Pakistan National Business Agenda

EU Market Access & Regional Peace

May 10, 2012Pakistan Business Council: Who we are?PBC is a non-political, private sector funded not-for-profit business policy advocacy platform. Established in 2005, as a Section 42 CompanyObjectives are to: Improve the general business climate, with pragmatic implementation of international/regional best practicesImprove the competitiveness of Pakistani industry.Help Pakistani companies integrate in regional and international marketsFurther the economic, social and human resource development of PakistanAt PBC, we view Government as a partner2

PBC Members - Pakistans Marquee Brands

3PBC Composition by Sectors of theEconomySectorCompaniesLarge Scale Manufacturing 31Services Including Financial Services07Total Members of Pakistan Business Council384PBC Members Contribution to the Economy5Why are we here today?We are here to seek the Trade Counselors' & the Commission's support for greater and a more secure long term access for Pakistani goods and services to the EU markets.We appreciate that at the moment the EU may not be in a position to give Pakistan specific concessionsPBC however firmly believes country specific concessions only hamper competitiveness of partner countrys industry in the long run.PBC WOULD LIKE YOUR SUPPORT FOR ENSURING A LEVEL PLAYING FIELD FOR PAKISTANI INDUSTRY. NOTHING EXTRA SIMPLY THE SAME TERMS OFFERED TO THE EUS OTHER TRADING PARTNERS.6First the hard numbersPakistans GDP Growth Rate is lower than that required to create employment opportunities for an increasing youth population Source: International Monetary Fund (www.imf.org/external/data) and calculations8The War on Terror has affected Foreign Direct InvestmentSource: World Bank Development Indicators (data.worldbank.org)9FDI net inflows: New investment inflows less disinvestment. Data are in current U.S. dollars.9With stagnating growth rates and lack of investment, a current account balance crisis threatensSource: International Monetary Fund (www.imf.org/external/data)10Current account balance: Sum of net exports of goods, services, net income, and net current transfers. Data are in current U.S. dollars10Pakistan has been unable to export itself out of poverty!Major trading partners EU & USA have mostly restricted market access for Pakistani exports.Diversifying export products & markets not possible in near to medium-term. Majority of the population has low education & skill levels ideal for textiles and agro products. Textiles will continue to be the major export item for Pakistan.EU measures in the past were mostly short term and do not allow companies to fully exploit the concessions.11While Pakistans exports stagnate, competitors continue to do well in the EU12Textiles however continue to be the major component of Pakistans exportsM. US $Mar 2012M. US $Mar 2011% ChangeCotton Textiles916.61,230.6(25.52)Raw Cotton68.446.646.61Synthetic Textiles55.892.531,22Sub-total1,040.81,319.4(21.14)Wool & Woolen Textiles10.112.7(20.23)Total1,050.91,332.5(21.14)Total Export All (Mar 12)2,000.92,463.2(18.77)Textiles as % of Total52.52%54.10%13The global textile and clothing scenario.Export Textiles 2000 2010- top 13 countries Billion USDSource: WTO, International Trade Statistics 20002001200220032004200520062007200820092010China16.13516.82620.56326.90133.42841.05048.68356.02565.36159.82476.900Extra-EEU17.27222.14023.14326.37124.33423.65124.60223.78524.19018.85420.748Hong Kong13.44112.21412.37413.08414.29613.83013.91013.41712.2569.97611.307USA10.95210.49110.69810.91711.98912.37912.66512.42612.4969.93112.168Korea12.71010.94110.71310.12210.83910.39110.11010.37310.3719.15510.968India5.5705.3756.0286.5107.0098.4629.3309.81210.4479.10512.872Taiwan11.8919.9049.5329.32110.0389.7069.7639.7209.2537.8919.753Pakistan4.5324.5254.7905.8116.1257.0877.4697.3717.1866.5107.484Turkey3.6723.9434.2445.2446.4287.0767.5938.9409.3967.7238.964Indonesia3.5053.2022.8962.9232.9613.3533.6053.8293.6753.2084.150Vietnam0.2990.3500.4200.4700.5340.7001.0001.3211.5631.8152.660Mexico2.5712.0912.2122.1022.0712.1382.1922.2161.9931.6241.928Bangladesh0.3930.4690.4900.5050.5970.6960.7500.8441.0901.0711.263Total 13102.943102.471108.103120.281130.649140.519151.672160.079169.277146.687181.165Total World157.400146.870152.760169.420195.541205.135218.594241.335253.359211.054250.652Rest World54.45744.39944.65749.13964.89264.61666.92281.25684.08264.36769.487Share %65.469.870.871.066.868.569.466.366.869.572.3Global Trade in Textile & Clothing (Yarn & Fabric)1515

Export Clothing 2000 2010- top 13 countries (minus China, Hong Kong & Extra-EEU) Billion USDSource: WTO, International Trade Statistics Global Trade in Textile & Clothing16Export Clothing 2000 2010- top ten countriesBillion USDSource: WTO, International Trade Statistics 20002001200220032004200520062007200820092010China36.07136.65041.30252.06161.85674.16395.388115.516120.399107.261129.838Extra-EEU 13.54415.74216.59019.04419.13020.01821.89524.79527.69921.80922.305Hong Kong24.21423.44622.34323.15225.09727.29228.39128.76527.90822.82624.049Turkey6.5336.6618.0579.93711.19311.83311.88213.88613.59011.55512.760India5.9605.4836.0376.4596.6329.21210.1929.93211.49511.45411.246Bangladesh5.0674.2614.0054.3266.2967.7518.2118.85510.92012.52015.660Vietnam1.8211.8672.6333.5555.0594.9984.8767.4008.7248.62910.839Indonesia4.7344.5313.9454.1054.2854.9595.6995.8706.2855.9156.820USA8.6297.0126.0325.5375.0594.9984.8764.3204.4494.1864.694Mexico8.6318.0127.7517.3437.4907.3066.3255.1394.9114.1654.363Pakistan2.1442.1362.2282.7103.0263.6043.9073.8063.9063.3573.930Korea5.0274.3063.9153.6053.3912.5812.1831.9141.7411.3961.610Taiwan3.0152.4842.1872.1131.9501.9511.5611.3931.1940.9040.963Total 13125.390122.591127.025143.947160.464180.666205.386231.591243.221215.977249.077Total World197.570194.490202.310225.940260.569277.971311.410347.059364.914315.622351.464Rest World72.18071.89975.28581.993100.10597.305106.024115.468121.69399.645102.387Share %63.563.062.863.761.665.066.066.766.768.470.9Global Trade in Textile & Clothing17Export Textiles & Clothing 2000 2010- top 13 countries (without China, Hong Kong and Extra-EEU)

Billion USDSource: WTO, International Trade Statistics Global Trade in Textile & Clothing18Export Textiles & Clothing 2000 2010- top ten countries -Billion USDSource: WTO, International Trade Statistics 20002001200220032004200520062007200820092010China52.20653.47661.86578.96295.284115.213144.071171.541185.760167.085206.738Extra-EEU30.81637.88239.73345.41543.46443.66946.49748.58051.88940.66343.053Hong Kong37.65535.66034.71736.23639.39341.12242.30142.18240.16432.80235.356USA19.58117.50316.73016.45417.04817.37717.54116.74616.94514.11716.862Korea17.73715.24714.62813.72714.23012.97212.29312.28712.11210.55112.578India11.53010.85812.06512.96913.64117.67419.52219.74421.94220.55924.118Turkey10.20510.60412.30115.18117.62118.90919.47522.82622.98619.27821.724Pakistan6.6766.6617.0188.5219.15110.69111.37611.17711.0929.86711.414Indonesia8.2397.7336.8417.0287.2468.3129.3049.6999.9609.12310.970Taiwan14.90612.38811.71911.43411.98811.65711.32411.11310.4478.79510.716Vietnam2.1202.2173.0534.0255.5935.6985.8768.72110.28710.44413.499Mexico11.20210.1039.9639.4459.5619.4448.5177.3556.9045.7896.291Bangladesh5.4604.7304.4954.8316.8938.4478.9619.69912.01013.59116.923Total 13228.333225.062235.128264.228291.113321.185357.058391.670412.498362.664430.242Total World354.970341.360355.070395.360456.110483.106530.004588.394618.273526.676602.116Rest World126.637116.298119.942131.132164.997161.921172.946196.724205.775164.012171.874Share %64.365.966.266.863.866.567.466.666.768.971.5Global Trade in Textile & Clothing19Major Investments in the World Textile SectorPakistans capacity is not keeping paceShipped Short-staple Spindles 2002 - 2011- World & Regions -ITMFs Textile Machinery Shipments Statistics

million spindles+ 7% 21Investments in Short-staple Spindles 2011 - 5 Biggest Investorsmillion spindlesITMFs Textile Machinery Shipments Statistics

2222Shipped Shuttle-less Looms 2002 - 2011- World & RegionsLoomsITMFs Textile Machinery Shipments Statistics

+ 43% 2010 & 2011: 19 instead of 14 Chinese producers 23LoomsInvestments in Shuttle-less Looms 2011- 5 Biggest InvestorsITMFs Textile Machinery Shipments Statistics

24MachinesInvestments in Circular Knitting Machines 2011- 5 Biggest InvestorsITMFs Textile Machinery Shipments Statistics

25China dominates the textile sectorBut changing Chinese demographics will reduce Chinas long term impactChinas Textiles Export in the World Market(Billion dollars and percentage) ValueShare in world exports/importsAnnual percentage change 2010 1980199020002010 2005-10200820092010Exporters China a 77 4.66.910.430.7 1317-829European Union (27) 67 --36.626.8 -1-1-237 extra-EU (27) exports 21 --10.18.3 01-2210India 13 2.42.13.65.1 98-1241United States 12 6.84.87.14.9 01-2123Hong Kong, China 11 ---- -4-9-1913 domestic exports 0 1.72.10.80.1 -16-14-29-10 re-exports 11 ---- -4-8-1814Korea, Republic of 11 4.05.88.24.4 10-1220Taipei, Chinese 10 3.25.97.73.9 0-5-1524Turkey 9 0.61.42.43.6 55-1816Pakistan 8 1.62.62.93.1 2-3-921Japan 7 9.35.64.52.8 13-1716Indonesia 4 0.11.22.31.7 4-4-1329Thailand 4 0.60.91.31.5 63-725Viet Nam b 3 ......0.21.1 30182932Mexico a 2 0.20.71.70.8 -2-10-1920Canada 2 0.60.71.40.8 -5-14-1716Above 15 228 --91.091.1 ----Leading exporters of textiles, 2010Source: WTOFigures from WTO show that in 2010, Chinas textile exports covered 30.7% of the worlds total textile trade, 20.3 percentage points higher than in 2000.In 2010, textile exports from India and Vietnam grew 41% and 32%, faster than China (29%).Textile exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in worlds total is still higher than China.27Chinas Garment Export in the World MarketValue Share in world exports/imports Annual percentage change (Billion dollars and percentage) 2010 1980199020002010 2005-10200820092010Exporters China a 130 4.08.918.336.9 124-1121European Union (27) 99 --28.528.1 38-141 extra-EU (27) exports 22 --6.66.3 310-212Hong Kong, China 24 ---- -2-3-185 domestic exports 0 11.58.65.00.1 -43-42-80-28 re-exports 24 ---- 35-116Bangladesh b 16 0.00.62.64.5 18231525Turkey 13 0.33.13.33.6 2-2-1510India 11 1.72.33.03.2 5109-6Viet Nam b 11 ......0.93.1 1818-227Indonesia 7 0.21.52.41.9 77-615United States 5 3.12.44.41.3 -13-612Mexico a 4 0.00.54.41.2 -10-4-166Thailand 4 0.72.61.91.2 14-1215Pakistan 4 0.30.91.11.1 23-1417Malaysia a 4 0.41.21.11.1 915-1424Sri Lanka b 3 0.30.61.41.0 45-57Tunisia b 3 0.81.01.10.9 -15-17-2Above 15 314 --79.589.4 ----Source: WTOLeading exporters of garment, 2010WTO figures show, Chinas garment export covered 36.9% of the worlds total in 2010.In 2010, Chinas garment export grew slower than Bangladesh, Vietnam and Malaysia.Garment exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in worlds total is still close to China.28As China prepares to move out of the lower end the EU moves the goalpost for PakistanNew Rules for LDC exports to the EUFrom January 2011, garments from LDCs made of IMPORTED FABRICS will get the GSP under a new rule. That is, ONE STAGE PROCESSING (fabric to garment) is the only requirement to qualify for GSP benefit.Single stage rule is applicable ONLY TO THE LDC beneficiary countries including Bangladesh which already has a strong presence in the global textile market.30Pakistans caseThe case for preferential market access for Pakistani exports into EUOut of around 60 countries classified as low income countries, only Pakistan, Vietnam & India do not get zero duty on their exports to EU. The rest get zero % duty on their exports to EU by way of:Everything But Arms preference to LDC (least developed countries) like Bangladesh, Nepal, Afghanistan etc.GSP+ preference to vulnerable countries like Sri Lanka (Sri Lankas status temporarily withdrawn in 2010)FTA (Free Trade Agreement) with select countries like Egypt, Mexico, Chile, Southern African Development Community, Tunisia etc.

32The case for preferential market access for Pakistani exports into EUAmongst regional competitors, Pakistan and India face the highest tariffs (both are restricted to GSP preference). Indias economy though is much bigger and growing at a faster pace than Pakistans economy. Indias GSP eligible exports to the EU were 10 times those of Pakistan in 2010

33The case for preferential market access for Pakistani exports into EUPakistan is a vulnerable country as defined by the EU.

200820092010%age of 7 largest GSP sections of imports from Pakistan into the EU out of total imports from Pakistan into the EU of GSP eligible products92.5%92.8%92.5%%age of imports from Pakistan into the EU of GSP eligible products out of total imports into the EU of GSP eligible products from GSP eligible countries0.81%0.90%0.80%Source: UNCTSD and calculations34The case for preferential market access for Pakistani exports into EUAdditionally:Pakistan is ranked at 142 in the HDI (Human Development Index) by UN, below Vietnam and India.EU has initiated FTA talks with India which will lead to zero duty status to many Indian exports shortly. FTA talks with Pakistan is put on the second stagePakistan, we feel, is being penalized for having an open economy35The case for preferential market access for Pakistani exports into EUAnd finally:Among countries having exports of less than 2% of total EU imports, Pakistan is the only country besides Vietnam which does not have zero duty status.

36So what can potentially happen if the EU provides Pakistan preferential access to its markets?Potential impact of greater access to Pakistan to the EU marketsIn the near term, not much maybe $300 - 500 million increase in exports per year. Mainly due to: a lack of investments in the value added sector.Because of the War on Terror buyers & their designers are not willing to come to Pakistan.Chronic power shortages which are likely to continue in the medium-term.Existing commitments of Pakistani exporters.38Not a major impact but still importantNot a major impact but still importantA clear signal that Pakistan is viewed as an important partner by the EU.An economically vibrant Pakistan is in the interest of the world.Investments including FDI will flow into Pakistan, especially in the textile & agricultural sector.In the medium-term provide fiscal space to the GoP to allow spending on infrastructure and social welfare projects.40How can you help?What support are we looking for from the Trade Counsellors?Pakistans is a unique case we would like the EU to include it in the list of First Stage countries for an FTA with the EU.In the meanwhile, we suggest that the EU/GoP/PBC work together to ensure that the Pakistan government is able to submit in time the application for GSP+ statusTrade counselors are requested to work to create goodwill to ensure final legislation for GSP+ preference does not restrict Pakistan (import share threshold of 2%)42What support are we looking for from the Trade Counsellors?PBC & European Union to ensure the relevant treaties / conventions are ratifiedPBCs access to top government figures could be utilized to make sure the relevant treaties / conventions are ratified and commitments are made for monitoring and reporting the implementation of treaties. Counselors work with their governments to allow Pakistan a longer timeframe for implementation of certain controversial treaties for which additional ground work is required.Any other suggestions are welcome.43THANK YOU44Diagramm12000200020006.5335.965.0671.8214.7348.6298.6312.1445.0273.0152001200120016.6615.4834.2611.8674.5317.0128.0122.1364.3062.4842002200220028.0576.0374.0052.6333.9456.0327.7512.2283.9152.1872003200320039.9376.4594.3263.5554.1055.5377.3432.713.6052.11320042004200411.1936.6326.2965.0594.2855.0597.493.0263.3911.9520052005200511.8339.2127.7514.9984.9594.9987.3063.6042.5811.95120062006200611.88210.1928.2114.8765.6994.8766.3253.9072.1831.56120072007200713.8869.9328.8557.45.874.325.1393.8061.9141.39320082008200813.5911.49510.928.7246.2854.4494.9113.9061.7411.19420092009200911.55511.45412.528.6295.9154.1864.1653.3571.3960.90420102010201012.7611.24615.6610.8396.824.6944.3633.931.610.963

ChinaExtra-EEUHong KongTurkeyIndiaBangladeshVietnamIndonesiaUSAMexicoPakistanKoreaTaiwan

Tabelle1Clothing20002001200220032004200520062007200820092010China36.07136.65041.30252.06161.85674.16395.388115.516120.399107.261129.838Extra-EEU13.54415.74216.59019.04419.13020.01821.89524.79527.69921.80922.305Hong Kong24.21423.44622.34323.15225.09727.29228.39128.76527.90822.82624.049Turkey6.5336.6618.0579.93711.19311.83311.88213.88613.59011.55512.760India5.9605.4836.0376.4596.6329.21210.1929.93211.49511.45411.246Bangladesh5.0674.2614.0054.3266.2967.7518.2118.85510.92012.52015.660Vietnam1.8211.8672.6333.5555.0594.9984.8767.4008.7248.62910.839Indonesia4.7344.5313.9454.1054.2854.9595.6995.8706.2855.9156.820USA8.6297.0126.0325.5375.0594.9984.8764.3204.4494.1864.694Mexico8.6318.0127.7517.3437.4907.3066.3255.1394.9114.1654.363Pakistan2.1442.1362.2282.7103.0263.6043.9073.8063.9063.3573.930Korea5.0274.3063.9153.6053.3912.5812.1831.9141.7411.3961.610Taiwan3.0152.4842.1872.1131.9501.9511.5611.3931.1940.9040.963Ziehen Sie zum ndern der Gre des Diagrammdatenbereichs die untere rechte Ecke des Bereichs.

Diagramm120002000200011.5310.2055.4619.5812.1217.7376.6768.23914.90611.20220012001200110.85810.6044.7317.5032.21715.2476.6617.73312.38810.10320022002200212.06512.3014.49516.733.05314.6287.0186.84111.7199.96320032003200312.96915.1814.83116.4544.02513.7278.5217.02811.4349.44520042004200413.64117.6216.89317.0485.59314.239.1517.24611.9889.56120052005200517.67418.9098.44717.3775.69812.97210.6918.31211.6579.44420062006200619.52219.4758.96117.5415.87612.29311.3769.30411.3248.51720072007200719.74422.8269.69916.7468.72112.28711.1779.69911.1137.35520082008200821.94222.98612.0116.94510.28712.11211.0929.9610.4476.90420092009200920.55919.27813.59114.11710.44410.5519.8679.1238.7955.78920102010201024.11821.72416.92316.86213.49912.57811.41410.9710.7166.291

ChinaExtra-EEUHong KongIndiaTurkeyBangladeshUSAVietnamKoreaPakistanIndonesiaTaiwanMexico

Tabelle1Tex&Clo20002001200220032004200520062007200820092010China52.20653.47661.86578.96295.284115.213144.071171.541185.760167.085206.738Extra-EEU30.81637.88239.73345.41543.46443.66946.49748.58051.88940.66343.053Hong Kong37.65535.66034.71736.23639.39341.12242.30142.18240.16432.80235.356India11.53010.85812.06512.96913.64117.67419.52219.74421.94220.55924.118Turkey10.20510.60412.30115.18117.62118.90919.47522.82622.98619.27821.724Bangladesh5.4604.7304.4954.8316.8938.4478.9619.69912.01013.59116.923USA19.58117.50316.73016.45417.04817.37717.54116.74616.94514.11716.862Vietnam2.1202.2173.0534.0255.5935.6985.8768.72110.28710.44413.499Korea17.73715.24714.62813.72714.23012.97212.29312.28712.11210.55112.578Pakistan6.6766.6617.0188.5219.15110.69111.37611.17711.0929.86711.414Indonesia8.2397.7336.8417.0287.2468.3129.3049.6999.9609.12310.970Taiwan14.90612.38811.71911.43411.98811.65711.32411.11310.4478.79510.716Mexico11.20210.1039.9639.4459.5619.4448.5177.3556.9045.7896.291Ziehen Sie zum ndern der Gre des Diagrammdatenbereichs die untere rechte Ecke des Bereichs.

Diagramm13.532.920022002200220020.4680.0980.0578.167.1920032003200320030.7570.0730.1410.59.80520042004200420040.4850.0810.1249.9359.4720052005200520050.3430.0770.04211.7411.2820062006200620060.2090.0870.16712.79612.04820072007200720070.5098320.103440.1344848.648.3120082008200820080.010.160.057.116.920092009200920090.090.090.0312.4711.9320102010201020100.340.140.0913.32312.4520112011201120110.640.210.02

WorldAsiaIndiaChinaPakistanTurkeyEuropeAmericasAfrica11.93(96%)12.45(93%)2.90(82%)7.19(88%)9.81(94%)9.47(95%)11.28(96%)12.05(94%)8.31(96%)6.90(97%)11.93 (96%)

Tabelle1200020012002200320042005200620072008200920102011World3.973.743.538.1610.509.9411.7412.808.647.1112.4713.32Asia2.973.132.907.199.819.4711.2812.058.316.9011.9312.45India0.920.880.770.940.741.432.783.742.531.372.36China0.840.610.764.957.055.916.686.063.685.047.86Pakistan0.430.480.490.631.241.040.670.320.240.020.22Turkey0.230.150.300.600.440.310.190.470.100.080.28Europe0.500.320.470.760.490.340.210.510.010.090.340.64Americas0.440.230.100.070.080.080.090.100.160.090.140.21Africa0.060.070.060.140.120.040.170.130.050.030.090.02Ziehen Sie zum ndern der Gre des Diagrammdatenbereichs die untere rechte Ecke des Bereichs.

Diagramm113.312.47.92.50.60.60.5

2009

Tabelle12009World13.3Asia12.4China7.9India2.5Bangladesh0.6Turkey0.6Indonesia0.5

Diagramm17110062200700010009006275052350800017006506380055650645012005505350046900480014004506655059050570013505506821360648510816877704475440329262612495504341741759934466258106985104054166595630815310114789733101047847

WorldAsiaEuropeAmericasAfrica41.759(96%)104,054(97%)62,200(87%)52,350(83%)55,650(87%)46,900(88%)59,050(89%)60,648(89%)40,329(90%)147,897(97%)104,054(97%)

Tabelle1200020012002200320042005200620072008200920102011World59,45045,60071,10062,75063,80053,50066,55068,21344,75443,417106,985153,101Asia47,45034,55062,20052,35055,65046,90059,05060,64840,32941,759104,054147,897Europe8,8507,8507,0008,0006,4504,8005,7005,1082,6269341,6653,310Americas2,5502,0501,0001,7001,2001,4001,3501,6871,2494669561,047Africa600550900650550450550770550258308847China35,45025,00051,25044,40046,45032,65042,15046,23628,59725,60089,406128,680Taiwan2,9501,7501,4004509003003201,0755271978471,219Korea, Rep.2,9008007505203503503502434203691,0042,460Italy2,8502,8002,1001,3001,6501,2001,3001,241766260363430India5506505509002,1504,8505,6503,9943,3023,4645,3898,492Turkey2,3501,3002,8004,5002,5502,4002,8501,9336461766841,881Bangladesh1750105060010003,9503,8504,2193,0688,4112,3031,418Ziehen Sie zum ndern der Gre des Diagrammdatenbereichs die untere rechte Ecke des Bereichs.

Diagramm115310114789712808984662909246014181219

2011

Tabelle12011World153,101Asia147,897China128,089India8,466Indonesia2,909Korea2,460Bangladesh1,418Taiwan1,219

Diagramm12805225755207921323999827658

2011

Tabelle12011World28052Asia25755China20792India1323Bangla Desh999Turkey827Indonesia658