INTERNATIONAL MARKETING

INTERNATIONAL MARKETINGFINAL PROJECT: SAFTA

SOUTH ASIAN FREE TRADE AREA (SAFTA)The Agreement on the South Asian Free Trade Area (SAFTA) is a trade agreement to promote trade and economic growth in South Asia by reducing tariffs for intra-regional exports. The South Asian Free Trade Area includes the eight members of the South Asian Area for Regional Cooperation (SAARC). These are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan which joined in 2005.SAFTA was launched in 2006 to reduce tariffs for intra-regional trade among SAARC countries. Member states have agreed to reduce their tariffs on each others goods not on sensitive lists as long as those goods have been produced in accordance with the agreements Rules of Origin provisions. The Agreement also includes provisions related to customs cooperation, dispute settlement, trade facilitation, safeguards against injury to industry, and eligibility for technical assistance.The ultimate aim of SAFTA is to put into place a fully-fledged South Asian Economic Union similar to the European Union. This will take a long-time. Currently, SAFTA only covers trade in goods. There are early discussions about a possible agreement on trade in services but details have not yet been agreed among SAARC member countries.SAFTA aims to promote and enhance mutual trade and economic cooperation by eliminating barriers to trade, promoting conditions of fair competition in the free trade area, ensuring equitable benefits to all, and establishing a framework for further regional cooperation to expand the mutual benefits of the agreement.HOW DOES SAFTA WORKS?SAFTA divides the eight member countries into least developing countries and non-least developing countries. Member countries accrue benefits and obligations depending on their categorization as either a least developing country or non-least developing country. Least developing countries have longer time periods to lower their own tariffs while gaining faster access to other countries lower tariffs.

Afghanistan is a least developing country along with Bangladesh, Bhutan and Nepal. Pakistan and India are non-least developing countries. Maldives graduated to become a non-least developing country in 2010. Sri Lanka is a hybrid, straddling the center of the two groups.

The SAFTA treaty obliges member countries to lower their tariffs by pre-determined dates: Non-least developing countries must lower their tariffs for least developing countries to 5% or less by 2011. Since the tariff reduction programs started in 2006, Afghanistan gains the benefit of already lowered tariffs across the region. Pakistan and India, the largest two non-least developing countries have already lowered the tariffs on all Afghan products not on their sensitive lists to 5% or less. All other countries have until 2016 to lower their tariffs on Afghan products not on their sensitive lists to 5% or less. Sensitive lists are lists of protected items which are not eligible for SAFTAs low tariffs. Afghanistan is also required to lower its tariffs of all goods not on its sensitive list to 5% or less by 2020...The Ministry of Commerce and Industries has negotiated an unprecedented arrangement giving Afghanistan ten years to reduce its tariffs to 5% or less. Afghanistan already has the lowest tariffs in the region as 3,764 of approximately 6,000 of its tariff lines have rates 5% or less.The SAFTA tariff reduction process will be gradual and linear, as reductions will occur at regular intervals for standard amounts. This decade-long process helps avoid any sudden or dramatic reductions in tariffs and eases the changes with minimal disruption to Afghan industry.

OBJECTIVES & PRINCIPLES OF SAFTAThe Objectives of this Agreement are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia: 1. a) Eliminating barriers to trade in, and facilitating the cross-border movement of goods between the territories of the Contracting States; b) Promoting conditions of fair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development; c) Creating effective mechanism for the implementation and application of this Agreement, for its joint administration and for the resolution of disputes; and d) Establishing a framework for further regional cooperation to expand and enhance the mutual benefits of this Agreement. 2. SAFTA shall be governed in accordance with the following principles: a) SAFTA will be governed by the provisions of this Agreement and also by the rules, regulations, decisions, understandings and protocols to be agreed upon within its framework by the Contracting States; b) The Contracting States affirm their existing rights and obligations with respect to each other under Marrakesh Agreement Establishing the World Trade Organization and other Treaties/Agreements to which such Contracting States are signatories; c) SAFTA shall be based and applied on the principles of overall reciprocity and mutuality of advantages in such a way as to benefit equitably all Contracting States, taking into account their respective levels of economic and industrial development, the pattern oftheir external trade and tariff policies and systems; d) SAFTA shall involve the free movement of goods, between countries through, inter alia, the elimination of tariffs, para tariffs and non-tariff restrictions on the movement of goods, and any other equivalent measures; SAFTA may, inter-alia, consist of arrangements relating to: a) Tariffs; b) para-tariffs; c) Non-tariff measures; d) Direct trade measures.

EXISTING EXPORTS TO THE TRADE BLOC COUNTRIESTop Pakistan Exports to IndiaPakistan's exports to India amounted to $402.7 million or 1.6% of its overall exports. 1. Fruits, nuts: $74 million 2. Salt, sulphur, stone, cement: $45.1 million 3. Cotton: $42.4 million 4. Copper: $34.5 million 5. Organic chemicals: $30.4 million 6. Sugar: $27.1 million 7. Oil: $21.4 million 8. Oil seed: $21.4 million 9. Raw hides excluding furskins: $20.6 million10. Inorganic chemicals: $13.2 millionTop Pakistan Exports to Afghanistan1. Rice (All Varieties)2. Petroleum Products3. Cement4. Pharmaceutical products5. Vegetables6. Fruits7. Plastic articles8. Chemical products9. Electronics and other machinery10. Household equipment

Top Pakistan Exports to Bhutan 7% of Pakistans total exports1. Cotton yarn2. Fabrics3. Pharmaceutical products4. SaltTop Pakistan Exports to SriLanka1. Cotton2. Rice3. Cement4. Potatoes5. Fabrics6. Medicament7. Textile fibers8. electrical machines and apparatus9. Dried FishTop Exports of Pakistan to Nepal1. Refined Petroleum (16%)2. Women knitwear (4.4%)3. Men knitwear (7.2%)4. Petroleum gas (4.4%)Top Exports of Pakistan to Maldives1. Refined Petroleum (28%)2. Petroleum gas (3%)3. Computers (2.2%)Top Exports of Pakistan to Bangladesh1. Refined Petroleum (6%)2. Raw cotton (3.5%)These are all of the major exports done by Pakistan with these countries. Total exports done by Pakistan equals to $24.7 billion worth trade across the world. Future prospected industry markets that can be explored in these countries are Textiles (Jeans etc.), Commodities (Oranges, etc.), handmade products (rugs etc.) and gemstones.Product 1: GEMSTONESWHY SRILANKA?Sri Lanka, long associated with the internationalgem and jewelrytrade, has been known as the cradle of treasures for its precious, natural gemstones. Both the artisan culture ofjewelrycraftsmanship and Sri Lankas gem industry has been widely acclaimed in literary works dating as far back as 250 B.C.Today Sri Lanka has made its mark in the international market and is known for quality gemstones and creating finejewelryin a range of unique and exquisite designs. With this reputation, the Sri Lankan gem and jewelry industry is now geared to establish a world-classgem and jewelryhub. The entire industry employs approximately 600,000 persons including miners, cutters and polishers, dealers, jewelry designers, manufacturers and craftsmen, marketers and sales people.GEMSTONES IN PAKISTANGems and Jewelry Industry in Pakistan is an emerging sector with immense potential for business development. The industry is moving on fast track to gain an important position in the world market. The countrys Gems and jewelry have shown phenomenal growth in the last few years, which is about US$ 1.2 Billion export (2012-13).The industry has a promising future outlook due to vast gemstones deposits, skilled human resource and craftsmanship, investment friendly policies, large and fast growing domestic markets, strategic location and liberalization and business policies. Having been blessed with a variety of gemstones, and being one of the top ten consumers of gold in the world the industry holds great potential to attract investment in the sector.Imports and Exports.Sri Lankas import policies have been greatly simplified, making the process much easier and more cost-effective. For a US$200 charge, rough, preformed, and cut stones can be imported for cutting, recutting, and heat treatment. The flat rate charge is assessed regardless of quantity and value. As of 2013, foreign customers buying gemstones parcels valued at over US$200,000 are expedited through customs so they can board their flight with minimum processing. Gemstones to be Exported:The Gemstone that will be exported to SriLanka will be from Peshawar (Khyber Pakhtunkwah); Swat (Malakand division) Emerald, various types of quartz, and epidote.Market Entry Strategy:For exporting gemstones to Srilanka, we will be choosing the Partnering market entering strategy. Partnering is almost a necessity when entering foreign markets and in some parts of the world it may be required. Partnering is a particularly useful strategy in this case as the market we are entering has a different culture, both business and social, is substantively different our own as local partners bring local market knowledge, contacts and if chosen wisely customers.Market Channel Strategy:The mineral/rocks would be collected from the mines (Source) which will be transported to the domestic manufacturer (Me). Later these will be acquired by the local middlemen (Bajaur Agency), who will send these to Srilankan Middleman (AJ Traders), who would bring the rock in its final finished form by passing it through several stages of cutting, polishing, and finally the finished product ready for further stage of production. This finished gemstone will now be sold in the active market of Srilanka which will then reach the end consumers. So basically raw material (raw rock) will be exported to the renowned Srilankas gem market which can be subjected to further importing. The process will be further explained via the diagram below:

Following are the competitive advantages for entering into Srilankas Gemstone Market; Long history ofgemcutting artisan culture which still sustains itself An educated and trainable workforce The availability of a wide variety of precious and semi-preciousgem stones A business friendly government, with minimum of formalities providing a wide array of tax incentives Duty free imports of raw materials Active member of International Colored Gemstone Association(ICA)Exporting to Sri Lanka would prove to be beneficial in terms of profits, as I will be exempted to pay the Income Tax as per the Law of Srilankas government regarding Fiscal Incentives for Foreign Countries:

Product no 1 : Jeans (Denim)Country: Sri LankaINDUSTRY ANALYSISThe textile industry in Pakistan is the largest manufacturing industry in Pakistan. The textile industry continues to be the second largest employment generating sector in Pakistan and the 8th largest exporter of textile products in Asia; and contributes 9.5% to the GDP providing employment to about 15 million workforce of the country.Textile exports were $10.5 billion by 2007.Textile exports share in total export of Pakistan has declined from 67% in 1997 to 55% in 2008 due to governments unhealthy policies. Pakistan is all set to increase its textile exports by three billion dollars this year since textile sector has improved its production capacities over the last few years (Ahmad, 2014).

The following chart shows the Exports and Imports of Sri Lanka with respect to Pakistan.050100150200250200102200203200304200405200506200607200708ExportsImports

SWOT ANALYSISSTRENGTHS Raw Material Fourth Largest Producer of cotton Cheap Labor Domestic Market (High Demand)

WEAKNESSES No value addition for products More raw material export now Political instability Untrained labor force No technological advancements Poor infrastructure (weak industrial base and Load Shedding issue)

OPPORTUNITIES Reducing cost of production Extending the product line Increased Marketing Collaboration with foreign companies

THREATS No Quota System New competitor in market Modernization Shortened Fashion Lifecycles

PROCEDURE FOR EXPORTING READY MADE GARMENTS TO SRI LANKAFirstly, the firm needs to be registered for exporting anything from Pakistan whether its private a corporation. Secondly, it is a must to have a National Tax Number (NTN) and Sales Tax number by the government. Without this, the company cannot receive payment and get custom clearance. Thirdly, the firm needs to open up an account in the bank. Also, if the company is receiving payment through Bank Transfer, the E-Form is needed from the bank for the custom clearance and sales tax. Lastly, the firm needs to get a freight forwarder and shipping agent. GOVERNMENTAL CONTROLSTalking about governmental controls, there are no quotas since 2005. Before that, there were quotas based on mens wear, womens wear, etc. Furthermore, there are no duties for exporter but the importer has to pay duties according to the products import specifications and countrys requirements. Many transactions are done in dollars as it is less hassle in money conversion according to the exchange rate. For license requirements, invoice is prepared in which price and quantity of our garments are set. Then there is E form, assigned by the bank. It includes NTN number, ID card number, mode of shipment (Air or Water), quantity and price, etc. ONLINE TRADE AGREEMENT AND ORDERSThe trade agreements are made online as the whole process is based on online communication. First of all, sampling is done on different website to attract products target market, we will carry out exhibitions or stalls through buying houses in Sri Lanka. Once the customer is interested in buying our readymade garments, then online contracts would be made through L/C.MODES OF ENTRYThe channel of distribution is an integrated system with the manufacturer on one end and the final user on the other. We are dealing with direct export selling.. However, this approach is best for achieving maximum profit and growth. PAYMENT METHODWe would use Sight letter of credit i.e. if the documents are in order and have been presented on/before the expiry date, they are accepted by the bank; the exporter receives payment. It would be a transferable confirmed L/C. If it has been confirmed by the exporters bank, that banks responsibility is to pay the exporter if it does not receive payment from the importers bank.CHANNEL MEMBERS Clearing agents: It is the Customs Clearance agent who would know the working of all the Customs Rules and Laws. They are responsible for checking whether the consignment doesnt consist any banned products, volume, check quality, etc. Freight forwarders: is a person or an organization that organizes shipment from manufacturers to final customer. Forwarder contracts with the carrier to move the goods. Different freight mode includes by air, ships, trucks or railroads. Documents that are revised by a freight forwarder are Goods declaration (GD), Invoices, and Bill of Lading. Insurance Company: For exporting Jeans, if any importer requires the insurance of the product, then the company would insure the shipment. Banks: needed in the process of payment. If the exporter has shipped the consignment, the bank will contact importers bank for payment.

Textile industry is the backbone of the Pakistans economy. We have to seriously analyze its strengths and weakness so as to make the textile industry more competent among itsrivals. What we really need here is to work out the plan and to implement it accordingly and although much work has to be done by Government of Pakistan, it also the responsibility of the entrepreneurs to cooperate and foresee the challenges and opportunities ahead. We can always win the race as it is never too late to safeguard and grow this vital and promising sector of our economy.

Product 2 : Sahar With Citrus Pvt Ltd Country to export: Out of other Safta Countries like India , Bhutan , Nepal and Maldives . I choose AFGHANISTAN Product I am going to launch and export :Sahar with Citrus pvt ltd (Kinnows) Reason to choose this product for Exports : According to the World Trade Organization (WTO), the biggest export market of Pakistani kinnow was Afghanistan in 2014, which bought $45.3 million worth of kinnow, followed by Russia, whose purchases totaled $28.5 million in the same year. Because they have the demand for our kinnow and Pakistan is not meeting their demand right now And the cheap trade without taxes due to the Safta Agreements it will be totally free for my firm Sahar with citrus ltd

According to statistics : A Myth that Afghanistan consumes Kinnows :A Journal of Market potential for Pakistani Citrus fruit (Kinnow) in world By Dr. Noor Ahmed Memon elaborates the current situation for exports to Afghanistan :Dr Noor Ahmed says that WTO figures are contentious, noting that Afghanistan could not possibly import that much kinnow from Pakistan because of its tiny population and weak purchasing power. My suspicion is that Pakistani kinnow goes to central Asian states from AfghanistanReference : Published in The Express Tribune, November 28th, 2012.http://www.foodjournal.pk/2014/Jan-March-2014/PDF-Jan-March-2014/Dr-Noor-Kinnow.pdf

The key players in this trade to start my Business In Pakistan :

The channels through which I could export Sahar with Citrus Kinnows :

Whole Format of proposal to Export my Kinnows:

Product No 3: CementCement Industry of PakistanWhat is Cement?Cement is a material with adhesive and cohesive properties that makes it capable of bonding mineral fragment into a compact and rigid mass. The word cement seems to have been derived from the middle age Englishcyment, and Latincaementum.All Pakistan Cement Manufacturers Association (APCMA):APCMA is the apex body of the cement manufacturers of Pakistan. It is registered body under section 3 of the Trade Organization Ordinance 2007 wide license no 14, dated April 26, 2008 issued by Ministry of Commence. It was incorporated on14th of September 1992 under section 32 of the Companies Ordinance 1984.Members: Lucky Cement Cherat Cement Fecto Cement DG Khan Cement Attock Cement Maple Leaf Cement Fauji Cement Pioneer Cement Kohat Cement Time for ActionPakistan cement exports to its main international market of Afghanistan have fallen by a quarter in the first nine months of the current fiscal year 2014-2015. Pakistan exported 2.06Mt cement to Afghanistan in the July-March period of FY14-15, compared to 2.75Mt in the comparative period of the previous fiscal, according to data by the All Pakistan Cement Manufacturers Association (APCMA) which means that Pakistan is losing ground in Afghanistan to exports from Iran and India. So, in this alarming situation, we should compete in this market and again gain market share in the cement industry of Afghanistan.Mode of Entry in the MarketI have chosen to do franchising agreement or do partnership with any existing APCMA member company who does the export to Afghanistan.Dealership for International MarketsORRegistration as ExporterStepsFollowing are the steps for the mode of entry in the market: Certificate of Chamber of Commerce in Pakistan National Tax Number Certificate. Export Import License (Jawaz Nama In the name of Partner in Afghanistan) Blank Cheque in the name of The Company (As Security) Copies of NIC Contract (Agreement) on stamp paper worth Rs. 100 each attested by Notary Public or Oath Commissioner. Bank Statement last three years. Company Profile/ Business Experience. Affidavit (Non Default in Pakistan or Abroad) on Stamp Papers worth Rs. 100 each attested by Notary Public/Oath Commissioner. Partnership Deed attested on Stamp Paper worth Rs. 100 (Between Owner of the Company & the person who own Jawaznama)