There can be no denying that Pakistan has been poorly let down by its leaders. Since its inception, no Pakistani Prime Minister has served a full five-year term. This has left the nation perpetually teetering on the brink of a political crisis. Policy changes have not been seen through execution; legislators worry more about their position than their responsibilities; foreign businesses are wary of setting up operations in Pakistan due to the political volatility.
Few industries in the nation are as high-potential as Pakistan’s textile industry. The sector already employs about 40% of the labor force. The numbers could increase significantly if given the proper governmental assistance. But first, the polity of Pakistan needs to wrench its nation out of the economic troubles it is embroiled in. Reaching a deal with the International Monetary Fund will only do so much. Pakistan needs a reimagining of its economy and its democracy. The foreign reserve deficit needs a reversal to make it viable for foreign businesses to enter Pakistan. It is disheartening for the global import-export community that these economic changes in Pakistan might yet be a little further down the line than would be imagined.
The post-COVID growth rebound had contributed to higher consumer demand for many products and commodities, thereby stressing supply chains and leading to a commodity price ‘super cycle’. From late February 2022 onwards, geopolitical tensions between two major commodity producers – Russia and Ukraine – significantly added to the commodity price spiral, pushing up prices of energy and food commodities even further. Just as the higher commodity prices were pressuring external accounts of emerging markets (EMs), higher inflation outturns in the US and other advanced economies resulted in central banks adopting a tightening monetary policy stance. The revival of global economic activity in the first half of 2021 has boosted merchandise trade over its pre-pandemic peak, as global merchandise trade volume has increased by 9.8 percent in 2021. Global trade grew by 26 percent and reached US$ 22.4 trillion, while services trade grew by 15 percent and reached US$ 5.7 trillion. World merchandise trade volume is projected to grow by 3.0 percent in 2022 and 3.4 percent in 2023 provided the Ukraine-Russia war does not expand further. Fig 8.1 depicts the growth pattern of the global merchandise trade.
During Jul-Mar FY2022, goods exports grew by 26.6 percent and amounted to US$ 23.7 billion, whereas services exports grew by 17.1 percent and amounted to US$ 5.1 billion. Despite the encouraging export performance, the country’s imports have also risen significantly. The broad-based surge in global commodity prices, COVID-19 vaccine imports, and demand-side pressures, all contributed to the rising imports. Resultantly, the trade deficit grew by 55.5 percent amounted to US$ 30.1 billion which is historically high. Remittances which always supported in easing out pressure of the trade deficit of both goods and services recorded at US$ 22.9 billion during Jul-Mar FY2022 and posted a growth of 7.1 percent. This ever-highest level of workers remittances was not sufficient to offset the trade deficit. Thus, the current account deficit recorded at US$ 13.2 billion during FY2022. Further, the low performance of the financial account during the period not only resulted in the depletion of foreign reserves but also brought the exchange rate under pressure.
Due to pro-business measures and recent rupee depreciation, (as per PBS data) exports marked an impressive growth of 25.0 percent during Jul-Mar FY2022 amounting to US$ 23.3 billion as compared to US$ 18.7 billion in the same period last year. Around two-thirds of the increase came from the textile sector, especially from the high-value-added segment. Pakistan’s textile exporters capitalized on the policy support available – including the SBP’s concessionary refinance schemes for working capital and fixed investment, and the regionally competitive energy tariffs – and managed to ship higher volumes to key destinations (such as the US, UK and EU). Higher cotton prices also helped to increase the export unit prices of both low and high-value-added textile products. Apart from textiles, rice exports also rebounded during Jul-Mar FY2022, mainly due to the non-basmati variety.
Pakistan witnessed a trade deficit due to high imports of energy products including fuel, machinery equipment and chemicals. The main import partners are the United Arab Emirates and China. Textiles account for most of Pakistan’s export earnings. Imports during FY2022 totaled Rs. 14,273,483 million as Rs. 8,982,441 million during the corresponding period of last year showing an increase of 58.90%. In terms of the US dollar, the imports during July – June 2021 – 2022 totaled $ 80,137 million as against $56,380 million during the corresponding period of last year showing an increase of 42.14%. The balance of trade figures from 2022 were (-) 8,612,355 million in terms of Rupees and (-) 48,355 million in US dollars. The food group having an 11.3% share of the total imports, witnessed a growth of 8.00% and its import reached to US$ 9,015.86 million during FY2022 as against US$ 8,347.8 million in FY2021. Within the food group, an increase in imports was observed in tea, sugar, soybean oil and palm oil.
The UAE is Pakistan’s third-largest trade partner after China and the United States. It is also viewed as an ideal export destination by the policymakers in the South Asian country due to its geographical proximity which reduces the transportation and freight costs and facilitates commercial exchanges.
The economic and trade relations between Pakistan and the United Arab Emirates (UAE) have witnessed significant growth and diversification over the years. The strategic partnership between these two nations is built on shared cultural ties, historical connections, and a mutual interest in fostering economic development. This essay explores the key aspects of bilateral economic and trade relations, highlighting the factors that contribute to the robust and dynamic nature of this partnership.
The diplomatic relations between Pakistan and the UAE were established in 1971, shortly after the UAE gained independence. Since then, the two nations have continuously strengthened their ties, not only politically but also economically. Historical connections, linguistic similarities, and cultural affinities have played a crucial role in fostering a strong bond between Pakistan and the UAE.
Trade between Pakistan and the UAE has experienced steady growth, with both countries benefiting from the diversification of their economies. The UAE has emerged as one of Pakistan’s major trading partners in the Middle East. The trade relationship is characterized by a balanced exchange of goods and services, contributing to the economic development of both nations.
Pakistan, with its rich agricultural resources, exports a variety of products to the UAE, including rice, textiles, and fruits. On the other hand, the UAE, as a hub for international trade, is a significant source of imports for Pakistan, supplying petroleum products, machinery, and chemicals. This complementary trade structure has led to a mutually beneficial economic interdependence.
In addition to trade, the UAE has been a key source of foreign direct investment (FDI) in Pakistan. The UAE’s investments have been directed towards various sectors, including real estate, energy, and infrastructure development. These investments have not only contributed to the economic growth of Pakistan but have also played a role in the creation of job opportunities and the transfer of technology and expertise.
Furthermore, both countries have engaged in joint ventures and economic cooperation initiatives. Projects such as the Abu Dhabi Fund for Development’s support for development projects in Pakistan and collaborations in the renewable energy sector underscore the commitment to long-term economic cooperation.
Despite the positive trajectory of economic and trade relations, challenges persist. Issues such as trade imbalances, non-tariff barriers, and bureaucratic hurdles need to be addressed to ensure a more equitable and sustainable trade partnership. Both nations must work collaboratively to overcome these challenges and create an environment conducive to further economic integration.
The opportunities for enhancing bilateral economic ties are immense. Both Pakistan and the UAE can explore new avenues for cooperation, such as technology transfer, joint ventures in emerging industries, and partnerships in the fields of education and healthcare. Strengthening people-to-people ties through cultural exchanges and tourism can also contribute to a deeper understanding between the two nations.
The bilateral economic and trade relations between Pakistan and the UAE have evolved into a multifaceted partnership that extends beyond commerce. The foundations of this relationship are rooted in historical connections, cultural affinities, and mutual economic interests. As both nations continue to explore avenues for collaboration, address challenges, and capitalize on opportunities, the prospects for a sustained and mutually beneficial partnership remain promising. The synergy between Pakistan and the UAE serves as a model for diplomatic and economic cooperation in the region, fostering a relationship that goes beyond the realms of trade and contributes to the overall development of both nations.
In 2021, the United Arab Emirates exported $7.13B to Pakistan. The main products that the United Arab Emirates exported to Pakistan are Refined Petroleum ($3.12B), Crude Petroleum ($1.36B), and Scrap Iron ($329M). During the last 18 years, the exports of the United Arab Emirates to Pakistan have increased at an annualized rate of 9.57%, from $1.38B in 2003 to $7.13B in 2021. However, In 2021, the United Arab Emirates did not export any services to Pakistan.
In the same year, Pakistan exported $1.28B to the United Arab Emirates. The main products that Pakistan exported to the United Arab Emirates were Refined Petroleum ($193M), Bovine Meat ($138M), and Rice ($122M). During the last 18 years, the exports of Pakistan to the United Arab Emirates have increased at an annualized rate of 0.74%, from $1.12B in 2003 to $1.28B in 2021.
In 2021, UAE ranked 55 in the Economic Complexity Index (ECI 0.16), and 23 in total exports ($296B). That same year, Pakistan ranked 87 in the Economic Complexity Index (ECI -0.55), and 66 in total exports ($32.7B).
During 2021, the United Arab Emirates had a large net trade with Pakistan in the exports of Mineral Products ($4.6B), Metals ($554M), and Machines ($481M).
During 2021, Pakistan had a large net trade with the United Arab Emirates in the exports of Textiles ($308M), Vegetable Products ($269M), and Mineral Products ($213M).
Recently, Pakistan and the United Arab Emirates agreed to enhance bilateral trade volume while pointing out that the import-export figures of the last fiscal year did not match the actual trade potential between the two countries.
Pakistan’s interim commerce minister, Dr. Gohar Ejaz, has announced that the South Asian nation is expected to finalize a free trade agreement (FTA) with the United Arab Emirates (UAE) during the forthcoming visit of a UAE delegation scheduled for the last week of September.
The UAE holds the position of being Pakistan’s third-largest trading partner, following China and the United States. It is regarded as an attractive export destination for Pakistan, primarily due to its geographical proximity, which translates into reduced transportation and freight costs.
Notably, the Gulf nation is home to approximately 1.8 million Pakistani expatriates and stands as the second-largest source of remittances for Pakistan, following Saudi Arabia. This significant expatriate population underscores the strong economic ties between the two countries.
The Emirates delegation is planned for the end of September to finalize the FTA between Pakistan and the UAE.
The UAE has previously entered into FTAs with approximately nine other countries and is actively engaged in discussions with Pakistan on this matter. The successful signing of the CEPA holds the potential to reduce trade tariffs significantly, which could have a positive impact on Pakistan’s income and revenue.
It is anticipated that the implementation of CEPA will further expand Pakistan’s market access in the UAE across various sectors, including food, health, pharmaceuticals, and tourism.
The International Trade Council is monitoring these developments closely, recognizing the potential for such trade agreements to facilitate economic growth and cooperation among nations.
The author, Mr. Nazir Ahmed Shaikh, is a freelance writer, columnist, blogger and motivational speaker. He writes articles on diversified topics. Mr. Shaikh can be contacted at nazir_shaikh86@hotmail.com