Pakistan is facing grim economic crisis in light of mammoth balance of payment deficit and low competitiveness in comparison to its trading partners. It ignites dire need to find new markets comparatively advantageous for Pakistan so that exports can be enhanced and economy can be pulled out of economic distress. For this purpose Pakistan must find new avenues to enhance trade with countries where it has comparative advantage. Markets and products are needed to explore with relatively less comparative advantage to boost export. In this regard Central Asian countries provide huge market gap that can raise export potential of Pakistan to new heights.
Prominence of Central Asian Markets
Central Asia has vital importance as it connects two major world markets, Europe on one side and South Asia on the other. Although countries in this region couldn’t observe enormous economic growth after the evacuation of Soviet Union but now these countries are reviving economically. Most of these countries have dependence on natural resources and that help in gaining economic stability. Central Asia comprises about 3% of proven oil reserves and 4% of world’s natural gas reserves due to which countries have an edge despite many economic drawbacks like stumpy level of market integration. Transition of CA economies also spurs the chance of growth for neighboring countries by providing new markets.
Trade Prospects for Pakistan
Pakistan has to discover new avenues to augment exports to rest of the world. It is only long-term solution to bring economic stability to country. Double-sided policies are needed to implement in Pakistan in a way that exports can be enhanced and reliance on imports gets diminished. For this purpose some policy recommendations are suggested here.
Expand Textile Exports
Textile is leading export sector of Pakistan but since last 5 years there has not been any advancement in terms of export in this sector. Total textile export to CA countries is just 13.7 million USD. It is quite less in terms of size of textile industry of Pakistan. All of Central Asian countries do not have well developed textile sector and there is huge market which is open to be captured. To boost up textile exports of Pakistan it is necessary to bring competitiveness in this sector so that prices can be lowered and exports can be enhanced.
Raising Cotton Production
One of the leading imports of Pakistan from Central Asian countries is the raw cotton. With passage of time the domestic production of cotton has reduced enormously. This has caused Pakistan to rely on import of cotton from other countries. In year 2014 total cotton production was 10.6 million bales of 480 pounds but it has dwindled by 20% in four years to 8.5 million bales in 2018. It is because of this huge decrease in domestic production that overall import of cotton has increased by 24% in last four years. Pakistan imports raw cotton form four Central Asia countries including Afghanistan, Tajikistan, Turkmenistan and Uzbekistan. These four countries export cotton to Pakistan of worth around 71 million USD, comprising around 70% of total import of cotton.
Pakistan is facing trade deficit of 35 billion USD and import of cotton is about 1 billion USD. By backing-up the domestic agricultural industry not only major portion of population will get benefit but also the trade deficit can also be diminished. It will additionally cut down the cost of importation of cotton required by textile sector. Last but not the least advantage will be the lessening balance of payment deficit where Pakistan is already facing severe hitches.
Another vivid prospect to get benefit from Central Asian countries is the import of energy fuels. Pakistan is facing huge energy crisis that is having severe effects on economy. Country is in dire need to find cheap energy sources so that input cost of production can be diminished. TAPI (Tajikistan-Afghanistan-Pakistan-India) gas pipeline has vast importance in this regard. Although the import of mineral fuels is very limited in Pakistan due to non-availability of infrastructure but it will surely diminish trade deficit pressure from Pakistan. Gas pipeline will not only reduce the balance of payment deficit but it will also make domestic industry more competitive with international market as input cost will get reduced.
Subsidization of Sugar and Rice
Sugar and rice are the primary exports of Pakistan to Central Asian countries. Pakistan has exported sugar of worth 320 million USD to Tajikistan and Kazakhstan but primary importer is Afghanistan. Sugar cane is the primary crop in Pakistan but industry is unable to meet desired demand. It is due to no competition in industry. Competition not only brings efficiency but also boost up the industrial production. There is huge demand of sugar in Central Asian countries as these countries have undeveloped sugar industry. This gap has to be timely fulfilled before it got captured by any other exporter of sugar like of China. Same gap is available in case of rice. But farmers have to be supported by making them available with reasonable price of crop so that production of rice can be encouraged.
Prospects and Opportunities
Pakistan must seize the potential opportunities that are available because of mammoth gap in Central Asian market. Through trade ties with these markets not only export division of country will get soar but import prices and hence production cost will diminish either. Such two-way policies are needed to be implemented in Pakistan in a way that exports can be enhanced and reliance on imports gets shrink. Central Asian markets give rise to new avenues for such prospects to lift up the economy.
Hence gargantuan benefits can be captured by trade ties with Central Asian countries. Multi-front policies are preferred to build and implement so that the issue of economic corrosion can be fixed.