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

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.



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 31^st, 2018.

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