Pakistan's trade performance and potential with ASEAN region: Recent trends and future opportunities

• Published date: 01 February 2022
• Author: Muhammad Abdul Kamal,Sakeena Shad,Saleem Khan,Assad Ullah,Khalid Khan
• Date: 01 February 2022
• DOI: http://doi.org/10.1002/pa.2325

ACADEMIC PAPER

Pakistan's trade performance and potential with ASEAN

region: Recent trends and future opportunities

Muhammad Abdul Kamal

1

| Sakeena Shad

1

| Saleem Khan

1

| Assad Ullah

2

|

Khalid Khan

3

1

Department of Economics, Abdul Wali Khan

University Mardan, Pakistan

2

School of Economics, Henan University,

Kaifeng, China

3

Department of Economics, Lasbela University

of Agriculture, Water and Marine Sciences,

Pakistan

Correspondence

Assad Ullah, School of Economics, Henan

University, Kaifeng, China.

Email: assad@henu.edu.cn

Owing to declining export growth and escalating trade deficits in Pakistan, this study

investigates the dynamics of comparative advantage, complementarity, and pinpoints

potential export products in the ASEAN region. This study scrutinizes the trade

dynamics between Pakistan and ASEAN over the period 2003–2016 by extracting

International Trade Centre (ITC), trade map data. The analyses are based on the

Trade intensity index, the Revealed comparative advantage index, Trade complemen-

tarity index, and trade potential method. The results show that Pakistan has the

highest comparative advantage over ASEAN in chapters 03, 08, 41, 61, 62, and 63 at

HS-2 digit product-level data. With Malaysia and Philippines, Pakistan's trade com-

plementarity is stronger than Indonesia, Singapore, Thailand, and Vietnam. The out-

comes also suggest that there is a huge trade potential that exists between Pakistan

and ASEAN member countries. These findings are useful for policy consideration in

identifying product specialization for enhancing competitiveness and promoting eco-

nomic growth.

1|INTRODUCTION

Pakistan, being a developing and open economy like the rest of the

world, entails the sustainability of trade for development. The varied

structure of Pakistan's economy mainly depends on the extent and

direction of trade. One of the perennial problem plaguing Pakistan's

economy is the dismal performance of exports in recent time, casts an

adverse impact on the overall economic system, impacting the GDP

growth and export-to-GDP ratio. With annual exports hovering

around 6% in the 1990s, it rose to 9.9% in the 2000s and faltered

sharply to 1.94% after 2010. As exports are one of the key determi-

nants of GDP growth, thus adversely affected the growth and

remained below par for the corresponding period, varying at 4.6, 4.7,

and 4.3%. Export-to-GDP ratio fell from 15.53% in the 1990s to cur-

rent 9.13%, exhibiting a sharp decline in exports and recorded lowest

in the regional comparison with Iran (22.4%), China (19.64%), India

(19.17%), Sri Lanka (21.44%), and Bangladesh (16.64%). According to

the World Bank, the share of Pakistan's exports in the world declined

by 20% during the period 2011–2017. The primary reason for most

developing countries persistently face balance of payments issue is

the failure to enhance their exports in comparison to imports. To cur-

tail the problem of trade imbalances, seeking new markets can prove

an important strategy along with structural reforms and product

diversification.

The growing trend in globalization and new realities is pushing

Pakistan toward East Asia. This transformation has been reflected in

recent years with a focus on trade enhancement, investment, and

cooperation in many fields. In 2012, Pakistan's exports enhanced sig-

nificantly to ASEAN and reached $1.9 billion; however, later in 2016,

the exports decreased dramatically to $81.8 million. Despite lower

exports to ASEAN (see Table 1), Pakistan has the potential to enhance

the trade with ASEAN by reviving foreign trade policy and active par-

ticipation of the Private sector. Pakistan is in the process to sign free

trade agreements with the ASEAN region to promote trade. In this

regard, the first ASEAN economic ministers meeting was held in Bang-

kok in 2009. Moreover, proposed Pakistan's FTA with ASEAN has sig-

nificant potential as Pakistan can get various benefits in terms of

cooperation in trade, investment, environment, education, agricultural,

and human resource development (Irshad, Xin, Xuan, & Arshad, 2016).

The Government of Pakistan has realized the missing trade

Received: 11 June 2020 Revised: 12 July 2020 Accepted: 23 July 2020

DOI: 10.1002/pa.2325

J Public Affairs. 2022;22:e2325. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of12

https://doi.org/10.1002/pa.2325