Overview of Business & Trade in Pakistan_edit 10th Nov 2012

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 1

Overview of Business & Trade in Pakistan

Pakistan History about the business.

The Unsustainable Power Prism Pakistan as an economy and political entity is in a mess.

However, a handful of financially Stable Corporation do give

some hope. But are they really up to it or is this jus another

political-business nexus?

It is sometimes rather baffling to think how the belief of a single

man can transform the fate of millions, once and forever. Desite

being and independent country for 64 years. Pakistan stands as

one of those unique experiments in policy and geopolitics which

well, still remains an experiment. If one wants to guage the

difference between this nation torn apart by whimsical fancies

and India, then it would be advisable to flick through the data

compiled by Center for Research & Security Studies based out

of Islamabad in 2009. The independent think tank reveals that

“The Two Ambani brothers can buy 100% of every company

listed on the Karachi Stock Exchangeand would still be left

with $30 billion‖

Further, the entire Pakistani produce of a year can be purchase by

the four richest Indians with $60 billion still left over to spare.

However, While US drones continue to bombard the federally

administered tribal areas of the beleaguered state.

―Mian Muhammed Mansha(Pakistani’s Richest man with a

net worth of $1 billion)‖, Founder and Chairman of Nishat

Group(one of the Pakistan‘s top five business houses) sits in his

plush office based out of Lahore planning the future strategic

orientation of his $5 billion empire. Infact, Nishat Group is the

face of a coin which the world never attempts to notice. What

started as a single textile mill in 1951 has now grown in to a

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 2

conglomerate with interests in banking, textile, Cement, aviation

and energy.

Today, The group‘s annual sales have surpassed Rs. 2.2 billion

and the corporate giant now employees a work force of 30,000.

A Robust machinery on the face of a failed state gives rise to

what is both a question and hope – are companies like Nishat

Group Pakistan Inc‘s last hope?

After all, at the end of the day, it is business which runs your

economy(given you have a sturdy political structure in place).

Nevertheless, it would be a futile effort to address this

predicament without the dwelling into the finer nuance of

Pakistan‘s unique genetic makeup.

Since 1947, upheavals witnessed by Pakistan‘s economy can be

broadly broken into six definitive periods each lasting

approximately a decade. The first one started with this country

emerging on the world map and lasted till about 1958. This was a

phase marred by issues which any newly formed state would

face.

―Ayub khan ‖(apart from being Pakistan‘s first ruthless dictator

was also a shrewed strategist). Aided by advisor from Harvard

University, Pakistan was exposed to one of the most healthy

cycles of economic development in the country‘s short and

chequered history.

While agriculture grew at 4%, manufacturing took off at a

phenomenal rate of 9% per annum. This had a direct impact on

GDP which doubled to 6%from 3% in the 1950‘s.Astonishingly,

by 1969,Pakistan was exporting more manufactured goods than

Thailand, Malaysia and Indonesia put together.

But by 1972, Khan‘s Policies (on the political front) had

backfired and thus came Zulfikar Ali Bhutto in power. The

introduction of populist policies under his regime resulted in a

kind of economic reversal. Sector wide nationalization dragged

back the GDP to 1950 levels.And the rest as they say is

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 3

history.The Unification of military along with Islamic bodies

resulted in what we today know as Islamic fundamentalism.

Bloodbath arising out of terrorism shows no signs of slowing

down. In fact, as of 2011, Pakistan‘s GDP growth rate has slipped

down to 2.2% per annum.

Moreover, as the surge in imports further outstrips exports, the

economy is poised for yet another tough phase. With public debt

amounting to $60 billion S&P Rates this economy B:-.

The fact is a couple of profit making power houses do not have

the where withal to give a meaning direction to Pakistan‘s

economy let alone save it. Economic growth is witnessed by

nations which have a well planned political structure along with a

mechanism to deliver security.

Pakistan lacks both of them.

The issue lies in the fact that no one really knows who is

controlling power in Pakistan.

Agrees Dr.Suvrokamal Dutta , a New Delhi based foreign and

economic policy experts, as he tell B&E.

If someone thinks that a few corporate institutions with financial

stability can safeguard the future of Pakistan‘s economy, I would

call it day dreaming. Moreover, these corporations are financially

strong because of their political links and derive huge synergies

from foreign aids received by the treasury. If these aids were to

stop, I guarantee that Pakistan as a political entity would

disintegrate within 10 days‖.

The only way this situation can change for the better is by

pursuing political and economic reforms collaterally. The West

will have a play an instrumental role in reinforcing amendments.

A Good Start would be to ramp up investment and generate

employment, which in turn would boost consumption. In the

absence of these imperative measures, Pakistan would continue

to be failed state for generations to come supported by the US.

Source : Business Magazine

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 4

1) Pakistan’s merchandise trade*

Imports have been continuosly outstripping exports.

Source:- World Bank

2) Movement of Karachi Stock Exchange (KSE)100 index over

the past four years.*

The index has relatively performed well compared to global

stock exchanges because of limited participation of FIIs

Figure/Image download from Internet

Source :- Karachi Stock Exchange

3) GDP growth rate of Pakistan over the last three decades

(Constant Prices)*

The growth rate fluctuated drastically every time the country

shifted from democracy to dictatorship and vice versa.

Figure/Image download from Internet

Source:-International Monetary Fund :- 2010 World

Economic Outlook.

4) Pakistan – External debt stocks*

Elusive Indicator as Pakistan runs on aids rather than debts.

Source :- World Bank

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 5

1. ISLAMIC REPUBLIC OF PAKISTAN

1.1. LOCATION

Home to one of the world‘s cradles of civilization,

Pakistan shares its eastern border with India and

north-eastern with China, with Afghanistan running

along the northwest and Iran in the southwest. Along

the southern boundary of Pakistan runs the Arabian

Sea with 1,064 kilometres of coastline. Roughly twice

the size of California, Pakistan covers an area of

approximately 803,940 square kilometres.

1.2. POPULATION DEMOGRAPHICS

The sixth most populous Country of the world,

Pakistan has a current population of approximately

164 million, with a growth rate of 1.828% (2007

estimates). The majority of southern Pakistan‘s

population lives along the Indus River; in the north,

most of the people are concentrated in the cities of

Faisalabad, Lahore, Rawalpindi/ Islamabad, and

Peshawar. Karachi, the capital of the Sindh province

and the largest city in Pakistan, is, by virtue of being a

sea-port, the financial and commercial centre. With a

population of over eleven million, Karachi is also the

fifth most populous city of the World.

Ninety seven percent of the Country‘s population is

Muslim, making Pakistan the second largest Muslim

country in the world and an important member of the

Organization of the Islamic Conference (OIC).

Hinduism and Christianity form the leading minority

religions; other religious groups include Sikhs,

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 6

Parsees, and a small number of Buddhists. The

constitution defines Pakistan as an Islamic nation and

Islamic Shariah is the supreme law of Pakistan.

However, the freedom of religion is guaranteed by the

constitution.

1.3. INTERNATIONAL TIME

International time of Pakistan is GMT + 5.

1.4. CLIMATE

Pakistan has a continental type of climate,

characterized by extreme variations of temperature.

During the winter season, temperature falls to -5 in the

northern areas of Pakistan. Temperatures on the

Baluchistan plateau are somewhat higher; maximum

temperature goes to 52C mainly in the Sibbi (located

in the Baluchistan Province). Along the coastal strip

the climate is tempered by sea breezes. In rest of the

country temperatures rise steeply in the summer and

hot winds blow across the plains during day. Daily

variation in temperature may be as much as 11C to

17C. Winters are cold with minimum mean

temperature of about 4C in January.

1.5. LANGUAGE

The national language of Pakistan is Urdu, but

comparatively few people use it as their mother

tongue. Punjabi is the most widely spoken language,

followed by Sindhi, Pashto, Saraiki, and Baluchi

respectively. English is extensively used by educated

people and is the official language of Pakistan.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 7

1.6. CURRENCY

The currency of Pakistan is Rupee and the acronym

used for the currency is PKR.

1.7. THE CONSTITUTION AND LEGAL SYSTEM

Pakistan is a federal republic with four provinces,

capital territory (Islamabad) and territory consisting of

tribal areas. Pakistan also administers Azad Kashmir

and the Northern Areas, portions of the Jammu and

Kashmir region.

The constitution of the Islamic Republic of Pakistan

of 1973 provides for Parliamentarian form of

Government. The Prime Minister (elected by the

National Assembly) is the head of Government and

the President (collectively elected by the National

Assembly, the Senate and the Provincial Assemblies)

is the head of the federation. The National Assembly

(also called lower house) and Senate (also called

upper house) are the legislator institutions. The

National Assembly has 342 members who are elected

from all provinces, the capital territory and tribal areas

on the basis of population. The Senate derives equal

representation from all the four provinces and has a

total membership of 100.

Pakistan‘s legal system is based on English common

law, adapted to the needs of an Islamic state. High

Court and Supreme Court of Pakistan are the highest

forum of judiciary at provincial and national level,

respectively. Additionally, the Shariah court is

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 8

responsible for ensuring that the Country‘s laws are as

per Islamic injunctions.

1.8. HIGHLIGHTS OF THE ECONOMY

Pakistan used to be heavily dependent on the

agriculture sector, but slowly and gradually, the

industry and service sectors have increased their

shares in recent years and they collectively account

for around three-fourths of the GDP.

In 2006-2007 Pakistan's real GDP at factor cost grew

by 7 % and inflation remained around 7.9 %. During

that period, there was a considerable increase in the

level of FDI.

Total exports amounted to US$17.011 billion 2006-

2007, growing by about 3.4 % and crossing the $17

billion mark. Imports amounted to US$30.54 billion

during the same period increasing by about 8.22%.

Major exports are textiles (garments, cotton cloth, and

yarn), rice, leather, sports goods, and carpets and rugs.

United States of America, United Arab Emirates,

England, Germany and Hong Kong are the main

export partners, while major import commodities are

petroleum, petroleum products, machinery, chemicals,

transportation equipment, edible oils, pulses, iron and

steel, tea. The major import partners are United Arab

Emirates, Saudi Arabia, Kuwait, United States of

America and China.

Cotton, Wheat, Rice and Sugarcane are Pakistan‘s

main crops while main industries of the Country are

textiles, telecommunications, cement, power,

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 9

commercial & investment banking, oil & gas, agro-

based produce, sports goods, surgical goods, leather

and leather goods, and cutlery.

Karachi, Lahore, Islamabad, Rawalpindi, Faisalabad,

Hyderabad, Gujranwala and Sialkot are the Country‘s

key business centres. Karachi and Gwadar have the

sea ports while Lahore, Rawalpindi, Sialkot,

Hyderabad, Multan, Faisalabad, Peshawar and Quetta

have the dry ports. Islamabad, Karachi, Lahore,

Peshawar and Quetta have the International Airports.

1.9. ECONOMIC ARRANGEMENTS

1.9.1.List of Countries / Organizations with which Pakistan

has Bilateral Investment Agreements

S. No.

Name of Country

Signing Date

S. No.

Name of Country

Signing Date

1. Germany 25.11.1959 24. Indonesia 08.03.1996

2. Sweden 12.03.1981 25. Tunisia 18.04.1996

3. Kuwait 17.03.1983 26. Syria 25.04.1996

4. France 01.06.1983 27. Belarus 22.01.1997

5. South Korea 25.05.1988 28. Mauritius 03.04.1997

6. Netherlands 04.10.1988 29. Italy 19.07.1997

7. Uzbekistan 13.08.1992 30. Oman 09.11.1997

8. China 12.02.1989 31. Sri Lanka 20.12.1997

9. Singapore 08.03.1995 32. Australia 07.02.1998

10. Tajikistan 13.05.2004 33. Japan 10.03.1998

11. Spain 15.09.1994 34. Belgium 23.04.1998

12. Turkmenistan 26.10.1994 35. Qatar 06.04.1999

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 10

13. United Kingdom

30.11.1994 36. Philippines 11.05.1999

14. Turkey 15.03.1995 37. Yemen 11.05.1999

15. Portugal 17.04.1995 38. Egypt 16.04.2000

16. Romania 10.07.1995 39. OPEC Fund 24.10.2000

17. Malaysia 07.07.1995 40. Lebanon 09.01.2001

18. Switzerland 11.07.1995 41. Denmark 18.7.1996

19. Kyrgyz Republic

23.08.1995 42. Morocco 16.04.2001

20. Azerbaijan 09.10.1995 43. Bosnia and Herzegovina

04.09.2001

21. Bangladesh 24.10.1995 44. Kazakhstan 08.12.2003

22. U.A.E. 05.11.1995 45. Loas 23.04.2004

23. Iran 08.11.1995 46. Cambodia 27.04..2004

1.9.2.Pakistan and The Non-Aligned Movement (N.A.M.)

Pakistan is an active member of NAM. Since the

Movement predominantly comprises developing

countries, it has consistently paid considerable

attention on economic issues. The Movement has

maintained its long-standing position on the need for

conscious steps to regulate the market measures as a

means of ensuring that growth in the world economy

and trade is both dynamic as well as equitable.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 11

1.9.3. Pakistan and The Economic Co-operation

Organization (ECO)

ECO is an inter-governmental regional organization

established in 1985 by Iran, Pakistan and Turkey for

the purpose of sustainable socio-economic

development of the Member States. ECO is the

successor organization of Regional Cooperation for

Development (RCD) which remained active from

1964 up to 1979.

In 1992, the Organization was expanded to include

seven new members, namely: Islamic State of

Afghanistan, Republic of Azerbaijan, Republic of

Kazakhstan, Kyrgyz Republic, Republic of Tajikistan,

Turkmenistan and Republic of Uzbekistan.

1.9.4.Pakistan and The D-8

D-8, also known as developing-8 is an arrangement

for development cooperation among the following

member countries: Bangladesh, Egypt, Indonesia,

Iran, Malaysia, Nigeria, Pakistan and Turkey. The

objectives of D-8 are to improve developing countries'

positions in the world economy, diversify and create

new opportunities in trade relations, enhance

participation in decision-making at the international

level, and provide better standards of living.

1.9.5. Pakistan and The South Asian Association for Regional

Cooperation (SAARC)

The South Asian Association for Regional

Cooperation (SAARC) was established on December

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 12

8, 1985 by Bangladesh, Bhutan, India, Maldives,

Nepal, Pakistan and Sri Lanka. South Asia, home to

nearly a fifth of humanity, is endowed with vast

natural and human resources. It has the potential of

becoming a vibrant region in the world, given its

enormous resources in manpower, technology,

agricultural and mineral assets, its history and

civilization, arts and culture. Intra-regional exchanges

in the SAARC framework and trade among its

Member States can realise much of this potential.

Appreciating the same, the association was formed

with the primary objective "to promote the welfare of

the peoples of South Asia and to improve their quality

of life".

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 13

2. INVESTMENT FACTORS

2.1 FIVE REASONS TO INVEST IN PAKISTAN (AMONG MANY

OTHERS!!)

a. Abundant land and natural resources

Extensive agricultural land

Crop production (wheat, cotton, rice, fruits and

vegetables)

Mineral reserves (coal, crude oil, natural gas,

copper, iron ore, gypsum, etc.)

Fisheries and livestock production

b. Strong human resources

English speaking work force

Cost-effective managers and technical workers

c. Large and growing domestic market

150 million consumers with growing incomes

A growing middle-class moving to

sophisticated consumption habits

d. Well-established infrastructure and legal system

Comprehensive road, rail and sea links

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 14

Good quality telecommunications and IT

services

Modern company law

Long-standing corporate culture

e. Strategic location as a regional hub

Principal gateway to the Central Asia

Republics

Strong and long-standing links with the

Middle East and South Asia

Comprehensive duty-free facilities for

investors

2.2 INVESTMENT OPPORTUNITIES

There are good investment opportunities in the

following sectors of Pakistan economy.

Oil & Gas

Energy and Power

IT Projects

Telecommunication

Agriculture & Agro-based Projects

Housing and Construction

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 15

Textile

Infrastructure

Health Projects

Mining & Minerals

Services Sector

Tourism Projects

2.3 TAX BENEFITS

Tax benefits as available under the second schedule to

the Income Tax Ordinance, 2001 are mentioned

below:

a. Exemption from total income:

Some important sectors where exemptions are

available are:

Software exports

Business Process Outsourcing (BPO)

Income of Non Profit Organisation (NPO)

Income of Computer Institutes

b. Reduction in tax rates

Tax rates have been reduced for some businesses,

for example:

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 16

Exploration of mineral deposits

Commission of export indenting agents

Income of Modaraba (also discussed in some

detail under the section on Income Tax)

2.4 SOURCES OF FINANCE

Pakistan has a diversified and modern financial

system, which is completely integrated with the

international financial markets. The main sources of

finance can be classified as following:

2.4.1 Banks

The banking sector of Pakistan is very modern and

organized. Most of the leading international banks

have branches in the Country and local banks are also

competing with them with quality services. Both

foreign and national banks have invested heavily in

infrastructure and information technology and thus are

able to provide state of the art facilities to the

customers. State Bank of Pakistan is the regulatory

body for the banks, which has established its

autonomous status.

2.4.2 Non-Banking Finance Companies (NBFCs)

The NBFC sector of the Country is equally strong.

The following classes of NBFCs are involved in

extending credit facilities to both corporate and

individual customers:

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 17

Leasing Companies

Investment Banks

Modarabas

Venture Capital Companies

Like foreign banks, many international NBFC also

have branches in Pakistan. The Securities and

Exchange Commission of Pakistan is the regulatory

body for NBFCs. The NBFCs offer various debt

facilities for medium to long-term including project

financing, lease and sale, and lease-back of assets.

2.4.3 Public offers through stock exchanges

Financing can be arranged through a public offer of

debt and equity instruments. The Securities and

Exchange Commission of Pakistan approves the

public offer and the equity and debt instruments can

be listed on all or any of the three stock exchanges in

Pakistan.

2.5 FOREIGN EXCHANGE REGULATIONS

The Foreign Exchange Regulations Act, 1947 (the

Act) and Foreign Exchange Manual govern issues

related to the receipt and remittance of foreign

exchange in and from Pakistan. The regulatory

authority in this regard is State Bank of Pakistan.

The present Act is friendly to foreign investors and

provides freedom to bring, hold and take out foreign

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 18

exchange, maintenance of foreign-currency accounts,

purchase and sale of shares and securities by non-

residents and foreign exchange borrowings for setting

up of a new industry or balancing, modernization or

replacement of an existing industry. The rules relating

to the purchase of technology and requirements for

import licences have also been substantially relaxed.

Approval of the Board of Investment – Government of

Pakistan may also be required in certain cases for

remittance of Foreign Exchange by a foreign investor.

The policy of the Board of Investment is also foreign

investor friendly.

2.6 EMPLOYEMENT REGULATIONS

2.6.1 Labour Policy

The labour policy issued by the Government of

Pakistan lays down the parameters for the growth of

trade unionism, the protection of workers‘ rights, the

settlement of industrial disputes, and the redress of

workers‘ grievances. The policy also provides for the

compliance with international labour standards

ratified by Pakistan. At present, the labour policy as

approved in year 2002 is in force.

With the efforts of Government and enlightened

elements within labour and employers, a forum i.e.

―Workers Employers Bilateral Council of Pakistan

(WEBCOP)‖ has been established which facilitates

the resolution of issues relating to bilateral rights.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 19

2.6.2 Child Labour

Awareness of the problem provided the basis for

enactment of the Employment of Children Act, 1991

in Pakistan, which has been followed by a number of

administrative and other initiatives to address the

issue of child labour effectively.

The Constitution of the Country also protects the

rights of children and states:

―No child below the age of fourteen shall be engaged

in any factory or mine or in any other hazardous

employment. All forms of forced labour and traffic in

human beings are prohibited.‖

2.6.3 Minimum wages

The Government has prescribed the Rs. 4,600 Per/

month the minimum wage to be paid.

2.6.4 Employees Social Security Ordinance, 1965

An Employees Social Security scheme was introduced

in Pakistan under the provisions of the Provincial

Employees Social Security Ordinance, 1965. The

main objective is to provide comprehensive medical

cover to the secured workers and their family

members including parents and to provide financial

assistance in case of sickness and employment

injuries. The Social Security scheme is implemented

on the basis of the contributory principle. The main

source of income is the Social Security Contribution,

which is collected under Section 70 of the Ordinance

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 20

from the employers of the notified industrial and

commercial establishment at a rate of 7% of the wages

paid to their workers who are drawing wages up to Rs.

5,000/- p.m. or Rs. 200/- per day. The workers once

covered under this scheme remain secured even if

their wages exceed Rs. 5,000/- per month.

2.6.5 Workers Welfare Fund Ordinance, 1971

Through the Ordinance, the government has

constituted a fund called ―Workers‘ Welfare Fund‖

for the welfare of workers. The Fund consists of:

a. An initial contribution of Rupees one hundred

million by the Federal Government,

b. Such moneys, as may from time to time, be paid

by industrial establishments under the Ordinance.

An industrial establishment, the total income of which

in any year is not less than one hundred thousand

rupees shall pay to the Fund in respect of that year a

sum equal to two percent of so much of its total

income as is assessable under the Income Tax

Ordinance, 2001.

The Fund is applied to:

The financing of projects concerned with the

establishment of housing estates or construction of

houses for workers; and

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 21

The financing of other welfare measures including

education training, re-skilling and apprenticeship

for the welfare of workers.

2.6.6 Companies Profit (Workers Participation) Act, 1968

The Companies Profits (Workers‘ Participation) Act,

1968 (the Act) provides for participation of workers in

the profits of the companies. The Act applies to

Companies engaged in as industrial undertaking that

fulfils the prescribed criteria and such companies are

required to:

a. Establish a workers‘ participation fund in

accordance with the scheme as soon as the

accounts for the year in which the scheme

becomes applicable to it are finalized, but not later

than nine months after close of the year;

b. Subject to adjustments, if any, pay every year to

the Fund not later than nine months after the close

of that year five percent of its profits during such

year, which shall, where the accounts have been

audited by an auditor appointed under section 23-

B of the Industrial Relations Ordinance, 1969

(XXIII of 1969), be assessed on the basis of such

audit; and

c. Furnish to the Federal government and the Board,

not later than nine months after the close of every

year of account, its audited accounts for that year,

duly signed by its auditors.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 22

The fund is distributed among workers of

prescribed categories.

2.6.7 Employees Old Age Benefits Act, 1976

The Employees Old Age Benefits Act, 1976 (the Act)

is applicable to every industry or establishment where

ten or more persons are employed directly or

indirectly. This statute intends to provide security and

benefit for old age to employees of industrial,

commercial or other organizations covered by it. The

Employee Old Age Benefits Institute (the Institute)

formed under it collects and receives contributions,

donations, bequests and all other payments. It deals

with pensions, invalidity pension, widow‘s pensions,

old age grants and other benefits, out of contribution

payable to the Institute by every employer of industry.

Contribution shall be payable monthly by the

employer to the Institute in respect of every person in

his insurable employment, at the rate of five percent

of his wages

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 23

2.6.8 List of other important labour laws

Name of law Applications

Factories Act, 1934 Regulates the working

conditions in factories,

employing 10 or more

workers

Payment of Wages Act,

1936

Determines the mode of

payment of salaries and

wages to the industrial

workers

Minimum Wages

Ordinance, 1961

Specifies the minimum

wage to be paid to

different categories of

workers

West Pakistan

Industrial &

Commercial

Employment (S.O.)

Ordinance, 1968

Provides the framework

and guidelines for the

service rules of industrial

and commercial workforce

Punjab Fair Price Shops

Ordinance, 1971

Provides criteria for the

establishment of fair price

shops at industrial units

where 100 or more

workers are employed

Canteen Rules, 1959 It envisages provision of a

canteen facility, where

250 or more workers are

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 24

employed

Industrial Relations

Ordinance, 2002

It provides framework for

the industrial relations

between management and

the workers. It regulates

trade union activities

Hazardous Occupations

Rules, 1978

Gives guidelines for

protection of workers

against certain hazardous

occupations in the factories

Employment of

Children Act, 1991

Regulates the employment

of children

Maternity Benefit

Ordinance, 1959

Provides certain facilities

to those female

employees, who are expectant

Shops & Commercial

Establishments

Ordinance, 1969

Regulates the employment

and working conditions of

workers in shops as well

as commercial

establishments (such as banks, offices etc.)

Road Transport

Workers Ordinance,

1961

Provides guidelines for

welfare of transport

workers

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 25

2.7 BUSINESS VISA AND WORK PERMIT

2.7.1 Business Visa for Citizens of Countries in “A” list

To facilitate travel to and staying in Pakistan for

foreign business persons and investors, business visa

policies have been considerably relaxed. Missions

abroad can issue up to five years multiple business

visa (non-reporting) within 24 hours to businessmen

of countries of list-‗A' on production of any of the

following documents:-

Recommendation letter from CC&I of the

respective country of the foreigner.

Invitation letter from Business organization duly

recommended by the concerned Trade

Organization/ Association, in Pakistan.

Recommendatory letter by Honorary Investment

Counselors of BOI.

Recommendatory letter from Pakistani

Commercial officers posted in Pakistan High

Commissions / Embassies / Consulates General

abroad.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 26

Countries of “A” List

B

u

Business Visa for Citizens of those Countries which are

not in “A” List

Missions are authorized to issued entry visa for one

month to Genuine Businessmen of countries besides

those in ‘A' list (except those countries not recognized

by Pakistan) from applicant's own country or place of

legal residence by Ambassador/High

Commissioner/Head of Mission only on the following

criteria:-

The applicant belongs to Company of

International repute. And / or

Fulfills the criteria laid down for List ‘A' country in

respect of valid sponsorship from Pakistan.

1. Australia 18. Hungary 35. Qatar

2. Austria 19. Indonesia 36. Russian Federation

3. Argentina 20. Iceland 37. Saudi Arabia

4. Bahrain 21. Iran 38. Singapore

5. Brazil 22. Ireland 39. Slovakia

6. Belgium 23. Italy 40. South Africa

7. Brunei 24. Japan 41. South Korea

8. Canada 25. Kuwait 42. Spain

9. Chile 26. Luxembourg 43. Sweden

10. China 27. Malaysia 44. Switzerland

11. Czech Republic 28. Mexico 45. Thailand

12. Denmark 29. Netherlands 46. Turkey

13. Finland 30. New Zealand 47. U.A.E.

14. France 31. Norway 48. United Kingdom

15. Germany 32. Oman 49. USA

16. Greece 33. Poland

17. Hong Kong 34. Portugal

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 27

2.7.2 Visa on Arrival to the Foreign Investors and

Businessmen

Genuine businessmen from developed countries as

mentioned below will be allowed Visa On Arrival

(VOA) non-reporting for 30 days on production of

any of the following documents:-

Recommendation letter from CC&I of the

respective country of the foreigner.

Invitation letter from Business organization duly

recommended by the concerned Trade

Organization/Association, in Pakistan.

Recommendatory letter by Honorary Investment

Counsellors of BOI.

Recommendatory letter from Pakistani

Commercial officers posted in Pakistan High

Commissions / Embassies / Consulates General

abroad.

List of Countries

1. United Kingdom

2. United State of America

3. Italy

4. Germany 5. Australia 6. Brazil

7. France 8. Switzerland 9. Sweden

10. China 11. Singapore 12. Hong Kong

13. Japan 14. Korea 15. Malaysia

16. Canada 17 Belgium 18. Netherlands

19. Luxembourg 20. Denmark 21. Ireland

22. Greece 23. Portugal 24. Spain

25. Austria 26. Finland 27. Turkey

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 28

2.7.3 Work Visa Procedures

A uniform facility has been extended to exempt

technical and managerial personnel from work permit

for the newly opened sectors of the economy,

including Agriculture, Service and Social Sectors, in

addition to exemption already enjoyed by such

personnel for working in the manufacturing/industrial

and infrastructure sectors. They are now only required

to obtain work visas.

Work visas will be granted to foreign technical and

managerial personnel for the purpose of transferring

skills and know-how. These visas will be granted

subject to a constructive plan to train Pakistani

personnel to take over the technical and managerial

responsibilities over a reasonable period of time.

A Committee under the Chairmanship of the Secretary

of BOI periodically considers and decides the cases of

granting or extending work visas to foreign personnel.

Companies requiring employment of foreign nationals

or extension in their visa should submit the request on

the prescribed application form to the Board of

Investment (FTP Wing) Islamabad. Work visas will

be authorised and issued by the Ministry of Interior on

the basis of the decision of the Committee.

The work visa may be issued for a period up to 2

years or for the life of the applicant's passport. The

concerned Pakistani Mission abroad will grant work

visas to the applicant whereas extension in work visa

will be endorsed by the Regional Passport Office of

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 29

the city where the expatriate is working upon

authorization by the Ministry of Interior.

In case of multiple entry visas, the number of entries

will not be restricted.

2.7.5 Conversion of Business Visa to Work Visa

For the purpose of changing the category of visa of

foreign national employees and investors from

business visa to work visa, the condition to go out of

Pakistan to any third country and get it converted

from the Pakistani Mission in that country has been

withdrawn. The Ministry of Interior will process such

requests simply upon receiving verification from the

BOI.

Multiple entry resident visas for up to 3 years will be

issued to businesspersons of all countries, except

those not recognized by Pakistan, who bring in an

amount of US$ 200,000.

2.7.6 Registration of Foreigners with the Police

It has been decided to exempt all foreigners who have

been issued work visas from registration with the

police, except for nationals of countries on the

negative list.

Even in the case of countries on the negative list

(except for Indians and foreigners of Indian origin),

foreign nationals in the managerial category who are

issued work permits/visas will also be exempted from

police registration.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 30

3 SETTING UP A BUSINESS IN PAKISTAN

3.1 LICENCE REQUIREMENTS

3.1.1 Specialised businesses

In Pakistan, certain businesses have been declared

specialized and in addition to corporate and tax

requirements, a specific licence is required to

commence such businesses. Such businesses are

Banking Companies, Non-Bank Finance Companies,

Security Service Providing Companies, Corporate

Brokerage Houses, Money Exchange Companies, a

Company which invests in Arms and Ammunition,

Security Printing, Currency and Mint., High

Explosives and Radio Active Substances. Certain

conditions e.g. as to minimum capital, qualification of

directors, corporate structure and area of operations

etc. are required to be complied with to obtain these

licences. However, the conditions for grant of licence

vary from business to business.

3.1.2 Generalised businesses

For other businesses some procedural approvals etc.

may be required but no specific licence is necessary.

3.2 TYPES OF BUSINESSES ORGANISATIONS

Complying with the requirements of licence, a

business can be established in any of the following

forms:

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 31

3.2.1 Sole proprietorship

An individual may set up the business as sole

proprietorship without any registration except with tax

authorities.

3.2.2 Partnership firm

A partnership firm can be established by executing a

partnership deed on a stamp paper of Rs. 500/- and

getting the same Notarized by the authorised Notary

Public Magistrate. The Partnership Act, 1932 is the

legal framework for partnership firms and a firm may

or may not be registered with the Registrar of Firms.

3.2.3 Companies

The Companies Ordinance, 1984 (the Ordinance) and

The Companies (General Provisions and Forms)

Rules, 1985 provide the legal framework for

operations of companies in Pakistan and the Securities

and Exchange Commission of Pakistan (the

Commission) is the regulatory authority in this regard.

In Pakistan, a company may be formed with or

without limited liability and the Ordinance provides

for the following categories of the companies:

a. A company limited by shares; or

b. A company limited by guarantee; or

c. An unlimited company

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 32

Companies formed in any of the above categories can

further be classified in two types:

a. Private company

b. Public company

c. Single Member Company

Any three or more persons associated for any lawful

purpose may, by subscribing their names to the

Memorandum of Association (document that defines

the objectives of the company) and complying with

the registration requirements, form a public company.

There is no limitation as to the maximum number of

members of such a company and after complying with

the prescribed requirements; it may offer its shares

and other securities to the general public. The public

company may get its shares and other securities listed

on the stock exchange(s).

A private company can be established by any one or

more persons associated in such manner as specified

in the case of a public company and means a company

which by its articles of association (document that

defines the standard operating procedures of the

company),

a. Restricts the right to transfer its shares, if any;

b. Limits the number of its members to fifty;

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 33

c. Prohibits any invitation to the public to subscribe

for the shares, if any, or debentures of the

company.

The name of every public limited company should

include the word ―Limited‖ as the last word of the

name. And the name of every private company and a

company limited by guarantee should respectively

include the parenthesis and word ―Private‖ and

―Guarantee‖ before the last word ―Limited‖. The

Commission may grant licence to a non-profit

association for the promotion of commerce, art,

science, religion, sports, social services, charity or any

other useful object to be registered as a company with

limited liability without the addition of the words

―Limited‖, ―(Private) Limited‖ or ―(Guarantee)

Limited‖ as the case may be, to its name.

The schedule of fees for registration of a company is

as following:

a. For registration of a company whose nominal

share capital does not exceed Rs. 100,000 the fee

shall be Rs. 2,500.

b. For registration of a company whose nominal

share capital exceeds Rs. 100,000, a fee of Rs.

2,500 is payable along with an additional fee to

determine according to the amount of nominal

share capital as follows.

i. For every 100,000 rupees of nominal share

capital or part of 100,000 rupees, after the first

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 34

100,000 rupees, up to 5,000,000 rupees, a fee

of Rs. 500.

ii. For every 100,000 rupees of nominal share

capital or part of 100,000 rupees, after the first

5,000,000 rupees, a fee of Rs. 250.

Provided that for registration of a company the total

amount of fee to be paid shall not exceed ten million

rupees

A single person may form a single member company

on fulfilment of certain legal conditions.

3.2.4 Modaraba

Pakistan‘s commitment to promote an ―Interest (Riba)

free‖ economic system was carried forward with the

promulgation of the Modaraba Companies and

Modaraba (Floatation and Control) Ordinance, 1980.

Its primary aim was to accelerate capital formation

and economic development in accordance with the

tenets of Islam. It is a distinct form of business and its

general concept is that investment comes from the one

partner while the management and work is an

exclusive responsibility of the other, and the profits

generated are shared in a predetermined ratio. The

corporate formation is arranged in such a way that a

Management Company is formed which is responsible

for the management of Modaraba and business is

executed by the Modaraba itself. For all legal and

practical purposes both the Management Company

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 35

and Modaraba are separate entities. A management

company may operate more than one Modarabas. The

Modaraba pays a fee to the Management Company.

Like Shares of a company, Modaraba certificates are

issued to the equity holders of the Modaraba. The

certificates can also be offered to the general public.

Modaraba has established itself as a well understood

Shariah compliant form of business and has been

practiced for the last 22 years. It also enjoys certain

tax benefits which are discussed in the relevant

section.

3.3 LISTING OF COMPANIES AND SECURITIES

There are three stock exchanges in the country,

namely:

Karachi stock exchange,

Lahore stock exchange, and

Islamabad stock exchange.

Karachi Stock Exchange (the Exchange) is the biggest

and most liquid exchange and has been declared as the

―Best Performing Stock Market of The World For the

year 2002‖.

All exchanges have their own regulations which are

largely similar. The Securities and Exchange

Commission of Pakistan (Commission) grants the

approval for the public offer and after such approval a

company may obtain listing for its equity and/or debt

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 36

securities according to the regulations of the

Exchange.

The stock exchange regulations provide for certain

reporting and other requirements. Some important

regulations are in respect of notice of board and

shareholders‘ meetings, approval for date of annual

general meeting of the company, reporting of the

results and announcements of the dividends, payment

of dividend at least once in five years and code of

corporate governance. The code is a comprehensive

set of rules for ensuring transparency and good

governance in the management of the company.

For an application to the Commission seeking

approval to issue, circulate and publish the prospectus

for public offer, a non-refundable fee is payable in the

following manner according to the size of total issue

including all types of securities:

Up to Rs. 250 million Rs. 25,000/-

More than Rs. 250 million and

upto Rs. 1,000 million Rs. 50,000/-

More than Rs. 1,000 million Rs. 100,000/-

As per regulations of the Karachi stock exchange, the

following fees are presently applicable:

Initial listing fee for the share capital is equivalent

to one tenth of one percent of the paid-up capital

subject to a maximum of one million and five

hundred thousand rupees.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 37

Listing fee for debt instruments and open-end

mutual funds is equal to one twentieth of one

percent of the amount of debt instrument/ seed

capital of mutual fund subject to a maximum of

five hundred thousand rupees.

Whenever a listed company increases the paid-up

capital of any class or classes of its shares, or

securities it shall pay a fee equivalent to one tenth

of one percent of such increase.

Annual listing fee is payable as following:

Companies having paid-up capital Fee per Annum

(Rupees)

Upto Rs. 50.00 million 15,000

Above Rs. 50.00 million and

upto Rs. 200.00 million 30,000

Above Rs. 200.00 million 60,000

Size of Instrument

Upto Rs. 50.00 million 15,000

Above Rs. 50.00 million and

upto Rs. 200.00 million 30,000

Above Rs. 200.00 million 35,000

3.4 FOREIGN INVESTOR IN PAKISTAN

A foreign investor may establish an independent

business with any of above mentioned corporate

structures. He can establish a sole proprietorship, can

enter into partnership with any local person or

foreigner and even can establish a company with or

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 38

without participation of local shareholder(s) and

director(s). If a foreign enterprise wishes to establish a

business in Pakistan as a part of its international

operations, in addition to the said corporate structures

it also has following choices:

a. It can obtain registration with Board of Investment

– Government of Pakistan (the Board), for

opening of a branch office, marketing office or

liaison office. Regulations of the Board impose

certain restriction on the operations of the

enterprise.

b. It can appoint an agent in Pakistan. Relevant

provisions of the Contract Act, 1872 shall apply in

such agency arrangements.

c. It can enter into joint venture with other business

entities. Relevant provisions of Contract Act, 1872

and Partnership Act 1932 are applicable to these

ventures.

3.5 ACCOUNTING AND AUDITING

The financial year for all business enterprises (except

as discussed in the section on Income Tax) is from 1st

July to 30th June of every year. All listed companies

are required to issue their financial statements for the

year ending on 30th

June at the latest by the last day of

the immediately following October, while other

Companies may submit their financial statements to

Securities and Exchange Commission of Pakistan

(SECP), at the latest by the last day of immediately

following December.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 39

All companies are required to get their financial

statements audited by a Chartered Accountant who is

a member of the Institute of Chartered Accountants of

Pakistan (ICAP). However, a company that has share

capital below three million rupees may get their

financial statements audited by a Cost and

Management Accountant who is a member of the

Institute of Cost and Management Accountants of

Pakistan (ICMAP).

Financial statements of listed companies are presented

according to the requirements of the fourth schedule

to the Companies Ordinance, 1984 while financial

statements of all other companies are presented

according to the fifth schedule to the Companies

Ordinance, 1984. ICAP considers and adopts the

International Accounting Standards (IASs) and SECP

notifies their application in preparation of financial

statements of companies. At present, all IASs issued

by International Accounting Standards Board except

IAS 15 and IAS 29 have been adopted and notified.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 40

4 TAXATION

The Central Board of Revenue (the Board) is the regulatory

authority which is responsible for the management of the

Taxation System and is engaged in the collection of taxes

under various structures. The taxes, duties and other levies

can be classified in two categories i.e. direct taxes and

indirect taxes.

4.1 DIRECT TAXES

Direct taxation consists of Income Tax and Capital

Value Tax.

4.1.1 Income tax

The Income Tax Ordinance, 2001 and Income Tax

Rules, 2002 provide the legal framework for the levy,

collection and other matter related to income tax. The

levy of income tax is an annual charge on the taxable

income.

Classification of assessees

The nomenclature of corporate and non corporate

structures for income tax purposes is as follows:

Company

Registered Firm

Un-registered Firm

Association of Persons (AOP)

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 41

Individuals

The Income Tax Ordinance, 2001 provides a broader

definition of the ―Company‖ which includes:

A company as defined in the Companies

Ordinance, 1984

A body corporate formed by or under any law in

force in Pakistan

A body incorporated by or under the law of a

country outside Pakistan relating to incorporation

of companies

A trust, a co-operative society or a finance society

or any other society established or constituted by

or under any law for the time being in force.

A foreign association, whether incorporated or

not, which the Central Board of Revenue has, by

general or special order, declared to be a company

for the purposes of this Ordinance

A foreign association, whether incorporated or

not, which the Central Board of Revenue has, by

general or special order, declared to be a company

for the purposes of this Ordinance

Sources of income

The Income Tax Ordinance, 2001 classifies income

into the following categories (called heads of income)

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 42

and prescribes the allowable deductions against each

head:

Salary

Income from Property

Income from Business

Capital Gains

Income from Other Sources

Taxable income under a specific head means the

income as reduced by allowable deductions. The net

income from each head is added to arrive at the total

income for the year, however, income from certain

sources is subject to separate taxation, or is subject to

presumptive tax. Under the presumptive tax regime,

the income is subject to deduction of tax at source

which becomes the discharge of final tax liability in

respect of that income. The taxation of income from a

certain source under the normal or presumptive tax

regime is notified by the Government and such

classification once advised may also change. At

present income from following sources is taxed under

the presumptive tax regime:

Dividend received from a listed company

Prize on a prize bond or winnings from raffle,

lottery, quiz or crossword puzzle, or prize offered

by companies for promotion of sale.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 43

Travelling agent‘s commission

Contracts other than service contracts

Royalty and fee for technical services of non-

residents

Scope of total income for tax purposes

The Residential status of an assessee is also an

important concept as it determines the scope of total

income for tax purposes. In the case of a resident

assessee the total taxable income means income from

all sources within and outside Pakistan subject to the

provisions of double taxation treaties, while in the

case of a non-resident individual it is restricted to

Pakistan source income only.

An individual is a ―resident individual‖ if he is present

in Pakistan for 182 days or more in a tax year or if he

is an employee or official of the Federal or Provincial

Government posted abroad.

A Company is considered to be resident when either it

is incorporated or formed by or under any law

enforceable in Pakistan or, the control or management

of which is situated wholly in Pakistan at any time

during the tax year.

A registered firm, un-registered firm and association

of persons is considered resident when its

management and control is situated (either wholly or

partly) in Pakistan.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 44

Tax year and filling of return

The tax year shall be a period of twelve months

ending on 30th

June of every year 'hereinafter referred

to as 'normal tax year''. All assessees except

companies are required to file their return of income

for the tax year at the latest by 30th September

immediately following the close of that tax year.

Companies are required to file their return of income

for the tax year at the latest by 31st December

immediately following the close of that tax year.

Central Board of Revenue has prescribed different

period of twelve months to be the ―tax year‖ for

various businesses. These different periods are called

―Special Tax Year‖. Accordingly the last date for

filling the return of income is also different as

prescribed for the normal tax year. Presently

prescribed, special tax years and last date of filing the

return are as following:

Business Tax Period Filling of

Return

(Year ending on) (Latest by)

Companies

Manufacturing Sugar 30th September 31

st March

All persons exporting Rice 31st December 30th June

All persons carrying on the

business of rice husking 31st August 28th or 29th February

All persons carrying on

the business of oil milling 31st August 28th or 29th February

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 45

All persons carrying on the

Business of manufacturing

and dealings in shawls 31st March 30th September

All Insurance Companies 31st December 30th June

A person may apply, in writing, to the Commissioner

of Income Tax to allow him to use a twelve months'

period, other than the normal tax year, as a special tax

year and the Commissioner may by an order, allow

him to use such special tax year.

In case of a class of persons having a special tax year,

the Central Board of Revenue may permit it, by a

notification in the Official Gazette, to use the normal

tax year as its tax year.

Tax rates

The rates of tax applicable to various assessees are

provided as Annexure 1.

Special rules for taxation of certain businesses

The Income Tax Ordinance, 2001 provides for

separate provisions for taxation of the following

businesses:

The fourth schedule to the Ordinance provides the

rules for the taxation of profits and gains of

Insurance Business.

The fifth schedule to the Ordinance provides the

rules for the taxation of profits and gains from the

exploration and production of petroleum profits

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 46

and gains from the exploration and extraction of

mineral deposits (other than petroleum).

WITHHOLDING TAX

Section 148 to Section 169 of The Income Tax

Ordinance, 2001 provides for deduction of tax on

certain payments. The ordinance provides for a

complete procedure for the withholding tax system.

Nature of such payments and pertinent rate of tax

deduction is provided as Annexure 2.

Exemptions, Rebates and other Benefits

The Second Schedule to the Income Tax Ordinance,

2001 deals with exemptions and rebates etc.

A. Exemption from total income

Part I of the Second Schedule provides

exemption from total income.

B. Reduction in tax rates

Part II of the Second Schedule provides for

reduction in tax Rates.

C. Reduction in tax liability

Part III of the Second Schedule provides for

reduction in net tax Liability.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 47

D. Exemption from specific provisions

Part IV of the Second Schedule provides for

exemption from specific provisions of the

Ordinance.

Exemptions for Modarabas

The Modaraba enjoys special tax benefits, which are

as follows:

Income (except income from trading activity) of a

Modaraba is exempt from tax provided that not

less than ninety percent of the profits in the year as

reduced by the amount transferred to a mandatory

reserve are distributed among the Modaraba

certificate holders.

It is taxed at a reduced rate of 25% as compared to

35 % applicable to companies.

Further, minimum tax is also not leviable on the

Modarabas.

Depreciation and Amortization

Third Schedule to the Income Tax Ordinance, 2001

prescribes the rates of depreciation for various assets.

It also provides for the following depreciation and

amortization allowances:

Initial depreciation Allowance @ 50%

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 48

Amortization of pre-commencement expenditure

@ 20%

Treaties for avoidance of double taxation

Pakistan has entered into treaties for avoidance of

Double Taxation with different countries. These

agreements are executed to avoid the fiscal loss of

both countries. A brief about these treaties is provided

as Annexure 3.

4.1.2 Capital Value Tax

The Capital Value Tax was introduced through the

Finance Act, 1989. Initially this tax was also

applicable to urban immovable properties and locally

assembled/imported vehicles, but currently it is

applicable to the following:ctivity

Rate of Tax

Purchase of shares through stock exchange:-

0.02%

Purchase of Air Tickets (Diplomats are Exempt):-

3.00%

Purchase of New Vehicles

3.75% to 7.50%

The tax is paid along with the payment and is final

discharge of liability.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 49

4.2 INDIRECT TAXES

The detail of indirect tax statutes is provided below:

4.2.1 Sales Tax

The VAT-mode Sale Tax has become a salient feature

of the country‘s tax policy. Sales Act 1990 forms the

legal frame work for the operation and collection of

sales tax. The ―Collectorate of Sales Tax‖ a division

of the Central Board of Revenue (CBR) is the

regulatory authority in this regard.

Sales tax is payable on monthly basis at the rate of 15,

17.5 & 20 % of the value of supplies net of the

amount of input tax i.e. paid on purchases. The

following persons are required to obtain the Sales tax

registration:

1. A manufacturer whose annual turnover from

taxable supplies made in any period during last

twelve months ending any tax period exceeds five

million rupees.

2. A service provider whose annual turnover from

taxable services made in any period during last

twelve months ending any tax period exceeds five

million rupees.

3. A retailer whose value of supplies made in any

period during last twelve months ending any tax

period exceeds five million rupees.

4. An importer.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 50

5. A wholesaler including dealer and distributor.

The Government promotes the sales tax registration

and it is a must for doing business with most of

Government departments, Corporations and large

Companies. To solicit such business a manufacturer,

service provider or retailer may obtain voluntary

registration at the time of commencing the business

even if his turnover does not fall within the limits

prescribed for compulsory registration.

4.2.2 Custom Duty

The Customs Act, 1969 (the Act) was promulgated on

8th March 1969. The Act consolidated and amended

the laws relating to the levy and collection of customs

duties and other allied matters. The Act along with

Custom Rules, 2001 provides the legal framework for

customs duties which presently are levied on the

following goods:

Goods imported into Pakistan;

Goods exported from Pakistan;

Goods which are brought from any foreign

country and are transhipped or transported,

without payment of duties, from one custom

station to another; and

Goods brought in bond from one customs station

to another.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 51

The rates of duty vary from item to item and are

provided in section 18 of the Act. In view of the post

WTO scenario, the Government is revisiting its tax

policy and reduction and elimination of duty is

expected.

4.2.3 Excise Duty

The Federal Excise Act 2005 and Federal Excise

Rules, 2005 provide the legal framework to address

the issues related to Federal excise duty. The Federal

Excise Duty is a federal charge and it is levied and

collected on excisable goods and services of the

following categories:

1. Goods which are produced or manufactured in

Pakistan.

2. Goods which are imported into Pakistan.

3. Goods which are produced or manufactured in the

non-tariff areas and are brought to the tariff areas.

4. Excisable services provided or rendered in

Pakistan.

The rates and basis of levying the duty vary from item

to item and are provided in the first schedule of the

Act. However, the Government now intends to

gradually withdraw Federal excise duty from a

number of items and restricts it only to five or six

non-essential items.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 52

Source:

http://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=we

b&cd=2&cad=rja&ved=0CDcQFjAB&url=http%3A%2F%2Fw

ww.ijaztabussum.com%2FDOING%2520BUSINESS%2520IN%

2520PAKISTAN.doc&ei=hRW3UPXUFMXOrQf5rYGQBw&us

g=AFQjCNGbWBZJougFemlRoeWb8IrsxKr-

kg&sig2=MIzqP19i2YBIrwLqwkVcEg

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 53

FLOW DIAGRAM of How the Formation of any company

takes place in Pakistan?

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 54

PUBLICLY TRADED COMPANIES

This is a list of Public companies that are traded on Pakistani

stock exchanges.

Automobile assembler

Adam Motors - Defunctioned

Al-Ghazi Tractors

Atlas Honda

Dewan Farooque Motors (including BMW Pakistan)

Dongfeng Motor Corporation

Ghani Automobile Industries

Ghandhara Industries

Ghandhara Nissan

Hinopak Motors

Hyundai Motors

Indus Motors Company

Master Motors

Millat Tractors

Pak Suzuki

Shaukat Agriculture Industry

Sigma Motors

TCM Automobiles

BANKS

Allied Bank of Pakistan

Askari Commercial Bank

Atlas Bank

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 55

Bank Al-Falah

Bank AL-Habib

BankIslami Pakistan Limited

Bank of Credit and Commerce International (BCCI)

Bank of Khyber

Bank of Punjab

Barclays Bank

Burj Bank

Citigroup

Dubai Islamic Bank

First Women Bank

Habib Bank

Habib Metropolitan Bank

Jahangir Siddiqui Bank

Meezan Bank

MCB Bank

National Bank of Pakistan

NIB Bank

PICIC Commercial Bank/NIB Bank

Sindh Bank

Soneri Bank

Summit Bank

Standard & Chartered Bank

State Bank of Pakistan

United Bank Limited

CHEMICAL

Colgate-Palmolive Pakistan

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 56

ICI Pakistan

Ittehad Chemicals

ENGINEERING CONSULTANTS

List of Construction Companies of Pakistan

National Engineering Services Pakistan

Siemens Pakistan

Mindstorm Studios

Zishan Engineers

DESCON Engineering

Zishan Engineers

FASHION

ChenOne

Amir Adnan

Deepak Perwani

Kamiar Rokni

HSY

Junaid Jamshed

Crossroads

FERTILIZER

Engro Corporation

Fauji Fertilizer Company Limited

Fatima Fertilizer

Dawood Hercules

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 57

ICI Pakistan

FOOD AND PERSONAL CARE PRODUCTS

LU

Peek Freans

Procter & Gamble

Reckitt Benckiser Pakistan

Unilever Pakistan

Shezan International

Pepsi Co Pakistan

National Foods

HOTELS

Pearl-Continental Hotels & Resorts

Sheraton Hotels

Marriot Hotels

Avari Hotels

Ambassador Hotel

INSURANCE

MetLife ALICO

Beema-Pakistan Company

Century Insurance Company

State Life Insurance Corporation of Pakistan

EFU Life

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 58

Adamjee Insurance Co. Ltd

PICIC Insurance

Jubilee Insurance

INVESTMENT BANKS AND STOCKBROKERS

Dawood Capital Management

First Dawood Investment Bank

Jahangir Siddiqui & Company

Jahangir Siddiqui Capital Markets

Jahangir Siddiqui Investment Bank

NEWS AND MEDIA

Geo TV

Hum TV

SAMAA TV

AAJ TV

ARY Digital

Style 360

Dawn News

Express News

OIL AND GAS EXPLORATION

BHP Billiton

MOL

Oil and Gas Development Company

OMV

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 59

Pakistan Oilfields

Pakistan Petroleum

Petronas

Schlumberger

Weatherford

British Petroleum

OIL AND GAS MARKETING

Attock Petroleum

Pakistan State Oil

Shell Pakistan

Sui Southern Gas Company

Sui Northern Gas Pipelines

Total

OIL REFINERIES

Pakistan Refinery Limited

Pak-Arab Refinery

Attock Refinery

National Refinery

Indus Oil Refinery Ltd (not yet operational)

Khalifa Coastal Refinery (not yet operational)

Trans Asia Refinery (not yet operational)

PHARMACEUTICALS

Abbott Laboratories

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 60

Brookes

Ferozsons Laboratories

Getz Pharma

GlaxoSmithKline Pakistan

Pfizer

Sanofi Aventis

GENERATION AND POWER DISTRIBUTION

Faisalabad Electric Supply Company

Gujranwala Electric Power Company

Hub Power Company

Hyderabad Electric Supply Company

Islamabad Electric Supply Company

Karachi Electric Supply Corporation

Kot Addu Power Company

Lahore Electric Supply Company

Multan Electric Power Company

Peshawar Electric Power Company

Quetta Electric Supply Company

Tribal Electric Supply Company

Water and Power Development Authority

SUGAR AND ALLIED INDUSTRIES

Baba Farid Sugar Mills

Fecto Sugar Mills

Madina Sugar Mills

Ramzan Sugar Mills

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 61

TELECOMMUNICATION AND IT AND TECHNOLOGY

Techlogix (Not traded on Pakistani stock exchanges)

CyberNet

Mindstorm Studios

Mobilink (Not traded on Pakistani stock exchanges)

Netsol Technologies

Ovex Technologies

Pakistan Telecommunication Company

Palmchip Corporation

Southern Networks

Telenor Pakistan (Not traded on Pakistani stock exchanges)

Nextech (Not traded on Pakistani stock exchanges)

Transworld

Warid

Ufone

Zong

Wateen

Worldcall

Wi-Tribe

TEXTILE COMPOSITE

Ahmed Hassan

Gul Ahmed Textile Mills Limited

Hussain Industries

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 62

TEXTILE PROCESSING

Chenab Group

TEXTILE SPINNING

Nishat Textile Mills

JK Fibre Mills & Spinning Mills

TEXTILE WEAVING

Gul Ahmed

TOBACCO

Lakson Tobacco Company

Pakistan Tobacco Company

TRANSPORT

Aero Asia International

Airblue

Air Indus

Askari Aviation

Pakistan International Airlines

Pakistan National Shipping Corporation

Pearl Air

Shaheen Air International

Star Air Aviation

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 63

MAJOR PAKISTANI BUSINESS GROUPS AND ALLIANCES

Al-Karam Group of Companies

Atlas Group

Attock Group of Companies

Bahria Town

Cowasjee Group

Chenab Group

Dewan Mushtaq Group

Fecto Group of Industries

First Dawood Group

Gul Ahmed Group

Habib Group

Hashoo Group

Izhar Group

Jahangir Siddiqui Group

Lakson Group

Muller & Phipps Pakistan

Nagina Group

Nishat Group

Saigol Group

Sharif Group

Sources:-

http://en.wikipedia.org/wiki/List_of_companies_of_Pakistan

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 64

EXPORT OPPORTUNITIES

WHAT ARE THE MAIN EXPORT OPPORTUNITIES IN PAKISTAN?

Despite some negative perceptions among the international,

including European, public, Pakistan has shown remarkable

political and economic developments since the late 1990s when

the country was on the verge of bankruptcy. With a rapidly

growing population of about 150 million, Pakistan is a major

country, recognised by the international community, and is one of

the most important actors in the Islamic world.

Based on its geographical location Pakistan has close political

and economic relations with the Middle East, Central and South

Asia. It is the main gateway to Central Asia and supplier to the

Emirates. Economic integration with South Asia has been less

effective in the past due to the strained relations with India on the

Kashmir issue. However, recently notable steps have been taken

by the South Asian Association for Regional Co-operation

(SAARC), of which Pakistan is a member, to establish a South

Asian Free Trade Area (SAFTA), including India.

Politically, despite some reservations from the European Union

about the last presidential and legislative elections, Pakistan has

been moving towards democracy. Based on the experience of the

last thirty years, it is hoped that the present administration and its

successors will continue to pursue the sound economic reform

policies initiated by President Musharraf. By the end of 2003, an

agreement between President Musharraf and the main opposition

Islamic Parties helped to resolve a serious impediment to the

functioning of Parliament. It is hoped that soon the European

Union as well as the Commonwealth of Nations will recognize

Pakistan as a full-fledged democracy.

The main consequence of these macro economic successes has

been an increased liquidity in the country and the subsequent

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 65

lowering of interest rates to a single digit for prime borrowers,

from rates as high as 17% to 18% a few years ago. This has

enabled higher profits for most businesses, followed by an

exceptional boom on the stock market.

Also, banks have aggressively marketed consumer finance to the

emerging middle class, allowing for a consumption boom (more

than a 7-month waiting list for certain car models) as well as a

construction bonanza.

The Central bank has carefully managed the incoming "hot

money" so that inflation remains under control at less than 3%

per annum.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 66

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 67

OVERVIEW OF THE ECONOMY AND FOREIGN TRADE

Pakistan's economy is still very dependent on agriculture. The

sector contributes 25% to GNP but employs nearly 50% of the

labour force. Industry contributes approximately 18% to GNP

and services about 50%, of which wholesale and retail trade

account for 15%, and transport and communication for 10%. As a

result of the importance of the agricultural sector, climatic

conditions and water resources have a significant impact on the

yearly economic performance. Over the period 2000 to 2003,

GNP growth has increased from an average of 3% per annum to

nearly 5% in fiscal year 2003.

The industry is concentrated in the Karachi area, as well as in

Punjab, around Lahore, Sialkot and Faisalabad. Other cities such

as Quetta, Multan, Hyderabad or Peshawar also present some

industrial activity but cannot compete with the former as far as

the quality of the business environment is concerned

The size of the domestic market has been increasing at a high rate

based on a growing middle class, presently estimated at 7 million,

with a Purchasing Power Parity of USD 7000.

The volume of foreign trade has been increasing since 1999; in

2003, total import value was USD 12 billion, approximately 1

billion higher than total exports.

Imports are dominated by petroleum and derivatives as well as

machinery and equipment.

The largest export sector of Pakistan is the textile and apparel

sector with nearly 70% of the total exports, the balance is made

up of cereals (mainly rice), miscellaneous manufactured goods

(mainly toys and sports goods), chemicals, food and fish products

and scientific instruments.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 68

The European Union is the single largest trading partner of

Pakistan and during fiscal year 2003, the share of Pakistani

exports to the EU markets was in excess of 30% of Pakistan's

total exports. The exports to the EU market this year grew by

more than 22% over the previous year. Pakistan enjoys a

reasonable trade surplus with the EU. Growth in exports to the

EU was primarily due to the enhancement of 15% in the textile

quota and therefore, an increased market access for Pakistani

exports from January 2002.

Chances for a substantial growth of intra-regional trade are high.

In January 2004, the South Asia Free Trade Agreement has been

signed, with the Free Trade Area expected to become effective in

2006. In a similar vein, bilateral trade between Pakistan and India

is expected to gain momentum after tariff cuts were agreed on at

the end of 2003.

FOREIGN INVESTMENT IN PAKISTAN

A number of large international companies have been operating

successfully in the country for the last twenty years or more.

However, no significant new entrants have come recently. The

main multinationals in the country are in oil and gas exploration

and production, electrical engineering, and the pharmaceutical,

food, and chemical industries.

European and American companies have not shown much

interest in privatization to date. Most export credit agencies in

EU Member States (with the exception of Hermes in Germany)

do not cover Pakistan risk (October 2003), except on a case by

case basis.

Despite this, inward foreign direct investment (FDI) has

increased significantly in the fiscal year 2010 to USD $30.09

billion, a large part being linked to privatization. Major investors

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 69

in the country come from the UK, the Middle East and the US,

each contributing 25% of FDI. China has traditionally had a

strong presence in the country, mostly through infrastructure

development and supply of low cost goods and equipment. China

accepts differed payment risks through large suppliers' credit, up

to ten year duration. It is certainly a country which has a long

term strategy regarding its investments, and European Investors

may have to compete with Chinese investments in Pakistan.

The recent improvements in the economy and the business

environment have been recognized by international rating

agencies such as Moody's and Standard and Poor's (country risk

upgrade at the end of 2003). Provided the positive trend is

maintained, Pakistan presents numerous and significant

opportunities for investments aiming both at using Pakistan as an

export base and at tapping an emerging market with a rapidly

growing middle class.

RECOMMENDATIONS FOR POTENTIAL INVESTORS

To limit the risks inherent in all business activities, medium sized

investors from Europe are advised to:

select a reliable partner, with an obvious long term

interest in a partnership, to help understand the local

environment;

target a sector where Pakistan has a specific advantage,

and to plan for a long term investment;

bring into the project a distinct and permanent advantage,

such as a new technology, process, know how, brand,

design or marketing ability;

ascertain that at least 75% of the output is exported,

gaining therefore sufficient foreign currency income to

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 70

service the foreign investment, while the local market,

still small, shall only become significant over time.

It is worth noting that finance is not at present an area where

Pakistani businessmen are looking for help or support from

overseas partners. As discussed above, further to an improved

macro economic situation, the country is liquid and many

business groups are flushed with funds, eagerly looking for

business opportunities and know-how.

HIGH POTENTIAL SECTORS FOR FOREIGN DIRECT INVESTMENT

TEXTILES AND GARMENTS

In the textile and garment sector Pakistan has a definite

competitive advantage, further enhanced by the disappearance of

the Multi- Fiber Agreement by the end of 2004. Despite its

successes and its recent spate of investment in state of the art

machinery, the industry still needs know-how and processes to

improve the quality of its products, as well as design, fashion and

marketing development.

This sector has been divided into the different stages of

production, such as spinning, weaving, knitting and finishing,

dyeing, etc. while the major groups usually cover all stages of the

product cycle. Most products are cotton based with emphasis on

the first stages of production like yarn, cloth and fabrics. Only

recently has the country entered into the more added value

production of garments. The particular emphasis on bed linen and

towels is worth noting, given that it is the subject of an anti

dumping review by the European Union.

Based on the competitive advantages of this sector in Pakistan,

and the liberalizing of international trade after the end of the

Multi-Fibre Agreement by the end of 2004, there should be

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 71

opportunities for a mutually beneficial co-operation between

Pakistani business groups and European investors.

FOOD PROCESSING AND PACKAGING

Opportunities in the food processing and packaging industry

(especially dairy products, fruits and vegetables, fish and sea

food), based on a very large agricultural sector and a large and

expanding fishing fleet, are primarily related to upgrading of the

underdeveloped collecting, processing, packaging and

distribution system.

Obvious export markets are the Middle East, South and Central

Asia as well as Europe and the USA if the present phyto-sanitary

constraints can be resolved. The local emerging middle class

should also provide an outlet for well processed and packaged

food in the medium term. The impression from the authors is that

investment in this sector should definitely be long-term, in view

of the necessity to organise the supply chain as well as the

distribution network in a rather primitive environment, be it in

the fruit, vegetable, dairy or fishing sectors.

Also, a major part of the sector depends on the packaging

industry, including carton boxes, tin can, or freezing processes,

which are still underdeveloped.

LIGHT ENGINEERING AND AUTOMOTIVE PARTS

The light engineering and automotive parts industry should also

provide opportunities, as far as they are backed up by export

markets. Based on an infant automobile industry still protected by

high tariffs and dominated by Japanese assemblers, the existing

automotive supply industry is in dire need of technology

improvements. Similarly, there is a great demand for machinery

and equipment linked to the textile and garment sector, such as

industrial dryers, cooling fans, spinning needles, etc.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 72

Last but not least, the electrical and engineering sector linked to

power generation and transmission is expected to face a strong

and growing demand in coming years. However, this sector has

been targeted only as a third priority sector mostly based on the

competition which is already present from technology sourced

from other Asian countries, such as Japan, Korea, Taiwan and

more importantly China, which appears to be a main trading

partner for Pakistan as well as a potential investor in this sector.

OTHER SECTORS

Other sectors have been identified as worthy of consideration by

foreign investors, but are more limited in size. The following

niche sectors have been identified:

SURGICAL INSTRUMENTS

This sector exports 95% of its production, mostly to the USA and

the EU. It represents a turnover of about USD 150 million per

annum and consists mostly of metal instruments. This industry is

concentrated in Sialkot, north of Lahore, making it one of the

significant clusters for such production worldwide. The technique

is mostly based on forging and metal finishing for which

cooperation with European firm with the proper know how might

be required.

MARBLE PRODUCTION

Marble is used extensively by the domestic construction industry,

and part of the production is exported, mostly to the Middle East.

Mining and production sites are spread more or less over the

North and East of the country. The production represents about

USD 25 million per annum. The main drawback of this industry

is the absence of sophisticated techniques: mining through

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 73

explosives which do not allow the production of large slabs of

marble and implies important wastage.

The industry is definitely interested in acquiring know-how, as

well as the proper slicing equipment to improve the quality of its

products. The main drawback for a foreign investor would be to

find the right partner in an industry which is made up of a

number of small enterprises.

GEMS AND JEWELLERY

This sector, based on vast resources of rough semi precious

stones is still in the infant stages. The official export of rough

stones represents about USD 5 million per annum, while no

stones are cut locally yet. The government is trying to develop a

stone cutting industry and has created three training institutes.

IT (CALL CENTRES, SERVICE CENTRES, SOFTWARE DEVELOPMENT, ETC.)

It may be surprising that this sector has so far not been developed

in Pakistan, especially when compared to its large neighbour

India. At present there is no such industry in Pakistan, despite the

opening of a few call centres by financial institutions or some

overseas Pakistanis from the USA. Also, some incubators have

projects in the animated video games sector. However, the

government has recently launched initiatives to promote the

industry, through the development of IT education and training.

Source:

http://www.iptu.co.uk/content/pakistan_export_opps.asp#1

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 74

LIST OF TRADING PARTNERS OF PAKISTAN.

The following is a list of Pakistan's main trading partners as of 2010.

Sources:- http://en.wikipedia.org/wiki/Foreign_trade_of_Pakistan

Pakistan Trade flows

Pakistan‘s exports are highly concentrated: currently the majority

of exports originate in the textiles and apparels sectors. Early

evidence indicates that Pakistan has so far been able to expand

exports in the wake of the abolition of OECD countries‘ quotas

on textiles and apparel in 2005.

Imports are more dispersed, as is typical in most countries

although inputs for the textile and apparel sectors (machinery,

fibers, dyes and chemicals, etc.) and petroleum products make up

sizeable shares of total imports.

The bulk of Pakistan‘s trade is with countries outside of South

Asia. This reflects in part Pakistan‘s specialization in products

that are also exported by its neighbors. This low level of trade

also stems from a half-century of protectionist policies and

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 75

political-military tensions in the region. Recent analysis

commissioned by the World Bank indicates the potential for

greater trade with India, notably in light manufactured products

(e.g., bicycle components and fans).

Commodity Composition of Trade, 2004

Principal Export Products Principal Import Products

Textiles

(fabrics and

yarns) $6.5 billion

Petroleum

products $3.7 billion

Apparel and

clothing $3.0 billion

Industrial

machinery $1.3 billion

Rice $682 million

Organic

chemicals $1.2 billion

Sports goods $315 million

Cotton and

fibers $800 million

Total exports $13.4 billion Total Imports $17.9 billion

Source: UN Comtrade

Direction of Trade, 2004

Principal Export Markets Principal Suppliers of Imports

United States $3.1 billion Saudi Arabia $2.1 billion

United Arab

Emirates $1.1 billion

United Arab

Emirates $1.8 billion

United

Kingdom $969 million United States $1.7 billion

Germany $665 million China $1.5 billion

Total Exports $13.4 billion Total Imports $17.9 billion

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 76

Source: UN Comtrade

A recent field survey conducted by the Sustainable Development

Policy Institute estimated total informal trade between Pakistan

and India at around $500 million per year (primarily imports

from India via Dubai). Cloth, machinery (for textiles and

pharmaceuticals), cosmetics and jewelry, and tires made up most

of the goods imported.

Trade Strategy

Pakistan has made substantial progress over the past decade in

constructing a more open and transparent trade policy regime.

The government has reduced tariff rates across the board.

The simple average ad valorem tariff rate in the 2005/06

trade policy is just under 15 percent, compared to over 50

percent in 1995.

.

Quantitative restrictions, exchange controls, and other

direct state interventions into trade have been largely

eliminated; ordinary customs duties are now the primary

trade policy Instrument

.

Many special regulatory orders that provided

discretionary exemptions to firms or industries have been

eliminated, thus leveling the playing field and making the

trade regime less complex.

.

The complete tariff schedule and regulatory orders

affecting trade are easily accessible from government

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 77

websites (see http://www.cbr.gov.pk).

Pakistan has steadily extended the positive list which

restricts the types of goods that may be legally imported

from India. The list expanded from 40 items in 1983 to

687 items in 2004/5, and to 768 in 2006.

The signing of the South Asia Free Trade Agreement

(SAFTA) in January 2004 is an important step towards

higher intra-regional trade in South Asia. The first phase

of SAFTA tariff reductions is expected to come into

effect from July 2006.

Pakistan's peers around the world have reduced their trade

barriers to even lower levels, however, and more work remains to

be done to remove the bias against exports that is implicit in the

tariff structure.

While India granted Pakistan the Most Favored Nation status in

1995/96, Pakistan has not yet reciprocated this move.

Perhaps more importantly, Pakistan faces the challenge of

increasing the productivity—and thereby the export

competitiveness—of its firms and producers. Value chain

analyses conducted by the World Bank identify a number of

"behind the border" constraints to trade, including problems trade

logistics, availability and cost of electricity, labor market

rigidities, the food safety standards regime, and slow duty-

drawback payments. To ensure that trade can contribute to

Pakistan‘s economic growth and poverty reduction, a concerted

effort must be made to address these impediments to

competitiveness.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 78

World Bank Operations on International Trade

In recent years the World Bank has supported the Ministry of

Commerce and other agencies in the Government of Pakistan

with analysis on trade issues, including most recently the

Pakistan Growth and Export Competitiveness Report, as well as

studies on agricultural trade, a series of studies on Pakistan-India

trade, plus policy notes on SAFTA, textile quotas, and tariff

rationalization.

The Pakistan Tax Administration Reform Project supports

improvements in customs administration.

Sources:-http://go.worldbank.org/E4GRINENAO

Pakistan Economic Development

In last few years there has been a steady rate of Pakistan

economic development that has manifested itself in its impressive

gross domestic product statistics. In financial year 2007 there was

a real increase of 52 percent in amount allotted in Pakistani

budget for development of national economy.

This has been an important step as far as development of Pakistan

economy is concerned as this move has sought to address

underdevelopment of national economy that has spread at all

levels especially in social sector.

Economic development of Pakistan has always been among its

major assets as far as garnering recognition from global financial

circles is concerned. In decade of 60s Pakistan‘s economy had

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 79

progressed at a decent rate and it was regarded as being

exemplary.

Economic policies adopted by national government have helped

economic development in Pakistan to a significant extent. In

1990s 2 percent of gross domestic product of Pakistan had been

earmarked for economic progress. This had been doubled to 4

percent of Pakistan‘s gross domestic product by 2003.

In 1999 PKR 80 billion had been set aside for economic

development of Pakistan and by 2007 this amount had gone up to

PKR 520 billion. In fiscal 2008 this amount was PKR 549.7

billion. Poverty in rural areas has been an important area of

Pakistani economics. From 2005 to 2008 $16.7 trillion has been

spent in order to address various issues related to poverty.

This money has played a vital role in overall economic

development at Pakistan. Poverty has been reduced to 24 percent

by 2006 from 35 percent at 2000-01. As per Human

Development Index of 2007 Pakistan has been accorded status of

a ―Medium Development Country‖.

Infrastructural upgradation is an important area of Pakistan

economic development. However, it has not been paid much

attention by Pakistan national government. Over years a number

of international financial organizations have played a major part

in development of Pakistan‘s economy such as International

Monetary Fund, Asian Development Bank and World Bank.

From 2006 to 2009 Asian Development Bank would be providing

almost $6 billion for Pakistan economic development. World

Bank is supposed to provide a loan for infrastructural

development worth $6.5 billion in same period. Pakistan would

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 80

also receive a yearly financial help from Japan worth $500

million.

Pakistan's failure to explore and exploit its own oil and gas

resources to its full capacity has led to them relying on imports to

meet the growing energy demands in the country. By 2011,

experts forecasts that Pakistan's oil imports will rise to

US$13.221 billion from the US$10.089 billion in 2010.

List of Pakistan's FTAs

Pak-Afghanistan Trade Agreement

Agreement on South Asian Free Trade Area

Pak-Malaysia Trade Agreements

Pak-China Trade Agreements

Pak-Sri Lanka Free Trade Agreement

Pak-Iran Preferential Trade Agreement

Pak-Mauritius Preferential Trade Agreement

Pakistan's Import and Export Indicators and Statistics at a

Glance (2010)

Total value of exports: US$20.29 billion

Primary exports - commodities: textiles (garments, bed

linen, cotton cloth, yarn), circe, leather goods, sports

goods, chemicals, manufactures, carpets and rugs

Primary export partners: US (15.87 percent of total

valor of exports), UAE (12.35 percent), Afghanistan (8.48

percent), UK (4.7 percent), China (4.44 percent).

Total value of imports: US$32.71 billion

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 81

Primary imports - commodities: petroleum, petroleum

products, machinery, plastics, transportation equipment,

edible oils, paper and paperboard, iron and steel, tea

Primary import partners: China (15.35 percent of total

imports), Saudi Arabia (10.54 percent), UAE (9.8

percent), US (4.81 percent), Kuwait (4.73 percent),

Malaysia (4.43 percent), India (4.02 percent).

Sourcres:-(http://www.economywatch.com/economic-

development/pakistan.html)

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 82

Challenge to Pakistan’s economic stability has been

overcome: ADB

ISLAMABAD: The immediate challenge to Pakistan‘s economic

stability has been overcome with the help of an International

Monetary Fund (IMF) - backed stabilization programme, said a

Fact Sheet of Asian Development Bank (ADB) issued here on

Thursday.

―Stabilizing macroeconomic fundamentals in view of the recent

weakening of some indicators, implementing a second generation

of reforms, addressing the infrastructure deficit, and improving

implementation of development projects are the key challenges to

the Government going forward‖, the ADB added.

It said that Pakistan is an important partner of the Asian

Development Bank (ADB) in its pursuit of fighting poverty in

Asia.

The ADB Facts sheet said that over the years, Pakistan has

undertaken important economic and governance reforms that

resulted in steady economic growth, allowing it to boost spending

on poverty reduction programs.

Recently, however, it said that the global economic recession that

followed a rapid increase in prices of food and other commodities

worldwide, coupled with an array of domestic challenges, have

impacted Pakistan‘s economic outlook negatively.

―The immediate challenge to Pakistan‘s economic stability has

been overcome with the help of an International Monetary Fund

(IMF)-backed stabilization programme‖, the ADB added.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 83

It added that Pakistan‘s poverty reduction strategy is

encompassed in the Poverty Reduction Strategy Paper (PRSP)

and the Medium-Term Development Framework for 2005-2010.

Highlighting the relationship with ADB, the Bank said that

Pakistan has received about $ 19.8 billion in loans since joining

ADB in 1966, with about $14 billion disbursed as of the end of

2008.

A total of 284 loans were provided through the highly

concessional Asian Development Fund window and the Ordinary

Capital Resources window with $ 188 million provided in grants

for 325 technical assistance (TA) projects, the Bank Facts sheet

said.

It said that a record lending programme in 2008 included a $1.87

billion disbursement and $1.2 billion in newly approved

assistance.

As of December 2008, there were 62 ongoing sovereign loans

amounting to $5.08 billion in net loan amount for infrastructure,

social sectors, governance, and earthquake rehabilitation in the

four provinces and at the national level. Under implementation

were 31 ongoing TA projects worth $61.93 million, the Bank

said.

The ADB is working with the Government and the private sector

to improve the country‘s infrastructure, energy security, and basic

public services.

Aligned with national development objectives, ADB‘s

partnership priorities aim to attract investment, create industries

and jobs, and improve the quality of life of citizens.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 84

A new Country Partnership Strategy (CPS) for Pakistan,

approved by ADB‘s Board of Directors in March 2009, aims to

support Pakistan‘s strategic objectives of prosperity and poverty

reduction, it added.

About Portfolio Performance, it said that in 2008, ADB‘s

operations in Pakistan remained robust with record disbursements

of $1.87 billion, and a majority of currently active loans are

expected to meet their respective development objectives.

Regarding the Impact of Assistance, it said that the ADB‘s

support to Pakistan in recent years has helped the Government

implement its reform agenda, while contributing to

macroeconomic stability and revived economic growth, as well

as reduced poverty levels.

This support, it said was premised on the three cornerstones of

ADB‘s strategy: sustainable economic growth, inclusive social

delivery, and pro-poor governance policies.

The Bank‘s Fact Sheet said that to support sustainable growth,

ADB is providing substantial levels of assistance to bridge the

infrastructure gap in the country, particularly in the areas of

transport and energy.

In this regard, it added that a multitranche financing facility

(MFF) to support the Government‘s flagship National Trade

Corridor Highway Investment Programme is helping Pakistan

improve key sections of the motorway and expressway and cope

with the infrastructure deficit in this vital sector.

Likewise, a facility to strengthen the power transmission network

is helping to improve the efficiency of the system and will lead to

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 85

reduced lines losses and improve availability of electricity, it

added.

To help support social development, ADB provided assistance to

improve delivery of social services at the local government levels

through a series of devolved social service programs.

Support for governance reforms was centred at the provincial

levels of government to improve fiscal and financial management

and was instrumentalized through resource management

programs.

To help bring justice to the poor, the Access to Justice Program,

closed in 2008 was designed to achieve greater civil society

engagement for improved justice delivery, strengthened public

oversight of the police, and the establishment of specialized and

independent prosecution services.

Responding to the earthquake of October,8 2005, ADB is

implementing the Earthquake Emergency Assistance Project

(EEAP). The project supports Government‘s efforts to

rehabilitate earthquake-hit areas.

The ADB has committed about $870 million in the form of loans

and grants and arranged another $97 million in bilateral grant

cofinancing for the ADB-funded Pakistan Earthquake Fund.

Under EEAP, 71 % of the targeted destroyed houses have been

reconstructed, ensuring peoples‘ access to shelters. In addition,

uninterrupted power supply stand to be restored in affected areas

through rehabilitation of 9 hydropower stations and 10 grid

stations.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 86

In addition, ADB placed strong emphasis on strengthening social

‗safeguards in Pakistan by providing technical guidance and

improved monitoring and resettlement actions, which together

significantly improved safeguard compliance and accelerated

physical progress of ADB-assisted projects in the country.

Other major projects/programs approved in 2008, it said were

included: Accelerating Economic Transformation Programme

$500 million), Sindh Rural Growth and Revitalization Program

($100 million),Sindh Cities Improvement Program ($38 million;

MFF: $300 million),Second ssBaiochistan Resource Management

Program ($100 million), Punjab Millennium Development Goals

Program ($100 million), Power Distribution Facility ($252

million; MFF: $810 million), Barani Integrated Water Resource

Project ($75 million) and Technical assistance loan for the

Lahore Rapid Mass Transit System ($6 million).

About Future Directions, it said that ADB‘s CPS projects have

planned assistance of $4.4 billion during 2009-2011 and an

annual average lending of almost $1.5 billion.

The focal areas delineated in the CPS 2009-2013 focuses on

reforms and investment in energy and infrastructure. The CPS

provides the framework for ADB‘s partnership priorities and the

future direction of its assistance strategy in Pakistan, it added.

Sources:- http://archives.dawn.com/archives/17094

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 87

REVIEW ON PAKISTAN EXPORTS

JULY-JUNE ( 2008-09 )

Pakistan‘s exports during July-June 2008-09 were US$ 17.688

billion as compared to US$ 19.052 billion in 2007-08 and US$

16.976 billion in 2006-07 reflecting a decrease of (7.16%),

(12.2%) and (3.19%) respectively.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 88

SECTOR WISE EXPORTS ARE AS FOLLOWS:

A) TEXTILE & GARMENTS CATEGORIES:

Textile & Garments Sector contributed 54.16% in Pak-exports

and declined at US$ 9.579 billion in 2008-09 from US$10.670

billion worth exports in 2007-08 registering a decrease of (-

10.22%).

Major categories that increased over the previous year were

Towels, Knitwear (Hosiery) and other Textile Material etc.

A decrease was witnessed in Textile items such as Cotton fabrics,

Textile made-ups, Cotton yarn, Garments, Ready made garments

and Synthetic textile.

PRODUCT WISE ANALYSIS:

I – Cotton Fabrics.

Export of Cotton Fabrics declined at US$ 1.955 Billion from US$

2.011 billion in the year 2008-09 as compared with 2007-08

showing a decrease of ( -2.75% ) and quantity showed also

decrease to 1882 million SQM from 2035 million SQM.

Major buyers of the product were Bangladesh, China, UAE,

Russian federation, Egypt and Mexico.

II – Textile Made-ups including Towels.

a) Bedware fetched US$ 480.138 million in 2008-09

as against exports of US$ 537.868 million in 2007-08,

showing a decrease of ( -10.60% ). Major buyers of the

product were UAE, Canada, Saudi Arabia, Chile,

Malaysia and Sri Lanka.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 89

b) Towels exports increased at US$ 643 million in

the year 2008-09 as compared with 2007-08 exports of

US$ 613 million which recorded an increase by (4.86%).

The quantity of the product increased to 165.638 million

kg from 152.323 million kg. Major buyers of the product

were USA, UAE, Saudi Arabia, South Africa,

Netherlands and Belgium.

III – Cotton Yarn.

During 2008-09 exports decreased by (-14.31%) of US$ 112

million as against exports of US$ 131 million in 2007-08.

Quantity decreased by (-5.59%) from 554.817 million kg to

523.790 million kg, however AUP came down (-9.96%).

China remained number one among the major buyers of the

product, while Bangladesh obtained number two position

followed by Egypt, Philippines and Australia respectively.

IV – Garments.

Export of garments decreased by (-23.26%) during the year

2008-09 and detail analysis of Knitwear and Readymade

garments is given as follows:-

a) Knitwear ( Hosiery ) witnessed increasing trend

touching US$ 1741 million in the review period 2008-09

as compared to US$ 1732 million last year. Upward trend

was also seen in exports to United Kingdom, Belgium,

UAE, Saudi Arabia and Sweden, while decreasing trend

was seen in the market of USA, Germany, Netherlands,

Spain and Canada.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 90

b) Ready made garments there was a decrease of

US$ 362 million (-22.76%) over the previous year.

During the period under review exports came down to

US$ 408 million from US$ 1442 million. However, it

showed increased trend in the exports to Belgium,

Turkey, Saudi Arabia, Sweden and Denmark. Major

decreases were witnessed in the markets of USA,

Germany, UK, Spain and France.

V – Synthetic textiles.

There was a decrease of US$ 139 million i.e. (-32.23%) over the

previous year. During the period under review exports came

down to US$ 278 million from US$ 410 million. Quantity is also

decreased by (-18.77%) from 442.5 million SQM of the previous

year to 359.4 million SQM. AUP was US$ 0.89 per SQM while it

was US$ 0.93 per SQM in 2007-08, thus showed a decrease (-

4.14%). Moreover, Mexico, Malaysia, Indonesia, Srilanka and

Kuwait were higher export markets. On the contrary, minor

decline in UAE, USA, South Africa, Saudi Arabia and UK were

observed.

B) OTHER CORE CATEGORIES.

This head Contributed (25.60%) in Pak-Exports and came down

to US$ 4.528 billion from US$ 5.177 billion showing a decrease

of (-12.20%) over the last year.

The items witnessed increased trend in Rice, Leather & leather

products, leather manufactures and leather footwear. However,

decreased trend appeared in the products of Leather garments

(excluding gloves), Leather gloves and Surgical Instruments and

Sport goods. Therefore, it further shown high trend in the

Molasses item.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 91

I – Rice.

This Commodity witnessed an increasing trend by US$ 1983

million from US$ 1836 million showing an increase of 8.02%.

Quantity felt down by (-8.87%). In terms of Quantity total export

of Rice which was 2809 thousand/MT in 2007-08 and in 2008-09

came down to 2560 thousand MT. However, AUP, which was

US$ 653.60/MT in 2007-08, went up to US$ 776.06/MT in 2008-

09.

a) Rice Basmati Contributed US$ 1070 .338 million

in total export of Rice, export of basmati was US$

1068.86 million in 2007-08. Quantity exported

868577 MT in 2008-09 as against 1138093 MT in

2007-08. AUP sowed increase by 26.86% per MT

from US$ 939.17 per MT to US$ 1191.41 per MT.

b) Rice Non-Basmati’s share is US$ 912.89 million

in 2008-09 from US$ 767.200 million of 2007-08.

AUP increased by 22.58% and quantity went up to

169.535 MT from 167.055 MT showing an increase of

1.23%.

The buyer of the Rice and Rice others was Iran

obtained number one followed by Afghanistan,

Saudi Arabia, Qatar, Kenya and Mozambique.

II – Leather and leather products.

Showed decrease of (-22.65%) exports of leather and leather

products which came down to US$ 943.788 million from US$

1220.119 million. Leather tanned contributed 2.18%, Leather

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 92

garments/manufactured 2.77% and leather footwear 0.65% in the

group of leather & leather products.

a) Leather showed a decrease of (-27.88%). The

export of

Leather fetched US$ 299 million as against US$ 415 million in

previous year. Quantity also decreased by (-21.57%) from 24,258

thousand SQM to 19, 026 thousand SQM.

Major buyers of the product were Bangladesh, Indonesia, Sri

Lanka, Thailand and UAE.

b) Leather garments ( Excluding gloves ) registered decrease

of (-25.68%) to US$ 392.537 million from US$ 528.154 million.

The major buyers of this product were Germany, USA, Spain,

France, Turkey and Brazil.

a. Leather gloves a downward trend of (-5.53%)

from US$161.168 million to US$ 152.258

million. The major buyers of the product were

Belgium, Saudi Arabia, UAE, Norway and

Poland.The product market of USA, Germany

and Sweden and France registered decrease

during 2008-09.

c) Leather Manufacture registered increase of

17.66% fromUS$ 10.177 million 2007-08 to US$

11.974 million 2008-09. The major buyers of the

product were USA, Germany, UK, Netherlands,

France and South Africa.

d) Leather footwear, obtained increase by 3.54%

from US$ 124.135 million of the previous year to US$

128.531 million.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 93

The major markets of the product were UAE,

Germany, Italy, Afghanistan, Oman and South Africa.

III – Carpet.

Exports during 2008-09 were US$ 145.77 million as

Compared to US$ 216.620 million of the previous year,

showing a decrease of (-32.71%).

Major Buyers of the product were Afghanistan, Thailand,

Mexico and China while USA, Germany, Italy, Turkey,

France & UK remained on decreasing side during 2008-

09. Pertinently, only ten Countries were buyers in the

export arena of Carpet from Pakistan in the year 2008-09.

IV – Petroleum & its Products.

Decreased (35.41%) in value and (4.57%) in term of AUP. Value

from US$ 1259.33 million to US$ 813.458 million and AUP

from US$ 804.85 MT to 768.05 MT. However, Quantity wise is

also decrease from 592,758 MT to 583,827 MT.

The major buyers of the products were also six Countries i.e.

India, Korea, Netherlands, Singapore, Kenya and South Africa.

V – Surgical Instruments.

The exports which were US$ 261.072 million in 2007-08 came

down to US$ 253.554 million in 2008-09 showed a decrease of

(-2.88%). Although exports to USA, Australia, India, Korea,

China & Turkey increased. The top buyer of this product was

USA.

VI – Sport Goods.

Exports from US$ 302.723 million in 2007-08 declined to US$

273.318 million in 2008-09, showed a decrease of (-9.71%) while

export increase took place in USA, Belgium, Italy, UAE and

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 94

Turkey. Offset by markets of Germany, UK, Spain, Netherlands

and Denmark, where declining trend is appeared.

C) DEVELOPMENTAL AND OTHER CATEGORIES.

This head Contributed 15.51%) in Pak-Exports and went-up to

US$ 2.743 billion in 2008-09 from US$ 2.365 billion showing an

increase of (16.01%) over the last year 2007-08.

Major categories that increased over the previous year were fish

& fish preparations, fruits & vegetables, engineering goods,

jewellery, marble stones and onyx manufactures, cement and oil

seeds. A decrease was witnessed in same developmental

categories such as chemical and its products, cutlery, gems

(Precious Stones) and furniture.

I – Fish & Fish Preparation.

In terms of Quantity and value exports increased by

(1.58%) and (10.41%) respectively and AUP is also increased

from US$ 1.60/Kg to US$ 1.76/Kg. Exports of fish and fish

preparation came-up to US$ 234 million 2008-09 from US$ 213

million 2007-08.

Major buyers were Thailand, China, Malaysia, Saudi Arabia,

Korea and Egypt. Decline was noticed in buyer Countries i.e.

UAE, Kuwait, Japan, Sri Lanka and Hong Kong.

II – Fruits.

Exports were US$ 157 million during the period under

review, compared to US$ 146 million in the previous

Corresponding period showing an increase of 7.84%. The major

buyers of the fruits were India, Afghanistan, Russia, Germany

and USA.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 95

III – Vegetables ( Excl: Leguminous ).

Exports were US$ 72.92 million during 2008-09 as

against US$ 56.39 million of the year 2007-08 showed an

increase by 29.31%.

The major buyers of the Vegetables were Afghanistan, Malaysia,

Saudi Arabia, Qatar and Canada.

IV – Chemical and its Products.

The exports which were US$ 619 million in 2007-08 and

decreased to US$ 604 million in 2008-09 showing a decrease of

(2.40%). However, exports of Pharmaceutical Products rose to

US$ 116.286 million from US$ 110.531 million. Italy,

Afghanistan, Philippines, China, USA and Sri Lanka are the

major buyers of the Product and among these major buyers

decreases are recorded in the markets of Netherlands, UAE,

Turkey, Korea and France.

V – Engineering goods (Machinery & Transport

equipment ).

There was an increase of (25.35%) and exports came-up

to US$ 264.898 million from US$ 211.329 million. Imports in

the markets like Afghanistan, Djibouti, Bangladesh, Sudan and

Iran were higher over last year. However there was a major

decline in UAE, Saudi Arabia, USA and UK.

VI – Cutlery.

Export of this item is US$ 48.681 million during 2008-09

compared to the US$ 54.856 million in the previous year

showing a decrease of (11.26%).

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 96

The major buyers of cutlery were France, Italy, Saudi

Arabia, China and Netherlands.

VII – Gems & Jewellery.

a) Precious & Semi Precious Stones (Gems )

decreased by (-54.84%) during 2008-09 and export

was US$ 3.386 million from US$ 7.497 million

(2007-08). The major markets of Gems were Canada,

Japan, Russian federation, Belgium and Iran while

declined trend was witnessed in USA, Hong Kong,

Germany, UAE and Thailand.

b) Jewellery, increased by 33.90%. Export came up

to US$ 285.684 million in 2008-09 from US$ 213.364

million 2007-08.

The exports of jewellery major buyers were UAE,

UK, Afghanistan, Turkey France, Netherlands and

India.

VIII – Marble & Stones / Onyx Manufactures.

Exports increased by 46.35% from US$ 22.119 million 2007-08

to US$ 32.371 million (2008-09). However the major buyers of

the products were China, Russian federation, Ukraine, UAE,

Saudi Arabia, Malaysia and Germany.

IX – Cement.

There was an increase of 39.21%. Export grew up from US$

416.977 million during 2007-08 to US$ 580.479 million in 2008-

09.

Major buyers of the product were Afghanistan, Qatar, Oman,

Iraq, Djibouti and Sri Lanka.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 97

X – Oil Seeds.

The Exports were US$ 39.379 million in 2007-08, came up to

US$ 41.746 million in 2008-09, showing an increase of 6.01%.

Increase took place in exports to Korea, Turkey, Iran, China,

India, UAE, Singapore, Netherlands and Saudi Arabia.

XI – Furniture.

The Exports were US$ 11.035 million in 2007-08 came down to

US$ 8.455 million in 2008-09, showing a decrease of (-23.38%).

The main buyers of the product were Afghanistan, Italy,

Germany, Netherlands, Poland, Australia and Denmark.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 98

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 99

Geographical Analysis JULY-JUNE ( 2008-09 )

Pakistan‘s exports during July-June 2008-09 as compared to the

corresponding period of the last year decreased by (-7.16 %) to

Middle East Region, (-9.60%), to Eastern European Region (-

14.78 %), to African Region, grew by (+5.55%), Asian Region,

increased by 5.28% Oceania region and Western European

Region decreased by (-9.47%) and (-14.49%) respectively.

Decrease is recorded in exports to American region by (-

10.63%).

1) American Region.

This region accounted for US$ 3,941.128 million showing a

decrease of (-10.63%) over the last year‘s exports.

North America: Accounted for US$ 3,587.674 million, which is

less by (-10.07 %) over last year. Decrease in exports took place

in the countries of North America (-10.07%). Exports to Central

America decreased by (-15.49%) US$ 109.160 million in 2008-

09.

South America: Shown decrease in exports by (-16.18 %) in

this region over the previous year, the value, which was US$

244.294 million during 2008-09 whereas the exports in 2007-08

were US$ 291.464 million.

2) Western Europe.

The exports to this region were US$ 4299.722 million. 16 EU

Countries accounted for (-14.53 %) at US$ 4234.844 million and

showed a decrease of (-14-.49%) as well over previous year‘s

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 100

exports. In terms of value exports decreased to US$ 4234.844

million from US$ 4954.684 million.

Major contributing countries are UK US$ 874 million,

Germany US$ 738 million, Italy US$ 580 million, Netherlands

US$ 465 million, Spain US$ 404 million, Belgium US$ 393

million and France US$ 313 million. EFTA decreased to US$ 63

million from US$ 72 million, showed a decrease of (-12.50%),

whereas Norway and Switzerland were remained major buyers

among the EFTA Countries.

3 ) Eastern Europe.

Export in this region accounted for US$ 324.401 million

which declined at (-14.78%) over the corresponding period of last

year. Russian federation, Poland, Ukraine, Lithuania, Estonia,

Hungary and CZECH Republic were major contributing markets

to US$ 105.5 million, US$ 45.09 million, US$ 32.43 million,

US$ 23.89 million, US$ 19.80 million, US$ 15.48 million and

US$ 16.19 million respectively.

4 ) Middle East Region.

In this region Exports accounted for US$ 3491.468

million. UAE exports was US$ 1469.990 million in 2008-09 and

US$ 2070.953 million was in 2007-08 which decreased at (-

29.02%). Exports to Iraq came up to US$ 71.75 million from

US$ 23.95 million which recorded increase up to 199.59% in

2008-09. Saudi Arabia, Turkey, Iran, Oman, Qatar and Kuwait

were the major markets contributed US$ 455.634 million, US$

403.198 million, US$ 399.619 million, US$ 187.545 million,

US$ 172.112 million and US$ 104.220 million respectively.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 101

5 ) African Region.

Exports in this region were US$ 1197.247 million in

2008-09 and gained 5.55% over the corresponding period of last

year. In the African Region, South Africa contributed US$

193.742 million from US$ 318.461 showing decrease of (-

39.16%) followed by Kenya US$ 119.939 million, Egypt US$

101.685 million, Sudan US$ 60.596 million, Mozambique US$

60.104 million, Benin US$ 58.328 million, Co, TE D‘Ivoire US$

55.837 and Somalia US$ 50.737 million respectively.

6 ) Asian Region.

Exports in this region accounted for US$ 4272.615

million in 2008-09 which showed increase of 5.28% over the last

year. Afghanistan contributed US$ 1397.518 million, China US$

701.043 million, Bangladesh US$ 383.373 million, Hong Kong

US$ 378.658 million, India US$ 319.619 million and Malaysia

US$ 124.378 million respectively.

7 ) Oceania Region.

In this region the exports were US$ 161.426 million in

2008-09 and shown decrease of (-9.47%) over the previous year.

Austria and New Zealand are major buyers of the region which

contributed US$ 128.926 million and US$ 29.640 million during

2008-09 respectively.

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 102

Top 20 Countries who exports and their figures.

The top 20 countries / major buyers export accounted for US$

13,645 million and grew by +8.44%.

Exports to 6 of these countries increased in Afghanistan

(+22.20%), China (+2.37%), Saudi Arabia (+19.88%), Iran

(+86.91%), Bangladesh (+12.11%), India (+25.41%) and Korea

Republic of (+22.77%) whereas decline trend was noticed in

USA (-10.21%), UK (-15.09%) and UAE (-29.02%) respectively.

Top 5 Countries Analysis.

1 – U.S. America.

Exports have decreased by US$ (-379.907 million) or (-

10.21%) in the year 2008-09. However, USA, contributed US$

3339.453 million during 2008-09, whereas it was increased by

+19.52% in 2007-08. Decline was recorded in Knitwear (US$

1069 million), Bed ware (US$ 625 million), Readymade

garments (US$ 404 million), Textile made up (US$ 302 million),

Cotton cloth (US$ 97 million), Wool Carpet & Rugs (US$ 51

million ), Leather gloves (US$ 32 million), Cotton

yarn (US$ 28 million), Rice Basmati (US$ 19 million), Art Silk

& Synthetic textile (US$ 17 million), Foot balls complete (US$

14 million), Cutlery (US$ 12 million), Guar and Guar products

(US$ 7 million) and Jewellery (US$ 7 million).

2 -- United Arab Emirates.

Exports have decreased by US$ 600.963 million or

-29.02% in 2008-09 and fetched total exports US$ 1469.990

million compared US$ 2070.953 million of 2007-08. Main

decline was recorded in Petroleum Products (US$ 234.488

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 103

million), Rice Basmati (US$ 215.408 million), Ready made

garments (US$ 39 million), Art Silk & Synthetic Textile (US$

32 million), Fruits (US$ 16 million), Plastic material (US$ 9

million) and Vegetables (US$ 6 million).

4 – Afghanistan.

During 2008-09, the total exports to Afghanistan were

US$ 1397.518 million showed an increase by 22.20%. Exports

increased in the items like Rice other varieties (US$ 142.686

million), Rice Basmati (US$ 82.25 million), Article of Plastic

(US$ 46.78 million), Vegetables (US$39.76), Wheat (US$

39.41 million), Fruits (US$ 27.64 million), other Chemicals (US$

25.12 million), Pharmaceutical Products (US$ 18.44 million).

However, significant decreases appeared in exports of Petroleum

Products (US$ 363.7 million), Household equipments (US$ 8.43

million), Fruits & Vegetables (US$ 8.32 million), Electric fans

(US$ 2.640 million) and Paper & Products (US$ 1.01 million).

5 – United Kingdom.

During the year 2008-09 the exports to UK came down by

(-15.09%) worth US$ 874.588 million compared to US$

1030.028 million (+5.41%) over the previous year. Exports

decreased in the items like Bedware (US$ 185.502 million),

Ready made garments (US$ 136.027 million), Textile made ups

(US$ 53.01 million), Cotton Cloth (US$ 46.064 million), Rice

Basmati (US$ 35.868 million), Towels (US$ 32.88 million),

Apparel and Clothing (US$ 32.73 million), Surgical goods (US$

27.07 million), Art Silk & Synthetic Textile (US$ 12.088 million)

and fruits (US$ 10.76 million).

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 104

6 – Germany.

Germany contributed US$ 737.988 million exports with

decrease of (-9.63%) during 2008-09 compared with last year

US$ 816.615 million (+4.29%). Declining trend in exports was

recorded in Ready made garments (US$ 174.50 million),

Bedware (US$ 114.103 million), Cotton Cloth (US$ 72.96

million), Knitwear (US$ 72.22 million), Surgical goods (US$

36.60 million), Towels (US$ 23.74 million), Foot balls complete

(US$ 18.21 million), Leather gloves (US$ 16.23 million), Textile

made ups (US$ 15.60 million), Wool Carpets & Rugs (US$

15.135 million), Leather (US$ 12.79 million) Leather footwear

(US$ 11.05 million) and Rice Basmati (US$ 9.39 million).

However, increase was seen in Apparel and Clothing (US$

59.883 million), Gloves Sports (US$ 9.03 million), Fruits (US$

7.56 million), Crude animal material (US$ 6.55 million), Other

leather manufacture (US$ 2.535 million) and other machinery

(US$ 2.015 million).

Sources:- http://www.tdap.gov.pk/tdap-statistics.php

OVERVIEW OF BUSINESS& TRADE IN PAKISTAN 105

GRAPHS AN`D CHARTS

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REFRENCES

Websites.

http://www.tdap.gov.pk/tdap-statistics.php

http://www.economywatch.com/economic-

development/pakistan.html

http://www.cbr.gov.pk

http://go.worldbank.org/E4GRINENAO

www.wikipedia.org

Magazine:-

Business World.