The World Bank has urged Pakistan to fully normalise trade relations with India to facilitate deep forms of trade integration as this step would allow Pakistan to benefit from New Delhi's fast growth and promote complementarities, including value chain activities and investment potential.
This is one of the key recommendations of a technical note titled "Pakistan-unlocking private sector growth through increased trade and investment competitiveness" prepared by a World Bank team comprised of Rafay Khan of the Trade and Competitiveness, South Asia and Nadia Rocha of the Trade and Competitiveness Global Practice of the World Bank Group. Guillermo Arenas, Olivier Cattaneo, Michael Ferrantino and Saima Zuberi also gave their input to the note.
World Bank's team argues that Pakistan still needs to fully leverage its strategic location and its proximity not only to regional but also global trade leaders. Integration with its neighbouring countries and regions is all the more important given the need for the country to diversify both its product basket and markets. Removal of international sanctions on Iran, as a starting point offers Pakistan the greatest opportunity to enter a relatively untapped market.
According to the World Bank, Pakistan needs to make Pakistan-Afghanistan Joint Economic Commission (JEC) effective. To streamline implementation of bilateral economic co-operation reforms, it would be important to make the JEC more effective. The JEC should meet on a biannual basis with the predetermined agenda. The JEC should also invite members of Pakistan Business Council (PBC), the Pakistan-Afghanistan Joint Chamber of Commerce and Industry and consumer associations to discuss outstanding issues. The JEC should become the main forum to review the status of large-scale projects that impact transit cooperation.
The Bank has also recommended that Pakistan should revise and fully implement the Afghanistan-Pakistan Transit Trade Agreement (APTTA) in the light of recent international and regional developments, and: (i) enforce measures aimed at minimising the incidence of customs fraud and avoidance, and monitor and curb informal trade; (ii) fully incorporate the Convention on the International Transport of Goods in the revised agreement. Both Pakistan and Afghanistan have acceded to the Convention; (iii) include updated provisions related to visa and transit facilitation, and harmonisation and simplification and custom procedures, banking channels, and dispute resolution; and (ix) extend the APTTA to other countries in the region such as Tajikistan, so as to maximise its benefits.
The Bank's team, in its technical note has asked Pakistan to conduct intensive ex-ante analysis on the expected impact of any proposed trade agreements. Pakistan-China FTA serves as a cautionary note while targeted tariff concessions on imports from China have resulted in an increase of value-added exports from Pakistan. Pakistan's exports to China remain at no or partial concessions-about 70 per cent of exports are in tariff lines at less than 50 per cent or no concession.
The Bank further stated that Pakistan should fully normalise trade relations with India to facilitate deep forms of trade integration. Deep integration with India could entail building on signed agreements on mutual recognition and visas, and improving infrastructure, institutions, services, policies, procedures, and market- oriented regulatory systems.
While Pakistan has grown on average by 3.37 per cent per year over the past eight years, South Asia region has grown on average by 6.6 per cent during that period. Critical economic sectors need to be re-energised and reinvigorated to ensure that Pakistan can grow at rates that will promote socio-economic development and generate jobs for growing population.
During 2005-15, Pakistan's exports of goods and services rose from $16.05 billion to $22 billion, an increase of only 37.6 per cent compared to an increase from $9.2 billion to $32.3 billion or 248 per cent in Bangladesh, $32 billion to $162.1 billion or 400 per cent in Vietnam and $99.6 billion to $263.3 billion or 165 per cent in India.
Pakistan's trade performance has been unsatisfactory. Exports have only grown by 3.17 per cent on average over the past five years. Aided by large reductions in trade barriers and technological advances, developing countries-led by China and other developing markets-have become the drivers of global trade.
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