Pakistan’s export potential too low to sign an FTA with Thailand

PBC director says import potential is very high with Bangkok being in trade surplus


Bilal Hussain October 31, 2018
In the case of Thailand, for its top 25 high potential exports, the ASEAN country had a potential to export items worth an additional $6.26 billion to Pakistan. PHOTO: FILE

KARACHI: Pakistan proves to be inefficient when its export potential is compared with Thailand, which is why it may be unfavourable for the country to seek a free trade agreement (FTA) with Thailand.

Trade potential is an economic concept that allows us to identify the scale and scope of increasing bilateral trade. It seeks to measure the prospective trade that can exist between the two countries, if the trade is completely frictionless between them.

Pakistan’s export potential for any product to be exported to Thailand is calculated by subtracting its actual exports for a particular product to Thailand from the minimum of its exports to the world or from Thailand’s imports of the same product from other parts of the world.

On the other hand, the import potential is calculated by subtracting Pakistan’s actual import from Thailand from the minimum of Pakistan’s imports from the world and Thailand’s exports to the world for that product.

Pakistan ranked 8th in size of trade deficit

In short, the assessment of trade potential helps understand the benefits or limitations of bilateral trade between countries with either preferential or free trade agreements.

Samir Amir, who led the Pakistan Business Council (PBC)’s comprehensive review of the proposed FTA with Thailand, said an FTA with Thailand will not go in favour of Pakistan.

While explaining Pakistan’s export and import potential with Thailand, Amir said Pakistan’s export potential was very low, while import potential is very high, which means Pakistan has a potential to buy more from Thailand than it is able to sell.

According to the research study, in 2017 the 25 high potential exports from Pakistan, at HS-06 level, had an additional potential of $1.39 billion of exports to Thailand as compared to the current exports of only $21.84 million for these 25 high potential items.

In the case of Thailand, for its top 25 high potential exports, the ASEAN country had a potential to export items worth an additional $6.26 billion to Pakistan. In 2017, exports of these 25 high potential items were worth $133.99 million.

“This report follows our country reports on Africa, Central Asia and Latin America. We will do eight reports on Asia, of which this is the first,” said PBC CEO Ehsan Malik.

“Thailand enjoys a trade surplus of over $1.2 billion with Pakistan. Its exports have been growing, while ours exports are flat,” he said, adding, “Our previous review of a possible FTA with Thailand also concluded that it was not desirable. We don’t have the capability of meeting what Thailand needs.”

“On the other hand, Thailand is ambitious to penetrate the automobile, auto parts etc sectors, which are all nascent industries in Pakistan and need time to build scale being poised against established countries like Thailand,” he explained.

Thailand had an all-time high trade surplus of $1.25 billion with Pakistan - with exports of $1.4 billion against imports of $148.32 million in 2017. Such a huge difference is due to diversity in product mix.

Thailand being a technologically advanced country exports vehicles, auto-parts, chemicals, and machinery and electrical appliances to Pakistan against imports of fish, paper products, cotton and textile articles.

Published in The Express Tribune, October 31st, 2018.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

COMMENTS (2)

Arsland | 5 years ago | Reply Our population is forecast to be 450-500 million by 2050, 4th largest in the world, no doubt we will be a significant nation .
Engr.Amir Sultan Rana | 5 years ago | Reply Pakistan should nib the issues at this time. Why we are lagging in exports or getting issues in signing up the agreements. I think, its high time for Pakistan to make comprehensive policies and execute them accordingly. These all policies should coupled with plans. Economic plans, long term plans...These are so much important and need to be addressed. Pakistan with a good amount of population and high potential people. We need to chalk out plans for coming 40-50 years atleast, which should be based of flourished Pakistan for all times to come. We are here to see Pakistan a developed Country and a country with his identity and vision for all times to come. Best of luck Pakistan.
Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ