pakistan’s exports to Malaysia in 2023 amounted to $300 million and imports $961 million compared to its exports of $375 million and imports from Malaysia valuing $1,060 million in 2022.
Recent years have seen nominal growth in Pakistan-Bangladesh bilateral trade, with an average rate of five percent. However, Pakistan’s exports to Bangladesh have witnessed a decline, falling from $953 million in 2022 to $705 million in 2023. Traditionally, Pakistan’s exports to Bangladesh have comprised textiles, mineral products, and chemical products, while imports from Bangladesh primarily include jute, other textile fibers, raw tobacco, and scrap vessels. Unfortunately, the Pakistan-Bangladesh Joint Economic Commission (JEC) remains inactive, hindering bilateral trade growth.
Pakistan had previously established itself as a key supplier of machinery and equipment to Bangladesh’s sugar and cement industries. Notably, Pakistan’s involvement in setting up two sugar mills proved successful, with these mills operating at high capacities and outperforming regional competitors. However, Pakistan’s subsequent policy shifts led to a loss of market share in Bangladesh’s plant machinery sector, despite ongoing challenges faced by Bangladesh’s sugar industry.
Bangladesh’s economy depends heavily on the sugar industry for employment and agriculture support. There are 15 sugar mills, all in the public sector. Pakistan had installed two sugar mills, namely Natore Sugar Mills and Pabna Sugar Mills, each of 1,500-2,000 tons cane-crushing capacity per day (tcd) on a turn-key basis. These sugar mills, designed, manufactured, and commissioned by the state-owned Heavy Mechanical Complex, Taxila, operated well, outperforming the sugar mills installed in the region by China, India, and other sources around the same time. In 1995, Natore Sugar Mills was declared the best sugar mills in Bangladesh, operating at 25 percent above its rated capacity.
The current state of Bangladesh’s sugar industry presents an opportunity for Pakistan to re-enter the market, with plans for privatization, divestment, and modernization underway. Additionally, the projected growth of the Bangladesh sugar market, expected to reach $2.29 billion by 2027, offers significant prospects for Pakistan’s sugar machinery exports. Similarly, Pakistan has also installed a cement grinding and packing plant of 65 tons per hour (tph) capacity in Bangladesh known as Mongla Cement Factory. Pakistan’s involvement in establishing the Mongla Cement Factory in Bangladesh highlights its potential in the cement industry.
Indonesia also presents opportunities for Pakistani engineering goods, particularly in the sugar sector. Despite previous success in installing the Subang Sugar Mills in the 1980s, Pakistan’s lack of follow-through in securing additional orders has limited its engagement with the Indonesian market. However, with Pakistan’s membership in the D-8, there exists an avenue to revive industrial cooperation with Indonesia, further facilitated by the existing Pakistan-Indonesia Preferential Treatment Agreement (PTA).
Alarmingly, Pakistan’s trade deficit with Indonesia remains significant, with imports totaling $4,191 million in 2021 compared to exports of only $170 million. This stark trade imbalance underscores the need for Pakistan to enhance its exports to Indonesia, leveraging existing agreements and frameworks such as the PTA and cooperation within the OIC and SAARC platforms.
In conclusion, while Pakistan possesses immense potential in international trade, particularly with Bangladesh and Indonesia, realizing this potential requires proactive engagement with bilateral and multilateral partners, effective utilization of existing agreements, and a strategic focus on key sectors such as plant machinery, engineering goods, tractors, auto-parts, sports goods, surgical goods & medical equipment, pharmaceuticals, rice, fruits & vegetables, cement, and a variety of other products and produce. Through concerted efforts and leveraging platforms like the D-8, Pakistan can enhance its global trade footprint and contribute more substantially to the world economy.
The writer is retired chairman of the State Engineering Corporation
