Survey on Strengthening Bilateral Economic Relationship ... · the second, and Indonesia is the...
77
Survey on Strengthening Bilateral Economic Relationship between Pakistan and Japan FINAL REPORT February 2019 Ministry of Economy, Trade and Industry International Development Center of Japan Inc. (IDCJ)
Transcript of Survey on Strengthening Bilateral Economic Relationship ... · the second, and Indonesia is the...
Survey on
Strengthening Bilateral Economic Relationship
between
Pakistan and Japan
FINAL REPORT
February 2019
Ministry of Economy, Trade and Industry
International Development Center of Japan Inc.
(IDCJ)
CONTENTS Chapter 1 Overview of Pakistan’s Economy .................................................................. 1
1-1 Macro Economy ....................................................................................................... 1
1-2 Industry................................................................................................................... 2
1-3 Trade ....................................................................................................................... 4
1-4 Inward Foreign Direct Investment ......................................................................... 6
Chapter 2 Pakistan’s Business Environment ................................................................ 8
2-1 Government Organization ...................................................................................... 8
2-2 Business-related Acts .............................................................................................. 9
2-3 Approval and Authorization for Foreign Direct Investment .................................10
2-4 Investment Policy .................................................................................................. 11
2-5 Infrastructure ........................................................................................................14
2-5-1 Electric Power .....................................................................................................14
2-5-2 Railways ..............................................................................................................15
2-5-3 Road ....................................................................................................................16
2-6 IT Industry in Pakistan .........................................................................................18
Chapter3 Requests and Proposals from Pakistan for Strengthening Economic
Relationship .....................................................................................................................21
3-1 Trade ......................................................................................................................21
3-2 Investment Promotion .........................................................................................22
Chapter4 Business Environment in Pakistan from the Viewpoint of Japanese Companies
.........................................................................................................................................25
4-1 Survey Method...........................................................................................................25
4-2 Survey Analysis......................................................................................................26
4-2-1 Analysis of Attractiveness and Competitive Advantage .................................26
4-2-2 Analysis of Promising Industries, Investment Decisive Factors, and
impediment Factors ..................................................................................................28
4-2-3 Analysis of Trade Opportunities......................................................................32
4-2-4 Identification of Recognition Gap on Business Environment and Factor
Analysis ....................................................................................................................36
4-3 Comparative Examples on Business Environment in Pakistan .........................38
4-3-1 Ranking in “Ease of Doing Business 2019” by the World Bank ...................38
4-3-2 Ranking in Global Competitive Index 2018 by World Economic Forum......40
Chapter 5 Measures for Strengthening Bilateral Economic Relationship .....................42
5-1 Improvement of Investment Environment ............................................................42
5-1-1 Overview of Investment Environment ............................................................42
5-1-2 Extraction of Issues .........................................................................................43
5-1-3 Identification of Items to be Improved and Suggestions for Improvement ....45
5-2 Improvement on Strengthening Bilateral Trade Relationship .............................50
5-2-1 Overview of Bilateral Trade ............................................................................50
5-2-2 Extraction of Issues .........................................................................................51
5-2-3 Identification of Items to be Improved and Suggestions for Improvement ....53
5-3 Possibilities of FTA ................................................................................................59
5-3-1 Japan’s FTAs ...................................................................................................59
5-3-2 Pakistan’s FTAs ...............................................................................................61
5-3-3 Possible Impact of FTA on Japanese and Pakistani Economies .....................71
1
Chapter 1 Overview of Pakistan’s Economy
1-1 Macro Economy
Pakistan launched "Vision 2025" in May 2014, a mid- to long-term growth strategy consisting of
three stages: Pakistan aims at becoming among world's top 25 countries in terms of the economic scale
by 2025, becoming one of the global leaders in important sectors by 2035, and becoming among the
world's top 10 countries being a member of developed country in 2047. Even though there was a
change of government, new policy has not been launched.
Pakistan’s population is exceeding 200 million people, of which the population under the age of 30
accounts for 60% of the overall population; in other words, Pakistan has a high economic potential. In
2017, Pakistan’s GDP is US $ 304.95 billion and per capita GDP is US $ 1,541.1.
Table 1-1 Pillars of Pakistan Vision 2025
Pakistan achieved GDP growth rate of 5.8% in 2018 (July 2017/ June 2018), which is the highest
in the past 13 years. Pakistan maintained a low level of inflation of 3.9% and achieved inflation targets
for four consecutive year. This in turn led to the credit expansion in private sector. High economic
growth rates are mainly due to domestic consumption and low interest rates, additional fiscal
expenditure, and the improvement of real income also supported high economic growth.
On the other hand, trade deficits tend to expand due to the rapid increase in imports caused by high
domestic demand, causing a decrease in foreign reserves almost by half from US$ 14.1 billion at the
end of 2017 to US$ 7.3 billion at the end of 2018. Normally, foreign exchange reserves are required
for three months of monthly imports, but the level remained below two months of monthly imports.
In order to curve the increase in imports, Pakistani government imposed Regulatory Duties (RD) on
１．Developing human capital and social development ４．Energy, Water & Food Security
・Realize 100% enrollment rate of primary education. ・Double the total domestic power generation capacity to
・Expand enrollment rate of higher education from 7% to 12%. 45,000 MW.
・Expand the proportion of public health eligible population ・Improve electrification rate from 67% to 100%.
from 48% to 90%. ・Reduce the population facing food insecurity from 60% to 30%.
２．Achieving sustained, indegenous and inclusive growth ５．Private Sector & Entrepreneurship Led Growth
・Modernize the public sector for the provision of efficient and ・Rank in the top 50 countries on the World Bank's Ease of Doing
effective civil services Business rankings.
・Become one of the largest 25 economies in the World. ・Expand private investment from overseas to over $ 40 billion.
・Increase export value from $ 25 billion to $ 150 billion. ６．Developing Competitve Knowledge Economy through
３．Democratic Governance, Institutioal Reform & Value Addition
Modernization of Public Sector ・Improve Productivity
・In the governance index of the World Bank, each item such as ・Improve Pakistan’s score on the World Bank Institute’s
political stability, nonviolence / terrorism, and corruption is Knowledge Economy Index from 2.2 to 4.0.
improved to the top 50% in the world. ７．Modernizaing Transportation Infrastructure & Greater
Regional Connectivity
・Positioned as a regional trade and commercial hub.
・Expand the road from 32 km to 64 km per 100 km2, and expand
the proportion of mode of railways in logistics from 4% to 20%.
2
luxury items in October 2017. Thereafter, State Bank of Pakistan issued Foreign Exchange Circular
No.06 of 2018, stating that advance payment for imports is basically not allowed.1。
The budget deficits in 2018 reached the all-time high in the past five years, and the public debt has
been increasing significantly. According to the IMF, public debt of emerging countries is considered
to reach a dangerous level when the rate of public debt exceeds 70% of GDP. However, the rate of
Pakistan exceeded 72.5% of GDP in 20182. In 2018, Pakistan requested financial assistance to the IMF,
Saudi Arabia, and China. Saudi Arabia agreed in October 2018 to provide Pakistan with a package
equivalent to US $ 6 billion. Pakistan has received financial assistance from IMF 13 times in the past.
Most recently, in September 2013, Pakistan received from the IMF Extended Credit Facility (EFF) of
6.6 billion dollars for three years.
Table1-2 Macro Indicators
Source: SBP
1-2 Industry
The textile industry is a pillar industry in Pakistan, and in 2017 the export value of textiles and
clothing accounts for 59.4% of all export items. In addition, there exists industrial cluster of the
automobile industry. After Automotive Development Policy (ADP) was launched, domestic
production of automobiles has been promoted by attracting new foreign-owned car manufacturers.
With respect to the service industry, Pakistan now attempts to promote IT industry as an emerging
industry.
In 2018, the share of GDP in each sector is 18.9% in agriculture, 20.9% in industry and 60.2% in
service, respectively. Compared to ten years ago, the share of agricultural sector has decreased from
22.6% in 2009, whereas the share service sector has been on an upward trend from 56.6% in 2008.
Meanwhile, the share of industry in GDP has basically remained unchanged.
1 http://www.sbp.org.pk/epd/2018/FEC6.htm 2 IMF「Fiscal Monitor 2018 April」
FY15 FY16 FY17 FY18
Target Result
Growth Rate（％）
Real GDP Growth Rate 4.1 4.6 5.4 6.0 5.8
Agriculture 2.1 0.2 2.1 3.5 3.8
Industry 5.2 5.7 5.4 7.3 5.8
Service 4.4 5.7 6.5 6.4 6.4
Credit to Private Sector 5.9 11.2 16.8 - 14.9
CPI 4.5 2.9 4.2 6.0 3.9
Percentage of GDP（％）
Current Account -1.0 -1.7 -4.1 -2.6 -5.8
Fiscal Balance -5.3 -4.6 -5.8 -4.1 -6.6
Public Debt 63.3 67.6 67.0 61.4 72.5
3
The growth rate of the service sector has been stable since 2009, but that of industry and agriculture
fluctuates significantly. With respect to sector’s contribution to GDP growth rate of 5.8%, contribution
of service sector is the highest of all sectors and accounts for 3.9% whereas agricultural and industrial
sector accounts for 0.7% and 1.2% (of which manufacturing industry accounts for 0.84%), respectively.
Agriculture achieved a growth rate of 3.8% in 2018, exceeding the target of 3.5% owing to the high
growth of sugarcane, rice and cotton production. In the industrial sector, the production of mining,
coal, lime and bauxite drove the growth rate. In the manufacturing sector, small and medium
enterprises maintained the same growth rate as the previous year, whereas the large manufacturing
industry (LSM: Large-scale Manufacturing Sector) exceeded the growth rate of the previous year.
Growth rate was spectacular in the industries such as petroleum (10.6%), cement (11.1%), automobile
(19.5%), steel (13.9%) and electronics (38.8%).
Regarding subsector of the service sector, growth rate of wholesale and retail sector was 7.5 % year
on year and attained the highest growth since 2007.
Figure 1-1 GDP by sector (in percentage)
Source：Pakistan Bureau of Statistics
Figure 1-2 Growth Rate by Sector
Source：Pakistan Bureau of Statistics
4
1-3 Trade
In 2017, Pakistan’s trade deficits further expanded to US $ 35.6 billion. In recent years, the trade
deficit tends to expand possibly due to the FTA with China and the imports of capital goods through
China Pakistan Economic Corridor (herein referred to as CPEC); however, it is said that imports of
low-cost capital equipment support Pakistan’s local industry, especially textile and cement through
technological upgrading and improvement of infrastructure3.
Imports have increased by 22% year-on-year from US $ 47 billion in 2016 to US $ 57.4 billion in
2017. This is because, in addition to the increased imports of petroleum, machinery, metals, and
chemicals, commodity prices of oil and steel rose. Consequently, the import value is 2.6 times higher
than the export value.
Exports tended to decline in recent years, from US $ 25.3 billion in 2011 to US $ 20.5 billion in 2016;
however, the situation turned around in 2017 and exports rose to US $ 21.9 billion. This was due to
the improvements in domestic energy supply and commodity prices in international markets.
CPEC is primarily focused on infrastructure development centered on power plants and the like, and
imports of capital goods such as machinery and transport equipment have been increasing significantly.
The IMF states that CPEC may have the positive effect of reducing Pakistan’s excessive dependence
on oil, improving productivity and boosting economic growth by realizing a stable supply of electricity.
However, at the same time, the repayment of loans, the repatriation of profits, and the imports of fuel
necessary for the CPEC projects might worsens the trade balance. It is expected to reach the peak of
trade deficit with a range of US$ 35 to 45 billion in 2024/20254。
In 2017, the United States is the largest market for Pakistan. The U.K. follows next and China ranks
the third largest market for Pakistan. Meanwhile, China ranked first in terms of imports. The UAE is
the second, and Indonesia is the third largest country for Pakistan’s imports. Japan ranked 22nd for
Pakistan’s market and ranked 6th as its import partner.
3 “Dynamic of Pakistan’s Trade Balance with China”, Junaid Kamal, Manzoor Hussain Malik, SBP Staff Notes 4 IMF Country Report No.17/212, July 2017
5
Figure1-3 Pakistan’s Trade from 2007 to 2017
Source：ITC TRADE MAP
6
Table1-3 Pakistan’s Top 5 Markets and Import Partners（2017）
Source：The World Bank WITS
1-4 Inward Foreign Direct Investment
In 2018, China made the largest investment with US$ 1.8 billion in Pakistan, 49.6 % increase year-
on-year, accounting for 58.6% of all inward direct investment. The U.K. ranked the second, investing
US$ 300 million with an increase of 42.5% over the previous year. Investment from Japan is US $ 60
million, increase of 3.6% over the previous year.
Electric power is the largest investment sector, totaling US$ 997million with an increase of 42.4%
year-on-year. This is mainly because CPEC has implemented a large number of electric power
development projects. Also, construction sector increased by 52%, amounting to US$ 710 million.
In addition, as a large-scale project, Edotco, an affiliate of Malaysia's major telecommunications
giant Axiata Group, announced that it would purchase a subsidiary of PMCL, Pakistan’s major telecom
carrier, for US$ 940 million. In terms of consumer goods, a major Dutch consumer company, Unilever,
announced in March 2018 to invest US$ 120 million for the expansion of its factory in Pakistan. In
April 2018, CCI Pakistan, bottler of a major American company Coca Cola, invested US$ 4.5 million
and established a new factory. In the non-manufacturing industry, German IT company, rocket Internet,
announced in May 2018 that it sold all the shares of "Dollars", the Internet communication venture
established in Pakistan in 2012, to a Chinese internet giant, Alibaba.
Export Partners US$ billions Import Partners US$ billions
US 3.6 16.3% China 15.4 26.8%
UK 1.6 7.5% UAE 7.5 13.1%
China 1.5 6.9% US 2.8 4.9%
Afghanistan 1.4 6.4% Indonesia 2.6 4.5%
Germany 1.3 5.9% Saudi Arabia 1.8 3.2%
Others 12.5 57.1% Others 27.3 47.5%
Total 21.9 100% Total 57.4 100%
7
Figure 1-4 Inward Foreign Direct Investment by country（2009/2010～2017/2018）
Source：SBP Website
Table 1-4 Inward Foreign Direct Investment by Sector
Source：SBP Website
（US$ million,％）
2016/17
Net FDI Net FDI % Growth
Electricity 700 997 32.2 42.4
Thermal 403 787 25.4 95.2
Hydro 207 129 4.2 △ 37.9
Construction 466 709 22.9 52.0
Finance 296 400 12.9 35.2
Oil and Gas Exploration 146 193 6.2 31.9
Food 526 93 3.0 △ 82.4
Trade 33 143 4.6 332.0
Transportation 58 57 1.8 -1.8
Transport Equipment 59 66 2.1 11.5
Total （including others） 2,747 3,092 100.0 12.6
FDI in Pakistan
2017/18 (provisional)
8
Chapter 2 Pakistan’s Business Environment
2-1 Government Organization
Private sector and entrepreneurship-led growth is positioned as the fifth pillar in "Vision 2025".
Government's role is to develop an institutional reform framework that is beneficial to creating a
business friendly, secure, transparent, and level playing field for private sector development, together
with policy and regulatory regimes that incentivize investment more efficiency,
Ministry of Commerce (MOC) is in charge of trade whereas Board of Investment (BOI) is
responsible of investment. In addition, the Federal Board of Revenue (FBR) assumes responsibility
for income tax, sales tax, excise tax, import and export duties, etc. The State Bank of Pakistan (SBP)
takes charge of foreign exchange and regulations.
MOC has jurisdiction over the regulation of commercial activities such as importing and exporting.
Also, MOC is the organization that negotiates and signs FTA with other countries. As a subordinate
body of MOC, National Tariff Commission handles rationalization of tariffs and elimination of
exceptional tariffs. It also possesses authority and investigation functions on tariff measures such as
anti-dumping, countervailing tariffs and safeguards. Moreover, based on requests from Pakistani
exporters, National Tariff Commission investigates and copes with WTO related issues. As another
subordinate body of MOC, Trade Development Authority of Pakistan (TDAP) promotes trade by
organizing exhibitions in Pakistan and overseas, analyzes overseas markets, and draft a trade policy.
BOI formulates investment policy and provides a series of facilitations such as receiving
applications, giving permission and approval on incentives in SEZs. Also, BOI gives approval for the
establishment of foreign representative offices and branch offices, facilitates such procedures as work
permit, negotiates and drafts a bilateral investment agreement, and take various measures for
improving investment climate. Counterpart of Chinese government for CPEC is Ministry of Planning
and Development (MOIP) but BOI takes initiatives in SEZs.
Securities & Exchange Commission of Pakistan (SECP) has jurisdiction over Corporate Law and
other related laws and is in charge of approval of the establishment of local subsidiary companies.
(See Table 2-1）.
Export Processing Zones of Authority (EPZA) under Ministry of Industry and Production (MOIP）
is in charge of Export Processing Zone (EPZ). EPZA promotes exports of companies in EPZ through
incentive measures such as exemption of import duties.
9
Table 2-1 Establishment of Local Subsidiary
Form of company
Scope of Activities Organization in Charge
Procedures
Overseas affiliated company
Commercial Activities
SECP
i) approval of BOI and other ministries, ii) capital payment, iii) application to SECP, iv) approval of Central Bank, v) tax number registration, and vi) local administrative procedures
Branch office Activities on
contract basis are permitted.
BOI i) approval of BOI and ii) registration at SECP
Representative office
Only survey is allowed.
(Commercial Activities are not
allowed）
BOI i) Approval of BOI and ii) registration at SECP
Application of Work permit
1-2 months（Online
application is acceptable）
BOI i) approval of BOI, and ii) approval of Ministry of Interior
Source：JETRO, JICA, BOI website
2-2 Business-related Acts
Acts related with investment are as follows:5
Special Economic Zone（SEZ Act 2012）：(Amendment in 2016)
➢ One-time exemption from all custom-duties and taxes on plant and machinery imported into
Pakistan (Section 37 a)
➢ Exemption from all taxes on income for enterprises commencing commercial production by the
thirtieth June 2020, in the SEZs for the next ten years (Section 37 b)
Income Tax Ordinance (2001), Division II of Part 1
➢ The rate of tax as specified in Division II of Part 1 of the First Schedule shall be reduced to 20%
for a company setting up an industrial undertaking between the first day of July, 2014 to the
thirtieth day of June, 2017, for a period of five years beginning from the month in which the
industrial undertaking is set up or commercial production is commenced whichever is later:
Provided that fifty percent of the cost of the project including working capital is through owner
equity foreign direct investment. (Section 18)
Income Tax Ordinance (2001), 65B. Tax credit for investment
➢ Tax credits equivalent to 10% or 20% of the costs incurred by newly established factories,
equipment machinery, etc. are given. It is possible to carry forward for 2 to 5 years.
5 JETRO ウェブサイト参照
10
➢ Conditions: For plants / machines purchased / installed for the purpose of business expansion,
facility replacement between July 1, 2010 and June 30, 2021.
Income Tax Ordinance (2001) 65D
➢ A fixed percentage of tax credits are paid out of corporate taxes paid for 5 years. Percentage is
calculated as corporate tax amount * (the amount of new stock issuance for immediate cash
consideration / total investment amount).
➢ A company that was established (stock registration and production start) between 1 July 2011 and
30 June 2021 and invested at a borrowing ratio of 30% or less.
Income Tax Ordinance (2001) 65E
➢ Where a taxpayer being a company, setup in Pakistan, invests any amount, with new equity raised
through issuance of new shares, in the purchase and installation of plant and machinery for an
industrial undertaking, for the purpose of the expansion of plant and machinery already installed
therein or a new project, a fixed rate of tax credit is given to the project cost, for a period of five
years beginning from the date of setting up or commencement of commercial production for the
new plant or expansion project.
➢ The amount of a person‘s tax credit allowed for a tax year shall be computed according to the
following formula：A*(B/C) where A (the amount of tax assessed to the person for the tax year
before allowance of any tax credit for the tax year), B (the equity raised through issuance of new
shares for cash consideration) and C (the total amount invested in the purchase and installation
of plant and machinery for the industrial undertaking).
➢ Where a taxpayer maintains separate accounts of an expansion project or a new project the
taxpayer shall be allowed a tax credit equal to one of the tax payable, including minimum tax and
final taxes payable under any of the provisions of this Ordinance, attributable to such expansion
project or new project
➢ Tax credit shall apply when a company established in Pakistan before July 1, 2011 utilizes
capital obtained by issuing new shares (borrowing ratio is 30% or less) and establish a factory
or purchasing equipment for the expansion of project for a new plant and purchase and
installation of plant and machinery from July 1, 2011 to June 30, 2021.
2-3 Approval and Authorization for Foreign Direct Investment
Almost all business sectors are open to foreign direct investment in Pakistan, yet the investors need
approval from Pakistani government for the fields below: (i) weapons and explosives, (ii) high-
performance explosives, (iii) radioactive substances, (iv) securities, currency, and money printing, and
(v) manufacturing of alcoholic beverages and alcoholic beverages, excluding their industrial use.
11
In agriculture sector, 100% foreign capital is allowed only in the case of establishing Corporate
Agricultural Farming based on Corporate Law. In other agricultural fields, share of foreign capital is
limited to up to 60%. Basically, 100% foreign capital is permitted in the service sector, but in the case
of finance, insurance and airline companies, the investment ratio of foreign capital is limited to up to
49%.
Regarding the minimum investment amount, there is no limitation in all sectors. In service sector,
foreign capital previously had to pay US$ 150,000 regardless of what percent of capital participation,
yet it was abolished by the investment policy announced in February 2013.
Table2-2 Pakistan’s Foreign Investment Policy
Manufatruing
Non Manufacturing
Agriculture Infrastructure
Service
（including
IT）
Necessity of Approval
of Government
Unnecessary
except probimited
industries
Unnecessary
licenses of relevant authority are required
Equity of Foreign
Capital
100％
（except agriculture,
airlines, Media and
Banking）
100% 100% 100%
Mimimun Investment Nothing Nothing Nothing Nothing
Limit of Repatriation
of Profits and Dividend Nothing Nothing Nothing Nothing
Tariff rate on
equipment which is
not manufactured in
Pakistan
5% 0 5% 0-5％
Initial Depreciation
Rate for Machinery
and Equipment
25% 25%
Limit of Remittance of
Royalties and
Technical Fees
Nothing
Follow guidelines. Lump sum payment up to
100,000 dollars (upper limit) for the first 5 years.
Up to 5% of net sales.
Source: BOI, JETRO website
2-4 Investment Policy
2-4-1 Incentives in Special Economic Zones (SEZs)
1) Incentives
SEZ Act Section 37 stipulates incentives for companies investing in Pakistan.
One-time exemption from custom-duties and taxes on import of plant and machinery into SEZ
expect items listed under Chapter 87 of Pakistan Custom Tariff.
Companies that commence commercial production by June 30, 2020 are exempted from all taxes
12
on income for the next 10 years, and companies that start production after the date shall be
exempted from taxes on income for the next 5 years.
Enterprises must commence commercial activities within 24 months from the date of approval.
2) Existing Special Economic Zones (SEZs)
There are currently eight Special Economic Zones (SEZs) with 7,847 acres in Pakistan: (i) Khaipur
SEZ, (ii) Bin Qasim SEZ, (iii) Korangi Creek SEZ, (iv) Hattar SEZ, Phase VII, (v) Quaid e Azam
Apparel Park, (vi) M-3 Industrial City, (vii) Value Added City6。BOI aims at attracting companies
through measures such as incentives and one stop service. However, its infrastructure issues remain
unsolved and there exist issues such as lack of gas, electric supply and unavailability of DSL. Table
2-3 shows features of each SEZ.
Table 2-3 Existing Special Economic Zones (SEZs）（2018）
SEZ Province Acres Main Industries Sectio
n
Section
sold
1 Khaipur SEZ Sindh 140 Agricultural processing 85 69
2 Bin Qasim SEZ Sindh 930
Light engineering, automobile, steel,
chemical, pharmaceutical, and
electronical appliances
717
Acres 541
3 Korangi Creek
SEZ Sindh 240
Consumer goods, food, pharmaceutical,
garment, textile, light engineering,
packaging and printing, warehouse, and
logistics
240
Acres 85
4 Hattar SEZ,
Phase VII KP 424 Mineral, marble, and food processing 318 274
5 Quaid e Azam
Apparel Park Punjab 1,536 Textile and cotton 494 N/A
6 M-3 Industrial
City Punjab 4,356
Textile, engineering, construction,
chemical, pharmaceutical, electronics,
food and beverage, and IT
576 476
7 Value Added
City Punjab 225
Textile, chemical, pharmaceutical,
engineering, and IT 128 128
Source: BOI website
In addition to the existing SEZs, there is an ongoing plan to establish nine SEZs in the CPEC
framework. Iron steel, petrochemical, textile, agriculture, and mining and mineral are prioritized
industries for Chinese SEZs. Proposed SEZs are (i) Rashakai SEZ, (ii) China SEZ, (iii) Boston
Economic Zone, (iv) Allama Iqbal SEZ, (v) ICT Model SEZ, (vi) Industrial Park on Pakistan Steel
Land at Port Qasim, (vii) Mirpur SEZ, (viii) Mohmand Marble City, and (ix) Maqpoondas SEZ. Table
6 http://www.invest.gov.pk/ViewNews.aspx?NID=2589
13
2-4 illustrates features of each SEZ.
Table 2-4 SEZs in the of CPEC Framework（2018） SEZ Province Acres Main Industries Status
1 Rashakai SEZ KP 1,000 Fruit, food, packaging, textile
sewing, and knitting
F/S completed, land
obtained
2 China Special
Economic Zone
Sindh
（Dhabeji） 1,000
To be decided at the stage of
F/S F/S in preparation
3 Boston Economic
Zones Balochistan 1,000
Fruit processing, agricultural
equipment, pharmaceutical,
bike assembly, chromium,
cooking oil, ceramic, frozen
warehouse, electronic
equipment, and halal food
200 acres developed
4 Allama Iqbal SEZ
Punjab
（Faisalabad
）
3,000
Textile, iron, pharmaceutical,
engineering, chemical, food
processing, plastic, agricultural
equipment etc.
F/S completed, land
obtained, under
construction next to
M-3 Industrial City
SEZ
5 ICT Model SEZ
Federal
Government
（Islamabad
）
200-
500
Iron, food processing,
pharmaceutical, printing and·
packaging and light engineering
To be determined
6
Industrial Park on
PS land at Port
Qasim
Federal
Government
（Karachi）
1,500
Steel, automobile,
pharmaceutical, chemistry,
printing and packaging,
garment, etc.
Land obtained.
Transferred from
Pakistan Steel Mill to
NIP
7 Mirpur Industrial
Zone AJ&K 1,078 Various industries
Land obtained. F/S in
preparation
8 Mohmand Marble
City FATA 350 Marble, and others
Completed
（expansion in
schedule）
9 Maqpoondas SEZ GB 250
Marble and granite, ore
processing, fruit processing,
steel, mineral processing and
leather
F/S completed
Source: BOI and CPEC website
AJ&K: Azad Jammu and Kashimir, FATA: Federally Administered Tribal Areas
2-4-2 Incentives for Export Processing Zones
1) Incentives
In the case of export-oriented companies, EPZ’s incentives and infrastructure with 30 year lease
term are more favorable than SEZ.
Duty-free import of machinery, equipment and materials.
Presumptive tax: companies can substitute corporate tax if they pay 1% of export value (FOB).
14
Domestic market available to the extent of 20% of sales if they pay tariffs.
Obsolete/old machines can be sold in domestic market of Pakistan after payment of applicable
duties & taxes
National import regulations not applicable
No sales tax on input goods including electricity/gas bills
Exchange control regulations of Pakistan not applicable
2) Existing Export Processing Zones (EPZs)
There are currently four existing Export Processing Zones, namely Karachi EPZ, Risalpur EPZ,
Sialkot EPZ and Gujranwala EPZ, all of which are managed by the Export Processing Zone Authority
(EPZA) under Ministry of Industries and Production. There are other EPZs, such as the Sandak copper
and gold mine development project, yet they are rather projects than industrial parks.
Karachi EPZ is located at a distance of 18 km from Jinnah International Airport and 10 km from
Port Qasim and is the first EPZ in Pakistan with an area of 305 hectares (Phase 1 and Phase 2). There
are 263 companies operating in the EPZ in 2016. They are mostly local companies and the share of
textile companies account for 75% of all companies. Sialkot EPZ has a high potential with abundant
skilled workforce in such industries as surgical instruments, sporting goods, leather goods. Out of 881
sections in the EPZ, 95% of the sections is already being occupied The Risapur EPZ is located close
to Central Asia markets such as Afghanistan, Iran and other Central Asian countries, and thus has a
potential in trade and warehousing business, food processing, carpets and furniture, minerals and
others. Gujranwala EPZ features light engineering and cutlery industries7.
Table 2-5 Existing Export Processing Zones（EPZs）
EPZ Year Acres Features
Karachi EPZ 1981 305 IT/Precision Engineering/High-Value Garments/Gems & Jewelry
Sialkot EPZ 2002 92 Surgical/Sports Goods/Leather Goods.
Risalpur PZ 2005 238 Trading-Warehousing / Furniture / Engineering.
Gujranwala EPZ 2013 113 Light Engineering / Consumer Durables.
Source: EPZA website
2-5 Infrastructure
2-5-1 Electric Power
Electricity generation capacity exceeded 26 million kW in FY2015 / FY2006. As for the energy mix,
thermal power generation accounts for 66%. There are 21 projects in the energy support project in
CPEC, totaling US$ 26.37 billion. These projects include assistance for coal-fired power generation,
7 https://content.pk/pakistan/export-processing-zones-in-pakistan/
15
hydroelectric power generation, solar power generation, and wind power generation and transmission
lines. There are 8 coal-fired power projects and the amount of investment is US$ 15.79 billion,
accounting for 60% of the total energy projects. The total output is as large as 9.54 million kW,
accounting for 69% of the total output. The ratio of coal-fired power generation is expected to increase
further in the future 8.
Table 2-6 Generating Capacity
1999/0
0
2009/1
0
2014/1
5
2015/1
6
CAGR
Generation
Capacity
（10,000kw）
Thermal 1244 1332 1554 1732 2.1
Hydro 483 656 703 712 2.5
Other Renewable Energy - - 44 81 -
Nuclear 14 46 75 109 13.8
TOTAL 1741 2034 2376 2634 2.6
Output
（100 million
kWh）
Thermal 4606 6437 7849 3.4
Hydro 1929 2851 3247 3.7
Other Renewable Energy - - 99 15.9
Nuclear 40 289 421 3.7
TOTAL 6575 9577 11616 4.3
Source: IEA
Generation Capacity Electricity Output
Figure 2-1 Pakistan’s Energy Mix（2015/2016）
2-5-2 Railways
Imported charcoal in Pakistan is transported by state-owned Pakistan Railways. Pakistan Railways
belongs to the Ministry of Railway of the Federal Government and the total length of all routes is
8 http://cpec.gov.pk/energy
16
11,881 km. Pakistan utilizes US$ 8.4 billion from CPEC loan in order to speed up and upgrade
transport capacity of railways. This will facilitate efficient transportation of coal for thermal power
plants9.
2-5-3 Road
Total road length in Pakistan is 261,595 km, and the length of trunk roads including the expressway
is 12,131 km. The National Highway Authority (NHA) under the Ministry of Communications has
jurisdiction over these national highways, motorways, strategic roads, and highways, being
responsible for the planning, promotion, and implementation of projects for construction, development,
operation, repair and maintenance of these roads. 5 routes totaling 996 km will be developed by CPEC,
two of which have already been under construction.
Table 2-7 Pakistan’s road network under NHA (Km)
Total Roads in Pakistan 261,595
Total of NHA Roads 12,131
- National Highways 9,489
- Motorways 2,280
- Strategic Roads 262
- Expressways 100
Source: JICA
CPEC was kicked off in April 2015 when Xi Jinping visited Pakistan and signed 51 projects. With
financial assistance from China, CPEC is said to be a huge investment with US$ 46 billion. CPEC will
connect 2,700 km of railway, highway and pipeline from Gwadar Port of Pakistan to Kashgar, Xinjiang
Uygur Autonomous Region of China. However, the amount of investment may vary because some
projects are still at the stage of review.
The scope of cooperation in CPEC is: (i) industry, (ii) finance, (iii) agriculture, (iv) tourism, (v)
education, (vi) human resources development, (vii) healthcare, (viii) people-to-people exchange, (ix)
increase of livelihood opportunities, and (v) regional security and stability strengthening. CPEC
projects will continue until 2030.
9 METI’s survey on the situation and efficient use of activated carbon in Japan (February 2019)
17
Table 2-8 Sector and Estimated Cost of CPEC (US$ million)
Sector Number of
Project Estimated Cost Estimated Cost
Energy 21
26,370 33,000
Generation Capacity：
13,810MW
Generation Capacity：
17,045MW
Infrastructure
(Road) 5 5,341 5,341
Infrastructure
(Railways) 3 8,237 8,237
Infrastructure
(Optical Fiber） 1 44 44
Gwadar Port 12 793 10,000-14,000
Total 42 40,785 58,622
Source：CPEC & Pakistani Economy: An Appraisal by Dr. Ishrat Husain (April 2018)
18
2-6 IT Industry in Pakistan
2-6-1 Overview of IT Industry
Pakistan's IT industry is growing, and there is a possibility of further expansion in the future. The
current situation and outline of IT industry is as follows:
Table 2-9 Summary Information of IT Industry in Pakistan
5,000 companies (estimated 3,500 export-oriented + 1,500 domestic)
300,000+ IT & ITeS professionals with expertise in current and emerging IT products and
technologies
20,000+ IT graduates each year join the workforce
Export Revenue: $3.8 billion (includes ? billion earned by MSMEs & Freelancers)
Export Remittances: $831.35 million (151% increase over last 5 years @ CAGR of 20%)
Domestic Revenue: $1 billion
Exporting to 100+ countries
3rd most financially attractive country in the world for outsourcing services (A.T. Kearney’s
Global Services Location Index 2017)
3rd most popular country for freelancing (Oxford Internet Institute (OII), ‘Online Labour
Index’ 2018)
300+ international companies including Global enterprises like Bentley, Ciklum, IBM, Mentor
Graphics, S&P Global, Symantec, Teradata, VMware etc. have established BPO support,
development & global consulting centers in Pakistan
Source: Pakistan Software Export Board(PSEB）
In order to promote the IT industry, the government of Pakistan approved several incentives for 15
years to the industry in 2001 to grow to more than USD 3 billion from the market size of USD30
million at that time. The main incentives for IT industry are as follows:
Table 2-10 Government Incentives for Pakistan's IT industry
Zero income tax on IT & ITeS exports till June 2025
Zero Income tax, and no minimum tax and no withholding tax for PSEB registered IT start-ups
for 3 years
Up to 100% foreign ownership of IT & ITeS companies
Up to 100% repatriation of profits for foreign IT & ITeS investors
Tax holiday for venture capital funds till 2024
Foreign currency account permitted for only receipt of export remittances (up to 35% can be
retained in foreign currency)
19
Accelerated depreciation of 30% on computer equipment
Provision of low rent space in Software Technology Parks (STPs)
Source：PSEB
2-6-2 Software Development
Software development is rapidly growing in Pakistan. IT companies are developing software for
use in various kinds of businesses and services. Local-made software packages can be implemented
at low cost in schools, hospitals, supermarkets and other companies, and large-scale control systems
such as ERP can be used for manufacturing of textiles, medicines, foods and beverages. The increase
in the use of Android smartphone, tablet, and Apple iPad has given a big boost to the mobile
application development industry.
According to the Pakistan Software House Association (PASHA), Pakistan's software development
cost is about 20% lower than India, and price competitiveness is their strength. The top 5 Pakistani
software exporters in 2018 are as follows:
Table 2-11 Top 5 Pakistani Software Exporters
Source：PSEB
2-6-3 E-Commerce
According to JETRO’s research report of "Pakistan's e-commerce market survey (March 2017)",
Pakistan's e-commerce market size is estimated quoting the IT professional’s view such as "The
current Pakistan e-commerce market size is USD100 million and it will grow to be an industry of
USD10 billion in the next five years". According to PASHA's survey, Pakistan has 150 million mobile
phone users, 53 million broadband users, and 36 million social media users for a population of 200
million.
Although Pakistan has basic conditions to succeed in e-commerce, there is still a shortage of online
platforms that are still mainly cash-based settlements and lack of online platforms that allow for all
payment methods tailored to the region.
1 NetSol Technologies Ltd Asset finance & leasing software
2
S&P Global Market Intelligence
Company Financial data analytics
3 Systems Limited IT consulting, ERP, BPO services
4 Ibex Global Solutions (Pvt) Ltd A TRG company providing BPO solutions & services
5
Teradata Global Consulting
Pakistan (Pvt) Ltd Data analytics & global consulting services
Rank
FY2018Name of Company Main Areas of Expertise
20
Many people living in urban areas of Pakistan are aware of the existence of e-commerce, since major
e-commerce management companies such as Daraz, OLX, and others are developing advertising
campaigns. The majority of people using online retail sites have chosen cash on delivery (COD) to
pay for ordered items and the operating companies also provide cash on delivery (COD) as a payment
method.
Major e-commerce companies are Daraz, which was acquired recently by Alibaba in China, Kaymu,
Foodpanda, Lumdi, Shophive, Homeshopping, Symbios, Rozee, Yayvo, Careem, Pakwheels, Olx,
Tradekey, Tohfay, etc.
2-6-4 Support for startup
Ignite (formerly National ICT R&D Fund) is a non-profit company owned by the Government of
Pakistan and administered by the Ministry of Information Technology and Telecommunication. It
provides grants to startups and innovate projects, operates incubators and digital skills training
programs through private sector partners, commission studies that inform public sector policy and
undertakes outreach to evangelize innovation and to spread awareness about its programs amongst
industry, academia, media and policy makers. Ignite was established in 2007 and is funded by mobile
telecom operators, landline telecom operators and internet service providers, ISP, in Pakistan by
government mandate. Ignite already used investment funds of 2.9 billion rupees to provide incubation
support to more than 141 startup companies, creating more than 890 jobs.
In addition, there are an increasing number of companies investing in Pakistan's IT companies,
according to PASHA, domestic and foreign major investors who made aggressive investment in the
past 4 years are as shown below:
（
Figure 2-2 Major investors for IT companies in Pakistan
Source：PASHA
21
Chapter3 Requests and Proposals from Pakistan for Strengthening Economic
Relationship
The Government of Pakistan focused on bilateral trade and investment, and several requests and
proposals on the economic relationship made by them were shown to the Japanese side in 2018.
Pakistan's main requests and proposals on strengthening economic relationship are as follows:
3-1 Trade
Regarding bilateral trade in 2017, Pakistan's export value to Japan is 216 million dollars, which is
an increase of about 100 million dollars in comparison with the previous year of 123 million dollars
in 2010, while Pakistan’s import from Japan increased by 700 million dollars from $ 1,594million
dollars in 2010, to 2,293 million dollars in 2017. Pakistan’ s Ministry of Commerce has pointed out
that the trade deficit with Japan has increased by more than 2,000 million dollars as a result.
Reasons for sluggish exports to Japan by major items are as follows.
Table 3-1 Reasons for Exports Decline to Japan by Sector
Source: Presentation Material of Ministry of Commerce, Pakistan
All the items are only a very small proportion compared with the total imported amount in Japan. It
is explained that the main reasons for major stagnation are high tariffs, visa problems, certificate
problems, necessity of technological enhancement to meet Japanese standards, difficulty of
compliance with standards, and so on.
Pak exp to Jap
(USD mns)
Japan Imp from World
(USD mns)
High tariffs
Visa issues
Articles of Apparel 38.1 High tariffs
Visa issues
Base Metals 20.2 31,520.30 Visa problems
High tariffs
Certification issue
Visa Problems
Constant demand
Visa issues
Support needed in upgrading
skills to meet enhanced
Japanese Standards
Animal Prods(Fish, meat, Dairy)8.0 15,968.90
Support needed in reaching
Standards
Visa issues
Support needed in upgrading
their skills to meet enhanced
Japanese Standards
Mis. Manufactured Articles 5.8 15,239.00 Standards compliance
Prepared Foodstuffs 2.1 23,670.70 Standards Compliance
Vegetable Products
10.8 20,425.40
Surgical Instruments
7.7 28,105.40
31,702.60
Leather15.6 6,063.40
Mineral Products12.5 210,039.80
Sectors
2013-17
Survey results
Textiles65.8 5,257.40
22
On the other hand, breakdown of imports to Japan and comparison with other countries are as
follows:
Table 3-2 Major items Imported from Japan (2017) and tariffs as well as comparison
with other countries
Source: Presentation Material of Ministry of Commerce, Pakistan
Note: MFN：Most Favorable Nation Treatment
In Table 3-2, it explains about the ratio of major import items from Japan to the total import value
of Pakistan as well as comparison with China and Malaysia respectively, showing the tariff rate, of
which China and Malaysia concluded FTA with Pakistan. It suggests that Japan faces the problem of
tariff rate differences in machinery, electrical equipment, steel, chemicals, medical and surgical
equipment, textiles and plastics.
3-2 Investment Promotion
Regarding Foreign Direct Investment (FDI) to Pakistan, they shown the total FDI, the comparison ,and
trend of FDI from Japan as follows.
Sectors
MFN rate
(avg)
Pak imps
from
Japan avg
13-17
Pak imps
average
%age
share of
Japanese
imports
China FTA
rate
Imports
from
China
Maly FTA
rate
Imports
from
Malaysia
Vehicles 34.3 887.26 2,254.50 39.40% MFN 399.69 MFN 50.6
Machinery 9.8 322.74 4,347.30 7.40% 2.2 1,206.07 2.8 60.7
Iron and steel, Articles of iron
and steel 13.9 239.67 3,101.90 7.70% 8.8 944.78 8.2 12.1
Misc manufactured articles 15.5 213.61 1,992.00 10.70% 7.5 259.3 7.6 8.8
Electrical equipment 15.3 60.6 3,784.70 1.60% 5.9 2,149.73 6.3 25.2
Chemicals 11.7 60.43 5,268.50 1.10% 3.1 1,379.18 3.5 90.2
Medical or surgical instruments, 9.1 46.84 559.9 8.40% 2.2 126.57 2.1 6.2
Textiles 13.7 33.86 2,744.10 1.20% 9.2 1,058.95 5.3 44.5
Plastics, Articles of plastic 15.4 32.9 1,995.70 1.60% 5.2 303.24 13.3 34.3
Important sectors for Japan USD millions
23
Figure 3-1 Trends of Foreign Direct Investment for Pakistan
Source: Presentation Material of Ministry of Commerce, Pakistan
Overall, the amount of FDI from Japan is extremely small. In the total FDI to Pakistan, share of
Japan's FDI since 2014 peaked at 7.1% in 2015 and decreased to 1.9% in 2018. The breakdown of FDI
from Japan is shown as follows.
Figure 3-2 Breakdown of Foreign Direct Investment from Japan to Pakistan
Source: Presentation Material of Ministry of Commerce, Pakistan
The total FDI from Japan declined by 16% from 2015 due to the decrease of power, trade and
chemicals, and slight increase is seen in the financial and automotive sectors. It is pointed out that the
overall trend is on downward and investment in the automotive sector has not increased so much.
7.1％ 1.5％ 2.1％ 1.9％
24
Pakistan is expecting a decrease in automobile-related imports from Japan and exports from Pakistan
in the future as a result of further investment reinforcement from Japan in the automobile sector.
In order to attract overseas enterprises, Pakistan has established SEZ and provided the following
incentives. They would like Japanese enterprises to enter SEZ and to increase their investment in
Pakistan more.
➢ Tax exemption for 10- year income of tenant enterprises
➢ Exemption of import duties on capital goods constructed and installed in SEZ
➢ Supply of gas, electricity, water etc.
➢ Function as a one-stop shop for contact / facilitation by BOI
➢ Additional incentives granted to the following 9 higher priority SEZs under CPEC include
provision of site on installment payment basis (50% down payment and quarterly payment), low
markup rate loan, cargo subsidy (50% in inland transportation of plants and machinery), etc.
(Refer to Table 2-4 for SEZ according to CPEC framework.)
However, various problems are being pointed out from Japanese companies currently having factory
at SEZ in Bin Qasim area, and under the present circumstances, the situations explained by Pakistan
are not necessarily in place. (Refer to Chapter 4 and Chapter 5)
25
Chapter4 Business Environment in Pakistan from the Viewpoint of Japanese
Companies
4-1 Survey Method
The survey in this Chapter refers to the document information by JETRO, JICA, and the Karachi
Japanese Commerce and Industry regarding the business environment of Pakistan as well as the
requests of Japanese companies made. In addition, a questionnaire survey on this subject was
conducted to Japanese companies related to Pakistan. Through their answers of their views and ideas
on the business environment or the issues they faced, it is decided to consolidate direct comments of
the Japanese companies in the present situation as much as possible for analysis.
The main items of the questionnaire survey are as follows:
➢ Attractiveness and competitive advantage of Pakistan
➢ Promising industries for investment in Pakistan,
➢ Investment decisive factors and impediment factors
➢ Trade opportunities with Pakistan
➢ Identification of recognition gap on business environment and factor analysis
The main evaluation methods in the questionnaire survey items are as follows:
➢ Evaluation by Perception (Subjective) (Evaluation point of 1 to 5)
➢ Objective evaluation based on actual situation (import and export etc.)
➢ Complementing information by description format
The questionnaires Survey was conducted in August 2018, and total of 50 Japanese companies
responded to us. The main breakdown of the responding companies is as follows.
By Operating /Non-operating in Pakistan By Industry Type
Figure4-1 Breakdown of Companies responding to Questionnaire Survey
In addition to the questionnaire survey, we conducted a direct interview with Japanese companies
which responded to the survey and those operating in Pakistan in order to obtain in-depth
26
information. Based on the information, we conducted the following analysis on the business
environment of Pakistan from the viewpoint of Japanese companies.
4-2 Survey Analysis
4-2-1 Analysis of Attractiveness and Competitive Advantage
Regarding the attractiveness and competitive advantage of Pakistan, the following consideration
and analysis were carried out based on the information obtained from the questionnaire survey.
1) Attractiveness of Pakistan
In the questionnaire survey, we asked responding companies about Pakistan’s attractiveness on
items of market, integration of industries, labor force, infrastructure, procedure & institution, politics
& society by 1 to 5 grades (1: lowest ~ 5: highest). The result was as follows.
（ １：The lowest～５：The highest, Numbers of each item are average values after
aggregation ）
Figure 4-2 Aggregate Results on Pakistan's Attractiveness
27
Based on the results above, the top five items as the Pakistan’s attractiveness are as follows:
Top5 Evaluation Point
1. Economic Growth 3.62
2. Pro-Japanese Sentiment 3.50
3. Market Size 3.42
4. Low Labor Cost 3.40
5. Retention Rate of Labor 3.05
On the other hand, the worst 5 items in terms of non-attractiveness are as follows:
Worst5 Evaluation Point
1. Security 1.86
2. Living Environment 1.95
3. Political Stability 1.98
4. Power, Water, Transport,
Communication 2.073
5. Taxation System 2.071
Highly evaluated items are "Economic Growth Potential", "Market Size", "Low Labor Cost", "Pro-
Japanese Sentiment", and it shows that it is attractive about stable growth in recent years and large
population of 200 million as a potential market.
On the contrary, low evaluated items are "Security", "Living Environment", and "Political Stability".
These issues have lowered the image for Pakistan.
Excluding political and social aspects, the worst 5 consists of 1) "Enhancement of Electricity, Water,
Transportation and Communication", 2) "Tax System", 3) "Quickness of Procedures", 4) "Ease of
Local Procurement", and 5)"Supporting Industry". As a result, issues of infrastructure inadequacy,
administrative inefficiency, and immature supporting industry can be seen.
2) Advantages of Pakistan
Regarding the competitive advantage, we asked responding companies to make multiple answers that
seem to be applicable for the following items in the questionnaire survey.
➢ Market size & Economic growth potential
➢ Business expansion due to economic growth
➢ Ease of establishing business
➢ Cost advantage over other countries
➢ Advantages of procurement by enrichment of supporting industries
28
➢ Development of logistics and infrastructure
➢ Easy to secure talented human resources
The results are as follows:
(Total of multiple answers by 50 Japanese companies.)
Figure 4-3 Aggregate Results on Pakistan's Advantages
The top three items of Pakistan's advantages are as follows:
Top3 Number of Companies
1. Market size & Economic growth potential 30
2. Business expansion due to economic growth 22
3. Cost advantage over other countries 16
The largest number of Japanese companies (61% of the total) considered "Market Size & Economic
Growth Potential" as the largest advantage and attractiveness as well. In addition, "Expectation for
Business Expansion" accounts for 45% of the total, and "Cost Advantage" accounts for 33% of the
total. There is a tendency to view that Pakistan market is a promising and that low-cost labor is its
strength. Compared with the other items, the number of respondents is overwhelmingly larger in these
three items, and conversely, with respect to the other items, there is almost no answer of "Securing
Excellent Human Resources" and "Ease of Establishing Business". These are not regarded as
superiority in the situation. There is no response to “Supporting Industry” and "Infrastructure ".
4-2-2 Analysis of Promising Industries, Investment Decisive Factors, and impediment Factors
29
Focusing on several sectors such as the automotive industry as the major investment sector of
Japanese companies, consumer goods sector as expected to grow in the future, and main industries in
GDP of the country, analysis of promising industry and investment decision factors was done. Based
on the results of the questionnaire survey and interviews, selection of promising industries and analysis
of investment decisive factors and impediment factors were made as follows;
１） Promising Industries of Pakistan
Based on the questionnaire survey, the top 10 promising industries for investment in Pakistan are as
follows:
TOP10
1. Automotive
2. Auto-parts
3. Daily Necessities
4. Processed Foods
5. Materials
6. Pharmaceutical
7. Logistics
8. Retail
9. IT Related
10. E Commerce
Figure 4-4 Aggregate Results on Pakistan's promising industries
The automotive industry is selected as the most promising, and responses of "automotive" and
"auto-parts" account for 38% and 32% of the total respectively. Next to the automotive industry, "daily
necessities" (28% of the total answers) was selected and it may be related to the population size of 200
million in Pakistan and the proportion of young people (60% of the population under 30 years old).
Following that, responses to "processed foods", "materials", "pharmaceuticals" and "logistics"
accounted for about 20% of the total are highlighted as future investment promising fields. In addition,
there are opinions that the IT industry and e-commerce seem promising also in the future.
2) SWOT Analysis of Pakistan Industries
Through the questionnaire surveys and corporate interviews, SWOT analysis on the entire Pakistan
industry is made after collecting and aggregating information on the strengths, weaknesses,
opportunity, and threat related to the Pakistan industry. The result is as shown below:
New promising sectors
30
Table 4-1 SWOT analysis of Pakistan industry as a Whole
Strength
・Low wage
・Price competitiveness
・Abundance of human resources
・Highly growth of domestic market supported by robust purchasing demand
・Expectation of future demand
・Vigorous consumer demand. Expansion of middle class
・They have a system that can produce cotton textile products cheaply by vertical
integrated production from cotton.
・High market share of Japanese cars
・The volume of tanning to leather is top class in the world
・Few competitors in Pakistan
Weakness
・Security Issues
・Geographical distance with Japan, import cost and transport time
・No tariff preferential treatment with Japan. Compared with India, Bangladesh, Southeast
Asia, it is disadvantageous in terms of tariffs.
・Poor infrastructure
・The level of business correspondence is low (small lot correspondence cannot be done.
Quality is unstable, no stable supply etc.)
・Poor understanding of the quality level required in the Japanese market.
・Difficulty of communication with Japanese to be hindered by distances, language and
cultural barriers
・It is difficult to raise the current procurement ratio due to low skills of component
manufacturers.
・Cost structure affected by foreign exchange due to import of most of raw materials
・The environmental regulation is remarkably delayed compared with that of other countries.
・The variety of the product is narrow and it cannot be diversified into other items.
Opportunity
・Future growth market with a population of 200 million
・Market growth can be expected with economic growth and population increase.
・expectation for shifting value-added advanced market by increase of population,
stabilized public security. and increase of income
・Expand business by exemption of tariffs
・Less advancement of other competitors in the same industry
・The number of births is large compared with Japan.
・Expanding business to new automotive manufacturers by new automotive policy
・Business opportunities on Metals, Transportation machines, Machines, Infrastructure,
Plants, Resources, Chemicals, Foods, Agriculture, Lifestyle related industries, and Energy
and Urban development
31
・It is expected not only Pakistan but also lateral expansion to the Islamic cultural area.
Threat
・Political instability
・Unstable foreign exchange fluctuation
・The presence of competitors with price advantage in neighboring countries
・Rising interest and labor costs, restriction of dollar remittance due to declining foreign
reserve
・Lack of growth strategies as a country
・Unstable government management of domestic economy
・Unstable taxation system
・Weakness such as inconsistent policies and vulnerable circumstances would become
extremely obvious and lead to country risk.
・Competition intensified in the future as competitors enter the market
・Production and sales may be sluggish due to unstable economic & political trends and
geopolitical risk.
3) Investment Decisive Factors & Impediment Factors
The top 5 topics on the investment decisive factors based on the questionnaire survey are as follows
（1：The lowest～5：The highest. Showing the average value of each item）
1. Market Size
& Growth Potential 3.9
2. Wage level 3.2
3. Foreign Exchange Regulation 2.8
4. Trade Clearance System 2.5
5. Procedure for Investment 2.5
Conversely, the worst 5 of impediment factors
is as follows
1. Security 1.6
2. Political Stability 1.9
3. Infrastructure 2.0
4. Taxation System 2.1
5. Political Consistency 2.3 Figure4-5 Aggregate Result of
Investment Decisive Factors
The evaluations of the top investment decision factors are as follows:
1. "Market Size & Growth Potential" 3.9 points
⇒ This is the biggest factor that the market scale is large and economic growth has been
achieved.
32
2. "Wage Level" 3.2 points
⇒ Low wages as well as economic growth is important factor for investment decisions.
3. "Foreign Currency Regulation" 2.9 points
⇒ Foreign currency regulation is evaluated as moderate compared with other countries.
Worst of the biggest obstacle to investment decision is 1) 1.6 points of "Security”, and the next is
2) 1.9 point of “Political Stability”.
4-2-3 Analysis of Trade Opportunities
１） Bilateral Trade between Pakistan and Japan
Improvement of trade balance is an urgent issue in Pakistan. For this purpose, it must be urgent to
strengthen exports of textile products that account for more than 50%, to expand new export markets,
and to develop new export items. Exports to Japan have been on the declining trend also in recent
years and trade deficit has continued to expand with the expansion of imports to Japan.
Figure4-6 Trend of Pakistan’s Trade with Japan and Trade Balance
Source：ITC
Import from Japan Export to Japan Trade Balance
33
２）Pakistan’s Export to Japan
The breakdown of Pakistan’s export by item is as follows:
Table4-2 Breakdown of Export to Japan by item 2017 (Unit: USD million)
Source: ITC TRADE MAP
i) Textile Products
Pakistan has five major items for export such as textile products, agricultural products & processed
foods, leather products, surgical instruments and sports goods. Textile products account for 50% of
the total export to Japan, and become the largest export item.
However, more than half of total textile export to Japan is occupied by low-value-added products
in such as cotton yarn and cotton fabrics, and it tends to be affected by commodity market situation.
Therefore, the export price is decreasing as the market price decreases. There is a need to raise the
proportion of high value-added apparel and home textile products. However, it is difficult to enter the
Japanese market unless these products would have a further competitive advantage and differentiation
in the competition with China, Bangladesh, Vietnam and so on.
In Pakistan, there are opinions that tariff reduction on their export products shall be required due to
price disadvantage compared with other Asian competitors such as Southeast Asian countries and India.
On the other hand, as the current currency depreciation rate has already been far exceeding the import
Product Value %
Total 217 100
Textile & Textile Articles 107 50
- Cotton yarn and woven fabrics 60 28
- Articles of apparel and accessories, not
knitted or crocheted18 8
- Articles of apparel and accessories, knitted
or crocheted17 8
- Made-up textile articles 9 4
- Others 3 1
Metals 42 19
- Articles of Iron or steel 29 13
- Copper 12 6
- Others 1 0
Mineral Products 16 7
- Mineral fuels, mineral oils and products of
their distillation8 3
- Articles of Iron or Steel 4 2
- Others 4 2
Leather 14 6
- Articles of leather 9 4
- Fur skins and artificial fur 5 2
Animal Products 12 5
- Fish and crustaceans, etc. 9 4
- Others 3 1
Others 26 13
1
2
3
4
5
34
duty rate, the price competitiveness issue is being relaxed. It is worth noting how much export growth
can be increased under this situation.
On the other hand, there are opinions of Japanese textile importers as follows.
➢ Even if import duties would be at the same level as India, Bangladesh, and Vietnam, it will not
motivate us to start importing from Pakistan unless they could clearly take advantage in price,
quality and delivery.
➢ It is too much biased to cotton products, and it is difficult to fill in containers unless more variety
of synthetic fiber products.
It seems to be necessary to strengthen the industrial structure that can respond to the needs of such
Japanese buyers.
ii) Agricultural & Marine Products and Processed Foods
Regarding agricultural & marine products and processed foods, it accounts for about 12% of exports
to Japan, among which export of seafoods is the most exported, which accounts for 4.1% of total
exports to Japan. Regarding processed foods, some Japanese companies have the following comments
with expectation for the future growth.
➢ Prospective export items to replace textile are processed foods and seafoods. Pakistan has not
fully utilized the rich agricultural and marine resources as export products yet. There is a
possibility that this sector will grow greatly by supporting logistics such as cold chain and
processing technology in the future.
➢ Abundant marine products are likely to be exported more if there is processing technology /
facilities. Fruits, vegetables, and rice can also be exported with more devising ways.
According to business people in Pakistan, it is said that about 40% of agricultural products are
being disposed in Pakistan, as well as the fact that logistics has not been sufficiently developed yet.
Since marine products such as seafood and shellfish are not used much for edible, there are plentiful
marine resources, and the future growth can be expected as export products as logistics and
processing technology would be improved.
Other than the above items, there were also many comments by Japanese companies evaluating the
quality of leather goods, and sports goods are also expected to strengthen exports for the next 2020
Tokyo Olympic Games. In addition, Pakistani intends to strengthen IT industry as emerging export
industry for the future, and they would like to seek support from Japan and to promote strengthening
business exchanges in IT sector.
3) Pakistan’s Import from Japan (or Japan’s Export to Pakistan)
35
The value of imports from Japan in 2017 (export value from Japan) was 2,294 million dollars, which
is more than 10 times the export value to Japan (217 million dollars), and the trade deficit continues
steadily.
The breakdown of major items imported from Japan are as follows:
Table4-3 Breakdown of Import from Japan by item 2017 (Unit: USD million)
Source: ITC Map
i) Transport equipment
As for the breakdown of imports, transportation equipment accounts for 53%, of which breakdown
consists of vehicle (66%), truck (15%), and tractor (8%). The following to the transportation
equipment is machines which accounts for 19% of the total, mainly consisting of bulldozers and
shovels (16%), engines (9%), spinning fiber preparation machinery (9%), looms (6%), and Centrifuge
(4%).
Regarding the transportation equipment, it seems that the import of used cars is a major part of it,
and the import of auto-parts is also a major factor in the country's import from Japan. In this sense,
there are opinions from Japanese companies that it is necessary to have stricter import restriction of
used car imports and to raise the local procurement rate of auto-parts to develop automotive industry,
which will be a measure to contribute to import reduction of Pakistan.
ii) Domestic Consumer Market
Product Value %
TOTAL 2,294 100
Transport Equipment 1,208 53
- Vehicles, and parts and accessories 1,206 53
- Others 2 0
2 Machinery 426 19
- Machinery, appliances 361 16
- Electrical machinery and equipment 65 13
3 Iron and Steel 346 15
- Iron and Steel 281 12
- Articles of Iron or Steel 48 2
- Copper and Articles thereof 6 0
- Others 11 1
4 Optic, Photographic Instruments, etc 94 4
- Medical Instruments 94 4
Chemical Products 61 3
- Organic Chemicals 25 1
- Tanning or dyeing extracts 9 0.4
- Others 27 1.3
Others 159 7
1
5
36
On the other hand, domestic consumer market is expected for future growth by many Japanese
companies, and there are opinions on exports of consumer goods to Pakistan as follows:
➢ Pakistan has a superiority in the population (200 million), pyramid type of the population
composition, and geopolitically important position.
➢ Market is expanding and the market potential is high.
➢ The population growth rate is as high as 2% / year, which is promising for consumption-related
industries.
➢ Based on expanding market size, growth in automobile, processed food, daily necessities,
medicine and other items would be expected. Consumer goods such as instant noodles, powdered
drinks, diapers, and sanitary supplies are promising.
Meanwhile, as for the import of consumer goods such as foods, if a high rate of regulatory duty would
be imposed even in the initial marketing stage, it will not lead to future local production. It is necessary
to improve the administrative treatment of the government for such issues.
Other than the above, there are opinions that IT sector and E-commerce are expected for trade increase.
➢ There is a possibility of subcontracting from developed countries because of availability of low-
cost IT engineers and English ability.
➢ Japanese brand e-commerce is promising because of luxury goods oriented.
4-2-4 Identification of Recognition Gap on Business Environment and Factor Analysis
１）Reason of Entering to Pakistan
The main reasons of entering Pakistan obtained from the questionnaire survey are as follows:
➢ Market size and market growth
➢ Entering Pakistan for textile business
➢ Potential of other business development such as economic cooperation projects
➢ Pro-Japanese sentiment and sincerity in business
➢ Merit of no competitors in the country
➢ Possibility of handling operation from India
➢ High market share of Japanese cars
➢ Acquisition of incentives for new entry and special economic zone. "
２）Reason of not Entering to Pakistan
On the other hand, the reasons for non-entering are as follows:
➢ Critical security and safety circumstances (Safety management )
➢ It is not in an environment where customers or other companies can enter
37
➢ In case of producing locally, there is a problem in infrastructure, procurement, and rent.
➢ Safety and health issues for living and issues of political stability.
➢ Prioritize India in South Asia due to market size and political confrontation.
➢ Having no know-how for local operation in Pakistan.
➢ No necessity to enter at present
➢ Insufficient market research
➢ High recovery risk to invest
３）Investment Decisive Factors and Impediment Factors
Comparison of investment decisive factors and impediment factors between entering and non-
entering companies based on the results of the questionnaire survey is as follows:
Entering Companies Non-Entering Companies
Figure4-7 Aggregate result of investment Decisive Factors (entering and
non-enterprising companies)
The top three of investment decisive factors of both entering and non-entering companies are
common and as follows:
1. Market Size and Potential Growth
2. Wage Level
3. Foreign Currency Regulation
Evaluation on market size and growth potential by entering companies are higher than one by non-
entering companies.
On the other hand, with respect to the worst there (impediment factors) of entering companies and
non-entering companies are as follows respectively:
<Entering companies> <Non-enterprising companies>
1. Security 1. Security
38
2. Infrastructure Development 2. Political Stability
3. Taxation System 3. Infrastructure Development
“Security” is common as the worst 1, however, the second and third ranking of entering companies
are “Infrastructure Development” and “Taxation System” respectively, and it shows the seriousness of
these problems in Pakistan.
4) Necessary Items to Promote the Entry into Pakistan
The main suggestions obtained from both the entering companies and the non-entering companies
for necessary items to promote the entry into Pakistan are as follows:
➢ Improvement in security situation (It is necessary to dispel prejudice due to recovery of public
security in recent years)
➢ Improvement in infrastructure
➢ Clarification and stabilization of policies
➢ Improvement in taxation system (Simplification of tax return work, simplification of withholding
tax exemption procedure, etc.)
➢ Simplification of procedures for applying for work visas (simplification of examination and
procedures)
➢ Improvement in foreign remittance procedures (Speed up permission for remittance of trade
payment, dividend, loyalty, etc.)
➢ Stability of foreign exchange
➢ The existence of an excellent agent that mediates the business between Pakistan and Japan
➢ Changes in the economic environment where can create the demand for high-quality products.
4-3 Comparative Examples on Business Environment in Pakistan
4-3-1 Ranking in “Ease of Doing Business 2019” by the World Bank
The World Bank publishes the business environment ranking by "Ease of Doing Business Index"
every year. "Ease of Doing Business Index" is a comparison of the institutional environment in
business activities of about 190 countries and ranking the ease of business of each country. In various
indices of 10 items, They score the difference from the top of each country with the top country as
100%. The total score is evaluated by simply averaging the total score of various indices.
Trends of the ranking for Pakistan over the past 5 years are as follows.
39
Table4-4 Ranking of Pakistan in “Ease of Doing Business”
In the past five years, Pakistan was downgrading year by year, but it stopped falling at 147th of the
previous year and ranked at 136th in 2019. However, it is still sluggish at a low level, and compared
with the other South Asian countries, India is ranked at 77th in 2019, meanwhile, Bangladesh is 176th.
Out of the top ten countries that had the most improvement through reform in 2019, two countries of
India and Afghanistan were ranked from South Asia for the first time, and India implemented six
reforms in the past year. India’s rank of 77th is highest in the region.
The worst 3 of the ranking among the 10 items in 2019 are as follows:
➢ Paying Tax 173th
➢ Getting Electricity 167th
➢ Dealing Construction 166th
Regarding “Paying Tax” that became the worst 1, there are many comments that the taxation system
is a hindrance factor for investment even in Japanese company questionnaires. In that sense, the
improvement on the taxation system is a common challenge and Pakistan should address urgently.
There are also many comments that pointed out on “Getting Electricity” of the worst 2 from Japanese
companies as requesting improvement of infrastructure development, which is also a commonly
recognized issue.
Items with improved ranking compared with 2018 are as follows:
➢ Starting a Business 142th -> 130th
➢ Registering Property 170th -> 161th
➢ Trading Across Borders 171 -> 142th
➢ Resolving Insolvency 82th -> 53rd
It is worth noting that the ranking of “Trading Across Borders” has been largely improved among
them. In the overall process of importing and exporting, there was improvement in the time and cost
(excluding tariffs) related to document compliance and domestic transport procedures. In order to
Year
Esae ofDoingBusinesRank
Starting aBusiness
Dealing withConstruction
GettingElectricity
ResisteringProperty
GettingCredit
ProtectingMinorityInvester
Paying TaxTradingAcrossBoarders
EnforcingContract
ResolvingInsolvency
2014/15 128 116 125 146 114 131 21 172 108 161 78
2015/16 138 122 61 157 137 133 25 171 169 151 94
2016/17 144 141 150 170 169 82 27 156 172 157 85
2017/18 147 142 141 167 170 105 20 172 171 156 82
2018/19 136 130 166 167 161 112 26 173 142 156 53
(Source: World Bank)
40
expand import and export in the future it is expected that such improvement would contribute to further
trade expansion.
4-3-2 Ranking in Global Competitive Index 2018 by World Economic Forum
Countries are ranked according to the Global Competitiveness Index in the Global Competitiveness
Report (UK: Global Competitiveness Report, abbreviated GCR) published by the World Economic
Forum. The World Competitiveness Index is defined as measuring the combination of institutions,
politics, and factors that define current and medium-term levels of sustainable economic prosperity,
based on the 12 pillars of competitiveness shown in the chart below, and the ranking is decided.
The ranking of Pakistan in 2018 is 107th, which is almost the same as Bangladesh of 103th in the
South Asian region, however, it is greatly separated from India of 58th.
Figure4-8 Ranking of Major South Asia Countries in Global Competitiveness Index
2018 (Unit: Ranking)
Source：World Economic Forum
Among the comparison with India, the market size is far apart, followed by a large difference in
social institutions, infrastructure, macroeconomic stability, labor market, financial system and other
fields. In comparison with Bangladesh, Pakistan is superior to Bangladesh in terms of business
dynamism and innovation ability, although it has no big difference overall. On the other hand,
Bangladesh's ranking is higher in terms of macroeconomic stability and ICT adaptation.
Country Overall InstitutionsInfrastractur
eICT adation
Macro
Economic
Stability
Health SkillsProduct
Market
Labor
Market
Financial
SystemMarket Size
Business
Dynamism
Innovation
Capacity
Pakistan 51 46 59 24 70 58 40 48 50 54 71 59 35
Bangladesh 52 46 53 40 73 71 44 48 51 52 67 50 31
India 62 58 69 28 90 59 54 51 58 70 93 61 54
(Source:World Economic Forum)
GCI2018 Point comparison
0
20
40
60
80
100
GCI2018 Point comparison
Pakistan Bangladesh India
41
The breakdown of index points in the 12 pillars of competitiveness in Pakistan is as follows:
（Unit: Index Point, 0：the lowest―100：the highest）
Figure4-9 Index Point of Pakistan in GCI2018
Source：World Economic Forum
Regarding Pakistan, there are two items as relatively high evaluation items of 70 points or more, such
as the market size (71) and macroeconomic stability (70). On the other hand, ICT adaptation (24) and
innovation ability (35) are two items with low evaluation.
Regarding market size, many Japanese companies highly evaluate the attractiveness and superiority
of Pakistan, and they are highly valued in common. Meanwhile, the stability of the macroeconomy
was not recognized particularly by Japanese companies, and it was evaluated in aspect of economic
growth. Although ICT and innovation are expected to grow in the future, it is shown that it may take
time in terms of competitiveness.
0
10
20
30
40
50
60
70
80
Pakistan GCI2018 Index Point
Country Overall InstitutionsInfrastractur
eICT adation
Macro
Economic
Stability
Health SkillsProduct
Market
Labor
Market
Financial
SystemMarket Size
Business
Dynamism
Innovation
Capacity
Pakistan 51 46 59 24 70 58 40 48 50 54 71 59 35
42
Chapter 5 Measures for Strengthening Bilateral Economic Relationship
5-1 Improvement of Investment Environment
5-1-1 Overview of Investment Environment
Suppression of the current account deficit and improvement of the trade balance are urgent issues
in Pakistan, and improvement of the trade balance requires high value-added products of existing
industries that account for textiles and food processing as majority of export as well as development
of new industry. Further, in order to maintain sustainable economic growth in the future, it is necessary
to break away from the current economic structure that depends on exports of textile products, to
realize diversification of industries through promotion of foreign investment, and to enhance industries
with export competitiveness.
Investment from Japan has still remained at a very low level due to concerns about security issues.
In recent years, however, there are also companies entering the domestic market such as Yamaha,
Ajinomoto, Morinaga, and there are slightly increasing trends in the number of companies entering
the market.
Although the country's ranking in the World Bank's "Ease of Doing Business" was improved to be
136th in 2019 from 147th in the previous year, the nine items out of the 10 indicators excluding “Getting
Credit” were flat or lower. Further reforms shall be required in order to improve the business
environment.
In general, although the Pakistan government has declared to attract foreign investment strongly,
the motivation for foreign companies to invest in the country seems still weak. In the 2010’s, China
has emerged as a major investment country, but the size of foreign investment is small compared to
the economic scale and future potential, and for direct investment by Japanese companies, it is limited
to some large sized companies such as automotive manufacturers.
To promote FDI to Pakistan, it is essential to solve problems in the investment environment such as
security problems, issues of power shortage, tax payment procedure simplification, etc. However,
there is also a problem in the method of attracting investment. For example, there is little information
on Pakistan, and one-stop services like ASEAN countries cannot be provided. Although there is a BOI,
it is FBR that has jurisdiction over the investment tax incentive system, and the company establishment
is vertically divided with Pakistan Securities and Exchange Commission (SECP) and BOI. In addition,
although various investment incentive schemes are prepared, it is hard to understand them, and
operation is also unclear. Therefore, sufficient information through publicity has not been provided.
It is necessary to increase FDI and improve the business environment for foreign companies
including Japanese companies by promoting improvement of the investment environment of the
country.
43
5-1-2 Extraction of Issues
We extracted comments on issues related to investment environment of Pakistan obtained through
the questionnaire survey and corporate interview. They are summarized as 3 items of the main issues
such as 1) investment climate arrangement, 2) automotive industry, and 3) domestic consumer market
as shown below:
1）Investment Climate Arrangement
A. Security Issues
Major Issues Comments from Japanese Companies
Security Concern
・Security concerns and vulnerability of the financial base are weak
points. It will be the same figure after 20 years if there would be no
development of infrastructure that allows foreign companies to enter
more.
・It is an impediment to the implementation of business trip due to
security issues and the Ministry of Foreign Affairs' travel restricted
areas.
Wiping prejudice on Security Concern is
Needed
・While concerns about security have not been wiped out and there is
an idea that safety assurance is a problem, security has been greatly
improved in the last few years, and there are views that it is necessary
to dispel the prejudice of "danger / dangerous country"
B. Administrative Issues
Major Issues Comments from Japanese Companies
Unstable and Unfair Taxation System
· Import duties may suddenly rise and it is a big obstacle to business.
The tax system should be stabilized.
· There is a problem of refund unpaid.
· Customs duties are disadvantageous to existing automotive industry.
· It is necessary to revise high-rate tariffs that hinder import sales for
advancement of foreign companies into Pakistan.
Overseas Remittance Issues
・There is a problem on delay of remittance procedures such as
royalties to Japan at the Central Bank of Pakistan.
· Since all raw materials are not covered by their own country, it is
inevitable to bring in materials from overseas, but business cannot
grow unless free settlement and remittance are possible
· Elimination of uncertainty related to overseas remittance is
necessary. (Acceleration of remittance permission review,
deregulation, simplification of withholding tax reduction exemption
procedure based on tax treaty)
Unstable Exchange Rate · It is necessary to stabilize foreign exchange.
44
Simplify Taxation · It is necessary to simplify the taxation system (simplify tax reporting
work). ·.
Simplify Visa acquisition Procedure · Elimination of corruption is necessary.
Elimination of Corruption · Elimination of corruption is necessary.
Unstable SEZ Procedures · Procedure with SEZ are inconsistent and different from regulation
Unstable Law Maintenance
· Establishment of a solid administrative system (especially food
related). Legal development concerning food is often unclear and
uncertain in many cases.
Request for Improvement of Business
Environment to the Government
· It is necessary to request for improvement of the business
environment without interruption.
Recognition Gap between Government and
Private Sector
· Although BOI says that they are making improvements through one-
stop service, SEZ operation, procedure online, website revision, etc.,
we cannot recognize such improvement and there is no difference in
recognition.
２）Automotive Industry
A. Issues on Auto-parts Manufacturers
Major Issues Comments from Japanese Companies
Need of Overseas Manufacturers and to
Develop Local Companies
・Many new car manufacturers were attracted by ADP, but in
order to develop the automotive industry from the ground up, it is
essential to nurture local parts manufacturers by advancing
overseas parts manufacturers.
Request for Japanese Auto-parts
manufacturers' Advancement
· Twenty Korean auto-parts manufacturers will come to discuss
and talk with local companies, while Japanese auto-parts
companies are still cautious for entering Pakistan , there are voices
of local irritation.
Increase of Local Contents Rate · It is difficult to raise the current local contents ratio because the
basic skills of local manufacturer is low.
Issues of Auto-parts quality · Low quality of local parts manufacturers
Lack of Willingness to Introduce New
Technology · Low motivation to introduce new technology.
B. Administrative Issues
Major Issues Comments from Japanese Companies
Fair Treatment on institutional aspects is
Needed related to ADP
・It is doubtful if fair treatment on institutional aspect is provided to
Japanese auto companies doing business in Pakistan.
Issues of Environmental Regulation
・The environmental regulation is remarkably delayed compared
with that of other countries, and as a result there is a limit to
overseas export development
Strict Implementation of Used Car Import
Regulation is Required
・It is necessary to regulate imported vehicles. There is a
regulation of used cars, but I want them to be strictly applied (it will
be a factor that hinders development of existing auto industry).
High Rate of Import Duty for Auto-parts
・A considerably high tariff is imposed on items which can be
produced in Pakistan. Requests to lower the tax rate on import
duties.
45
Tariffs Unfavorable to Existing Companies ・Customs duties are disadvantageous to existing automotive
companies.
３）Domestic Consumer Market
Major Issues Comments from Japanese Companies
Responding to Expanding Market
We should pay attention to the fact that growth in automotive,
processed food, daily necessities, medicine can be expected in the
expanding market.
Possibility of Logistics Hub · We should recognize the possibility of logistics hub connecting
Asia / Eurasia / Europe.
High Rate Tariff that Hinders Import Sales ・It is necessary to revise high-rate tariffs that hinder import sales
for advancement of foreign companies into Pakistan.
Unclear Law Maintenance in Food Sector
· Establishment of a solid administrative system (especially food
related) is needed. (Legal development concerning food, response
to Halal, high tariff etc.)
5-1-3 Identification of Items to be Improved and Suggestions for Improvement
Based on the information of issues related to the business environment in Pakistan considered by
Japanese companies pointed out in 5-1-2, five main items are identified as improvement targets in the
aspect of investment climate improvement. The main items are 1) Taxation System, 2) Overseas
Remittance Issue, 3) Special Economic Zone (SEZ) Issue, 4) Security Concern, and 5) Strengthening
Automotive and Auto-parts Industry. The details are as follows:
1) Taxation System
＜Items to be Improved＞
Many Japanese companies pointed out problems on unstable taxation and procedures as well as
necessity to simplify tax procedures related to import taxes, refunds, tax return procedures. The
problem of the tax system is that Pakistan's tax payment ranking of 173rd in the World Bank's "Ease
of Doing Business" and is recognized as a big issue as an impediment to investment.
Regarding import duties, regulatory duty is imposed on the importation of specific goods separately
from normal import duties. The tax rate often rises suddenly, and It can be a problem for business
people to continue the business. In case of a Japanese companies, they complained that the regulatory
duty was initially imposed 10% apart from the import duties (20%) on the product imports but jumped
up to 50% in 3 years. Abolition of regulatory duty is important for improving the future business
environment.
There are also many stories that tax refunds have been left unpaid. In several Japanese companies
that have obtained corporate tax exemption, Final Tax Regime (FTR) were applied to them and they
had to pay withholding tax on the total sales amount and importing raw material. There are cases in
which withholding taxes have been withheld are not refundable for several years.
46
Moreover, there are opinions that in the current Automotive Development Policy (ADP), tax
incentive measures for existing automotive industry are unfair compared with new entrants, or also
opinions that high tariffs on imported products will result in hindering future advancement at the
marketing stage assuming local expansion. Furthermore, some companies pointe out as a hindrance to
the minimum tax imposed a tax amount of 1.26% on sales even if the company has loss.
Together, it is necessary to simplify withholding tax exemption procedures and tax return
procedures based on the tax treaty. It is necessary to simplify these issues, which is also in line with
the issues on taxation items of the World Bank.
＜Suggestions for Improvement＞
◼ Requesting Government to Improve Regulatory Duty and Tax Refund Issue
Regarding the regulatory duty, the government intends to review it, and it is desirable to continuously
check the progress on a regular basis. Likewise, it is desirable to request the government to handle the
refund payment issues for improvement and to confirm the progress.
2) Overseas Remittance Issue
＜Items to be Improved＞
Many problems are pointed out about unstable foreign currency regulations and delays &
uncertainties in foreign currency remittance procedures. Unless business people can have free
settlement or remittance, it will lead to impede business and economic growth.
Regarding remittance for import payment, prepaid remittance before shipping had been permitted
up to US $ 10,000, but regulations on import settlement methods were strengthened by Circular No.06
& 07 of 2018 in July 2018, and prepayment remittance became impossible in principle. As a result,
the business with low creditworthy counterparts is in a difficult situation.
While all foreign currency remittance procedures such as dividends, royalties, technical assistance
fees, etc. shall be reviewed by the central bank, it is pointed out that the central bank's review will be
delayed for a long period, and it causes the payment delay to the headquarters and service providers.
There are many business disadvantages caused by such problems. Elimination of uncertainty related
to overseas remittances, speeding up of remittance permission review, deregulation, etc. are required.
These problems seem to be caused by measures taken to prevent foreign currency outflows in line
with the recent decline in foreign exchange reserves, but if such a foreign currency regulation or
remittance delay problem would not be resolved promptly, a vicious cycle of further economic
deterioration would happen.
＜Suggestions for Improvement＞
◼ Requests for Improvement to the Government and Progress Confirmation
47
It is understood that the circumstance of insufficient foreign reserves is in the background, and it
is a measure taken to curb the outflow of foreign currency. However, if this situation continues to
overseas remittance, the whole business activities will have negative impact and it will lead to a vicious
cycle of investment decline and trade decline. For Japanese firms too, remittances to headquarters and
technology service providers have already been disturbed, and problems have arisen. The government
intends to undertake a review, and it is desirable to confirm the progress on the status of alleviation
and improvement on a regular basis.
3) Special Economic Zone (SEZ) Issue
＜Items to be Improved＞
In Karachi's SEZ where Japanese companies have factories, they have opinions that they feel stress
about many inconsistent procedures and procedures that are different from the regulations, and no
development of infrastructure such as electricity, water, and gas. In addition, tax exemption for
corporation tax are not being carried out as described. In such circumstances, it is a big obstacle to
attract Japanese companies in the future.
In SEZ in Pakistan, tenant enterprises are subject to tax exemptions on corporate income for 10
years and one-time import exemption of capital goods to be constructed and installed in SEZ, and the
Bin Qasim Industrial Park in the vicinity of Karachi is SEZ aimed at attracting Japanese companies.
There are already two Japanese companies (motorcycle manufacturing and steel plate). However,
according to them, the problem still continues. It seems that one of the reasons is that it is not possible
to share sufficient information and unify intention among the relevant institutions such as NIP which
operates industrial park, Sindh BOI, Federal government BOI, furthermore FBR which is in charge of
tax incentives
For example, the following problems were still left unattended. (1) despite the tax exemption of
corporation tax, withholding tax with application of FTR and no refund at all, (2) frequently asked
documents to be submitted to relevant organizations and becoming enormous volume, (3) NIP and
original Land ownership issue is not solved with landowner state-owned enterprise, and lease contract
cannot be concluded, (4) supply of electric power, water, and gas are not provided.
It is inevitable that all institutions related to SEZ need to work on problems to solve quickly with
awareness of the parties. Otherwise, it is a huge negative impact on investment from Japan as an
impediment to the entry of Japanese companies.
＜Suggestions for Improvement＞
◼ Reform of the SEZ Management System
The management organization of SEZ's Bin Qasim Industrial Park is a state enterprise named
National Industrial Park Development and Management Company (NIP). NIP, founded by the
48
Ministry of Production, is an organization to promote intensive industrial growth and development by
developing nationwide industrial parks in Pakistan. However, in the case of Bin Qasim, not only NIP,
the Sindh Investment Authority (BOI), the federal government BOI, FBR and other government
agencies are also involved, and unification and information sharing are not carried out much among
them. There are many opinions that various kinds of confusion occur. In this sense, it is better to reform
it to a system that can strengthen the authority of NIP and correspond to one stop service through the
single point of contact with reference to Industrial Estate Authority of Thailand (IEAT). Currently, the
federal government BOI is talking about doing a one stop service, but it does not work as far as the
actual situation is concerned.
◼ Referential Case in Thailand
For example, IEAT in Thailand have established a one-stop service center, which includes
purchasing and renting land related to IEAT, consulting about factory construction sites, applying for
permission / approval of factory establishment, joint development of industrial parks, etc. · It can be
done through one stop service center. In addition to the factory land in the industrial estate of IEAT,
the infrastructure such as roads, drainage canals, wastewater treatment facilities, flood prevention
systems, electricity, water supply, and telephone are maintained. Post offices, banks, shopping centers,
Gas stations, and workers' lodgings can also be offered.
4) Security Concern
＜Items to be Improved＞
Security concerns to Pakistan have not yet been dispelled, but the situation has been greatly
improved in recent years, and there are many opinions that Japanese companies need to rectify
perception of security situation in Pakistan
According to the Global Terrorist Index (GTI), Pakistan is the fourth most dangerous terrorist
country in the world and more than 15,000 people have been victims of terrorism by 2015. The
economic cost of terrorism has not only increased the police and military budget but also the decline
in foreign investment and trade. However, the security of Pakistan has been improved in recent years,
and since the beginning of the military sweeping operation, including the efforts to combat terrorism
after 2014, the number of terrorist attacks and crime cases also decreased greatly. As a result, the
number of terrorist attacks that exceeded 2,000 a year in 2012 has decreased to 800 in 2016.
Given these circumstances, there are many opinions that Pakistan as "dangerous country" is still
recognized excessively, and it is necessary to rectify the erroneous perception of Pakistan's security
situation prevailing in Japan. Improving the image of the country can be expected to have a positive
effect on promoting investment and trade.
＜Suggestions for Improvement＞
49
◼ Strengthen Publicity about Improvement of Security Situation
Pakistan is still regarded as a country with high terrorist risk, however, its security situation has
been greatly improved in recent years. Since there is not enough information about it in Japan, it is
important to inform the fact that at least the security situation has been improved significantly in the
last few years. It is important for the government to appeal it as a part of public relations activities.
Efforts should be made to create promotional videos that improve the image of the country by
incorporating the attractiveness of Pakistan if possible, as well as appealing it outside through the
Internet.
5) Strengthening Automotive and Auto-parts Industry
＜Items to be Improved＞
Promotion of supporting industries for automotive sector is important, and it is also important
industry for considering promotion of investment from Japan. Therefore, promoting investment from
Japan in this industry should be enhanced. Although domestic production of automobiles in the country
has increased in recent years to 270 thousand units level in 2016/17, it is still lower than the country's
population size.
The government implemented the Automotive Development Policy (ADP) in 2016 and aims to
expand the domestic production of automobiles to 350,000 units by 2021 in the five year plan from
2016 to 2021. In addition, tax incentives are set up in ADP, and preferential treatment is given to newly
entering makers (category A) and existing makers (category B). The existing makers have
disadvantages in preferential tax rate and period. Since there are few benefits for them, they have a
strong opinion that it is unfair for Japanese automotive manufacturers and it is requested to review the
incentives.
Used car import, which is an impediment factor to local automotive production, is prohibited in
principle, and even when importing using personal cargo, relocation, gift system, it is limited to used
cars with car age of less than 3 years. However, in fact, imports have sharply increased in improper
way, and in 2017 the number of imported used cars was 87 thousand units increased by 52% compared
with the previous year. Since the restrictions on used car import seems to be loose, strict application
of import restrictions is necessary for development of the supporting industries and the creation of
new employment in automotive industry.
In addition, it is important to strengthen training of supporting industries for the future development
of the automotive industry. However, there are problems such as poor technical strength of local parts
manufacturers, lack of quality control, low motivation to introduce new technology. For further
development, it is indispensable to train local component manufacturers by advancing overseas parts
manufacturers. There is currently no specific condition for investment incentives and incentives for
auto-parts manufacturers. Some preferential treatment is needed to promote Japanese parts
50
manufacturers' advancement in the future. In addition, in Pakistan, the environmental regulations are
significantly behind compared with other countries, and as a result, the entry of Japanese products
with environmental advantages is difficult. It is limitation on overseas export development.
Improvement on the environmental regulations is also needed.
＜Suggestions for Improvement＞
◼ Incentive Measures for Strengthening the Development of the Auto-parts Sector
The automotive industry is closely related to Japan and is also an important target for Pakistan's
future industrial development. Particularly strengthening training for auto-parts sector is indispensable
for development of the automotive industry, and by attracting auto-parts manufacturers from Japan, it
is possible to increase investment from Japan and to improve local procurement rate. Further, it leads
to reduction of imports, improvement of technical skills of the sector, and creation of new jobs.
Therefore, if the Pakistani government would investigate and realize investment incentives for
attracting auto-parts manufacturers, it will lead to strengthen investment promotion, as well as many
ripple effects such as a possibility of auto-parts export based on technological improvement and import
reduction.
◼ Review on Incentives of ADP
The tax incentive measures of ADP for automotive manufacturers are given a lot of preferential
privileges for newly entering manufacturers and make the existing manufacturer feel unfair. However,
the existing manufacturers are the actual driving force for the growth of the automotive industry, and
it is desirable to provide them with the business environments that can make additional investment
positively. Therefore, for the existing manufacturers, ADP should be revised to give the same
incentives as those of newly entering manufacturers equally.
◼ Promotion of Public-Private Dialogue in the Automobile Industry
In addition to the above suggestions, it is necessary to actively engage in information sharing and
exchange of opinions by the government and automotive sector for the future development of the
automotive industry referring to issues such as strict implementation on used car import regulations
and improvement of environmental regulations. Solution efforts in concrete form by both government
and automotive sector is desirable.
5-2 Improvement on Strengthening Bilateral Trade Relationship
5-2-1 Overview of Bilateral Trade
Improvement in trade balance is an urgent issue in Pakistan, and it is urgent to develop textile and
processed food products that account for about 60% to improve the trade balance and to develop new
export items.
51
Although exports to Japan are generally sluggish, there is an opportunity for textile products that
Japanese buyers have a tendency to look towards other countries besides China to secure suppliers
other than China in the trend of “China Plus One”. Taking into consideration of the Japanese market
which is the third largest market in the world, there is still plenty of rooms for Pakistan to expand
exports to Japan, with the support of export promotion. Pakistani exporters should deepen the Japanese
market research, by improving their response to product quality, design, price, delivery, etc.
The Government of Pakistan makes the trade deficit resolution as a top priority by promoting export
at the "Strategic Trade Policy Framework (STPF)" in 2013, which has important items of (1)
focusing on intra-regional trade, (2) strengthening organization for export promotion, (3) Streamlining
procedures of relevant government offices (4) New procedures for export development, (5) Expansion
of exports from the developing areas of Pakistan, (6) Promotion of domestic trade to strengthen
international competitiveness, and (7) Strengthening the verification and evaluation organization.
However, it does not seem that these contents are functioning sufficiently. Further efforts should be
made in order to expand exports in the future.
Regarding exports to Pakistan from Japan, transportation equipment accounts for more than 50%
of the total. It is estimated that exports will decrease if restraint on imported used cars will lead to
increase in the local procurement rate of auto-parts. Meanwhile, Pakistan's domestic consumer market
has a population of 200 million and further expansion is expected in the future. Therefore, further
export expansion of Japanese brand products can be expected, especially in consumer goods sector.
5-2-2 Extraction of Issues
We extracted comments on issues related to trade relationship with Pakistan obtained through the
questionnaire survey and corporate interview. They are summarized as 2 items of the main issues such
as 1) Issues on Trade Promotion, and 2) Issues on Export Items to Japan as shown below:
１）Issues on Trade Promotion
A.Enhancement of Advantages
Major Issues Comments from Japanese Companies
Advantages in comparison with other countries are required
・Even if Japan's import tariffs were at the same level as India, Bangladesh and Vietnam, it would not motivate the import unless it has a clear advantage over price, quality and delivery.
Issues on Geographical distance ・Disadvantages on geographical distance with Japan, import cost and transport time
B. Corporate Response to Customers
Major Issues Comments from Japanese Companies
Improvement of Delivery time is required
・It is necessary to improve the delivery of Pakistan side.
52
Cannot deal with a small lot ・Due to mass production type, they cannot support a small lot.
Quality & supply is not stable ・Quality is unstable. Difficult for Stable supply.
・They cannot understand the quality level required in the Japanese market.
Language barriers problem ・It is difficult to have a good communication with Japanese to be hindered by distances, words and cultural barriers
C. Administrative Issues
Major Issues Comments from Japanese Companies
Export incentives do not work ・Although there are export incentives, many cases are not actually implemented. It is not functioning.
Improvement of information provision ability
・Government of Pakistan needs to make efforts to provide market information of export target countries. On the other hand, information on Pakistan is not sufficiently informed to the Japanese buyers.
・TDAP should have technical partnership with JETRO including improvement of information providing function.
Improvement of foreign currency regulation
・There is a problem with settlement of raw material import. · There are restrictions on remittance due to Pakistan's
foreign currency regulation.
Improvement of taxation system ・There is a problem with the tax system. Import tax may rise suddenly.
Unstable legal system ・Legal system changes frequently
Request for tariff exemption ・It is necessary to exempt tariffs on trade with Japan. Purchasing costs are increased due to import tariffs in Japan.
High tariffs. Procedures are unstable
・The tariff of Pakistan is high and even if tax exemption is permitted at the time of importing, procedures may not be carried out as described.
Logistics improvement is needed ・It is necessary to improve the logistics of Pakistan. It affects stable supply.
D. Others (IT related, etc.)
Major Issues Comments from Japanese Companies
Expectation for IT human resources development
・There is a possibility of having subcontract from developed countries for IT engineers. PC / software industry due to IT literacy improvement is promising. On the other hand, the level of education at vocational training schools is not necessarily high and there is a system problem such as no national certification of graduation certificate. It is expected that Japanese IT companies' advance into Pakistan and IT human resources development by Japan.
EC business into Pakistan ・EC site for Japanese brand is expected due to sophistication of consumption by economic growth is promising.
Japan brand promotion should be done
・It seems to be meaningful to hold events like Japan Brand Fair for introducing Japanese products and promoting future trade and investment. However, it is not done currently due to security reasons.
53
２）Issues on Export Items to Japan
A. Textile Products
Major Issues Comments from Japanese Companies
Cannot diversify to other items ・Textile products from Pakistan are denim, home textile, knitted products only. Cannot diversify to other items
There is no variety of synthetic fiber products
・With cotton product limitation, there is no variety of synthetic fiber products and not attractive to us.
It is necessary to differentiate textile products and establish superiority
・There are inexpensive products compared with other countries, but in addition to price, improvement is necessary for quality, delivery, stable supply etc. It is also necessary to show differentiation and advantage.
B. Processed Foods
Major Issues Comments from Japanese Companies
Should utilize agricultural and marine resources
・There is a possibility and expectation to utilize abundant agricultural and marine resources and to handle processed foods as export products.
Support for logistics and processing technology is needed
・In order to expand the business of processed foods and fishery products, it is necessary to support cold chain logistics and processing technology.
Export expansion by processed foods
・Fruits, vegetables and rice will also lead to export expansion if they can be well processed.
5-2-3 Identification of Items to be Improved and Suggestions for Improvement
Based on the information of issues related to the business environment in Pakistan considered by
Japanese companies pointed out in 5-2-2, five major items are identified as improvement targets in the
aspect of bilateral trade promotion. The items are 1) Strengthening Superiority and Differentiation, 2)
Strengthening Facilitation Capacity for Trade Promotion, 3) Strengthening Competitiveness of Textile
Industry, 4) Strengthening Export of Processed Foods, and 5) Strengthening IT Related Industry. The
details are as follows:
1) Strengthening Superiority and Differentiation
＜Items to be Improved ＞
There are many cases compared with India and Bangladesh in South Asia, and many Japanese
companies often think about Pakistan in terms of trade in comparison with these countries.
Regarding exports to Japan, India and Bangladesh are already in advantageous position in terms of
price comparison with Pakistan, since they had import duty exemption measures by FTA or LDC in
trade with Japan. However, even if Pakistan gains tax exemption as well, there is no clear advantage
in terms of quality, delivery, stable supply, etc., and it will not motivate the commencement of import
54
with Pakistan unless there is clear superiority and differentiation factor in products. In this sense, it is
necessary for Pakistan to further enhance its efforts to provide products that meet the needs of the
Japanese market, by enhancing competitiveness and its superiority. In addition, it is also necessary to
develop and extract products that can demonstrate Pakistan's unique strengths in comparison with
other countries, as well as strengthening differentiation.
Regarding exports to Pakistan, priority is not yet high in the international expansion of Japanese
companies. Their manpower is usually prioritized in India where the market is already larger.
Considering in the same framework as India, They usually point out that Pakistan's advantage and
differentiation are unknown in the region. However, many companies are basically interested in
expansion of their business in Pakistan mainly for the domestic consumer market, focusing on
Pakistan's market size and economic growth. Therefore, further appeal of Pakistan's attractiveness and
advantage is needed.
＜Suggestions for Improvement＞
◼ Strengthen appealing on advantages and differentiation
While Pakistan is a country that can be expected on the size of the market and economic growth, on
the other hand, it is always in the shade of India in South Asia. Japanese companies always put priority
on India considering the market size, security, etc. In order to see not only India but also Pakistan, it
is necessary to confirm the advantage and differentiation factors of Pakistan together with the publicity
through public relations activities. Government organizations such as BOI and TDAP should prepare
necessary publicity materials on the attractiveness and advantage of Pakistan and incorporate it into
the external promotional activities.
2) Strengthening Facilitation Capacity for Trade Promotion
＜Items to be Improved＞
The government is implementing trade promotion activities through TDAP, and their activities
mainly focus on arrangement of hosting exhibitions and dispatching delegation to overseas exhibitions,
judging from the stagnation of exports in recent years, it cannot be considered as sufficient effects.
The government has announced export incentive measures. The incentives shall be paid if the
increase in exports exceeds the target level. However, according to Pakistani exporters and industrial
groups, the fact is that it is not functioning effectively. Therefore, most of exporters have
disappointment on the incentive measures. In order to increase the motivation of exporters to expand
exports in the future, efforts should be made to make functioning of incentives effectively.
In addition, although Pakistan exporters need more market information of export target countries,
there is little provision of sufficient information since TDAP has focused on exhibition type promotion
mainly. It is necessary to collect and analyze information on overseas markets and make it useful for
55
exporters. As well as strengthening information provision capability. There is a same story for
importers in Japan. They pointed out that information of Pakistan's exporters and market information
are lacking, and it is necessary to strengthen information provision and public relations activities on
Pakistan’s market for foreign countries as well.
In addition, as same as the case of investment promotion issues, Japanese importers pointed out
issues on overseas remittance, high import duties, regulatory duty, and it is necessary to improve these
issues for bilateral trade promotion also.
＜Suggestions for Improvement＞
◼ Strengthen Facilitation Capacity of Government Agencies
TDAP mainly focuses on holding exhibitions such as EXPO Pakistan and arranging various
overseas delegation, however, compared with the activities of trade promotion organizations abroad
such as JETRO, their activities are carried out only in a relatively narrow area.
In order to contribute to further export growth, it is necessary to upgrade the activities of TDAP
itself. I heard that research activities about overseas market information including Japan have just been
started by TDAP, however, it is necessary to strengthen capacity, including exchange and cooperative
relationship building with foreign trade promotion organizations.
In addition, strengthening the business matching ability is also important . It is necessary to actively
create opportunities for business transactions, not only exhibitions nor business meetings but also
efforts like business matching through internet. The matching by internet have already been carried
out by Thai trade promotion organization, DITP. Further, since the current export incentive measures
do not seem to be functioning effectively, the government should also announce export incentive
measures with effectiveness to raise the motivation of exporters.
3) Strengthening Competitiveness of Textile Industry
＜Items to be Improved＞
Although textile products are an important export item that accounts for more than 50% of the total
export value of Pakistan, exports have been declining in recent years. Many of the export items of
textiles are commodity type such as cotton yarns and fabrics, and these products are more sensitive
to the price trend of the market because the added value is low. Therefore, it seems that the decline in
cotton yarn prices in recent years is also affecting the decrease in exports.
In that sense, it is necessary to strengthen the export of high value-added products such as home
textiles and apparel. Japan is the third largest textile market in the world, and strengthening the export
of high value added products to Japan can be an important key for Pakistan's textile exports that has
been mainly for the western markets to a large extent.
56
Meanwhile, Japanese textile importers show several issues related to Pakistan's home textiles and
apparel products. The following two points are major issues:
➢ Because denim, home textile, knit products are limited to products manufactured with cotton yarn
of the thick count, there is no variety of synthetic fiber products and it cannot be diversified into
other items. The attractiveness is diminished and containers cannot be filled sufficiently.
➢ Textile products are relatively inexpensive compared with other countries, however, besides price,
it is necessary to improve quality, delivery, stable supply etc. It is necessary to improve
differentiation and advantage.
Therefore, even if tax exemption measures would be taken, unless efforts are made to solve the
above problems, it would not lead to an increase of exports to Japan simply. After fully understanding
and recognizing the needs and countermeasures of the Japanese market, it is necessary to strengthen
the competitiveness of the textile industry supported by both public and private sector as a whole.
＜Suggestions for Improvement＞
◼ Strategic Approach to the Japanese Market and Differentiation
In Japan, the trend of "China Plus One" is progressing for diversifying suppliers other than China,
and, in this sense, it is an good opportunity for Pakistan to expand its export into the Japanese market,
focusing on areas where Pakistan's strengths can be utilized and export promotion activities should be
continued. They should respond in line with the strategic approach and export promotion activities to
the Japanese market, in cooperation with parties concern in the industry. It is also desirable to examine
the comparative advantages of competing countries in Asia and build a system that can further appeal
in the Japanese market by enhancing Pakistan's strengths and differentiation factors.
◼ Strengthen International Competitiveness of Textile Companies
Japanese companies generally have very strict criteria for quality, inspection and delivery. This point
is taken up as a problem frequently in dealing with Pakistan exporters. As for the delivery, Japanese
textile industry has many seasonal changes in the fashion season, delaying the delivery is a fatal
problem. Moreover, there are still plenty of rooms for improvement in production management, quality
control, inspection, etc. in Pakistani textile companies, and it is necessary for public and private sectors
to make efforts to improve business behavior and strengthen international competitiveness. For
example, it is desirable to conduct educational activities such as seminars for improvement, technical
assistance by experts or educational activities and training for senior and middle managers of corporate
management through government support.
4) Strengthening Export of Processed Foods
＜Items to be Improved＞
57
Agricultural & marine products and processed foods are Pakistan's second largest export items next
to textile products. However, agricultural and marine resources of Pakistan have not fully been utilized,
and it is said that 40% of the total agricultural products has been disposed. Therefore, both Japan and
Pakistan are concerned about the possibility and expectation for handling processed foods as export
products by utilizing abundant agricultural and fisheries resources.
Especially, there are opinions that it will lead to future export expansion by commercializing
agricultural products such as fruits, vegetables, and rice as processed foods. Regarding marine
products, Pakistan has not used them as much for food in the past, shrimp and crab, squid and octopus
are not often eaten mainly due to religious reasons. Therefore, the marine resources are very well
conditioned and abundant, and it is expected to be utilized for export.
On the other hand, in order to extend the business of processed foods and fishery products for export,
it is necessary to further improve the level of logistics such as cold chain and processing technology,
and support from Japan in this field would be important.
＜Suggestions for Improvement＞
◼ Strengthening the processed food industry
Pakistan has focused on fresh agricultural products such as fresh mango for export to Japan,
however, not only fresh products, but also processed foods such as juice, puree, pulp and dried fruits
have a possibility to enter Japanese market. Therefore, export promotion activities of these processed
foods should be carried out.
Recently, mango related drinks and desserts have come to be seen in Japan a lot, and demand has
surely increased. Therefore, there are many opportunities to enter the market. In addition, since there
should be rooms for entry of other fruits and nuts besides mangoes, it is desirable that efforts shall be
made to explore. For example, dry dates are exported to Japan through a trading company as a raw
material of sauce.
As for fishery processed products, shrimp has already been processed into freeze-dried in China
via trading companies. It is worth considering to support for expanding export of processed foods
from Japan through effective utilization of marine resources.
◼ Promoting the Export of Halal Food
Pakistan has the world's second largest Muslim population next to Indonesia, and the leading
producer of "Halal food" for Muslims. Currently, about 1.6 billion people, more than 20% of the world
population, are Muslims and are expected to increase further in the future. It is said that about 200,000
Muslims live in Japan and the number of tourism population for Japan from Islamic countries in Asia
such as Indonesia and Malaysia have also increased in recent years. Therefore, it can be considered
that Japanese companies will have partnership with Pakistan to develop a variety of Halal food
58
products and to establish a scheme to export not only to Japan but also to Islamic markets around the
world after obtaining Halal certification.
5) Strengthening IT related industry
＜Items to be Improved＞
Pakistan's IT industry has been growing in recent years and is considered to be expanded in the future.
IT exports from 2016 to 2017 are 3.3 billion dollars and are expected to grow to 6 billion dollars over
the next few years. The breakdown consists of 17% enterprise software, 15% marketing technology,
13% financial services, 9% consumer goods, 8% retail / electronic commerce. In addition, major IT
companies such as Amazon are expecting Pakistan startup companies, and the government has started
to promote startup companies through the government fund “Ignite”.
Both Pakistan and Japan pointed out that IT engineers have a good potential for subcontracting from
developed countries and growth is expected in export. On the other hand, there are indications that the
level of education at vocational training schools is not high, and according to a local company that
develops software for Japan, smooth interaction can be done in the business with Japanese interpreter.
There are circumstances and view that training of Japanese language human resources is also needed.
Japanese IT companies are expected to enter Pakistan and train IT human resources. In addition, e-
commerce is promising due to sophistication of consumption accompanying economic growth.
Advancement of Japanese companies in this field may lead to promotion of trade including domestic
sales of Japanese products in the future.
＜Suggestions for Improvement＞
◼ Enhance Business Matching in IT Sector
According to PSEB (Pakistan Software Export Association), there are about 5 thousand IT companies
and about 300 thousand IT engineers in Pakistan, with about 20 thousand new graduates every year as
a new labor force in the IT industry. The cost of software development is about 20% cheaper than
India. In order to attract IT companies, the government provides various incentives. It is desirable for
Pakistan to do promotion activities to Japan so that the Pakistan IT industry can obtain understanding
through seminars and pitch events. Together, it is desirable that activities such as establishing
cooperative relations with JETRO and IT industry organizations in Japan, strengthening business
matching between the two countries, and enabling new transactions and business creation.
◼ IT Human Resource Development
Pakistan is requesting Japanese government to support IT human resource development as well as
expecting that IT engineers in Pakistan can work in Japan in the future. In this regard, it is a good
reference that JICA’s technical assistance has been provided to Bangladesh in IT sector.
59
5-3 Possibilities of FTA
5-3-1 Japan’s FTAs
As of the end of 2018, Japan has signed or 18 economic partnership agreements (EPAs) (Table 5-
1). The proportion of trade with these partner countries accounts for 51.6% of total trade (36.5% in
the case of TPP 11 excluding the United States). "Growth Strategy 2018" aims at raising EPA/FTA
ratio to 70% of total trade by 2018 as a policy objective. However, the ratio of EPA/FTAs of total trade
reaches 85.8% when trade volume of partners under EPA negotiation is included besides existing EPAs
already in effect and signed.
Countries and regions under negotiation are Canada, Colombia, China, Korea, East Asia Regional
Comprehensive Economic Partnership (RCEP), Turkey, Gulf Cooperation Council (GCC) such as
United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait (Figure 5-1）.
Table 5-1 EPAs and FTAs in Japan (in effect and signed)
Year of Entry
into Force Country/Region
Year of Entry
into Force Country/Region
2002 Singapore 2009 Switzerland
2005 Mexico 2009 Vietnam
2006 Malaysia 2011 India
2007 Chile 2012 Peru
2007 Thailand 2015 Australia
2008 Indonesia 2016 Mongolia
2008 Brunei 2018 TPP11
2008 ASEAN 2018 TPP12（Signed）
2008 Philippines 2019 Japan-EU EPA
Source：MOFA website
Figure 5-1 Share of Trade Value of Countries and Regions in Japan’s Total
Trade
60
Source：MOFA website
According to Article 24 of the GATT, the FTA in trade in goods is justified as an exception to the
most-favored-nation treatment principle when such requirement as the abolition of tariffs on
substantially all the trade items between the members is vertically satisfied. Regarding the
interpretation of substantially all trade items, it is generally considered that there is a criterion that
90% of tariff in terms of trade value is eliminated within 10 years10.
In the case of FTAs between developing countries, it is possible to apply the enabling clause which
says that it is not necessarily to satisfy the requirement of GATT Article 24. However, in the case of
FTA between the developed and developing countries, the enabling clause is not allowed. When Japan
negotiates FTA with developing countries, both Japan and the partner country must fulfill the
obligation of Article 24 of GATT11.
10 Tadashi Yasui, Report on the status of Japanese EPAs (August 2006) on “The Finance” Vol. 42, No.5 published
by MOF 11 Keiishi Baba, Report on Trade policies, Bunshin-do, 2005
61
5-3-2 Pakistan’s FTAs
（１）Pakistan’s FTA/PTA partners and countries under negation
In Pakistan, the chronic trade deficit continues, and "Vision 2025" sets a target to increase the export
from US $ 25 billion in 2014 to US$ 150 billion in 2025. In recent years, MOC launched Strategic
Trade Policy Framework (STPF 2015 - 2018) 12 and exerted efforts to increase exports to US$ 35
billion in FY2018.
Pakistan has signed a preferential tariff agreement (PTA) with six countries and SAARC (South
Asia Association for Regional Cooperation). While PTA is a reduction of tariffs on partial items, the
FTA attempts to eliminate tariffs on all items. Pakistan signed FTA with China and Malaysia, and
singed PTA with Indonesia, Iran, Mauritius and Indonesia. Overall, the amount of trade between
Pakistan and FTA/PTA partners is small except for China and Indonesia. Pakistan's FTA and PTA
partners are all developing countries, and hence it is possible to apply the enabling clause. This
exempts Pakistan from the requirement of Article 24 of GATT and make it possible to sign PTA.
Countries under negotiation or joint research are illustrated in Table 5-2 Pakistan has not singed any
FTAs since FTA with Indonesia in 2013. Recently, Pakistan and Indonesia are in the process of
reviewing the PTA. Indonesian Trade Minister Enggartiasto Lukita suggested that it could be followed
up with a FTA13.
Table 5-2 Pakistan’s FTAs under negotiation
Country Status
Bangladesh In November 2003, FTA negotiations began.
Thailand In August 2015, negotiations on FTA was restarted for the first time in 10 years. Nine
negotiations have been held.
Singapore In August 2005 negotiations on comprehensive FTA including trade, investment and services
began, and the third negotiation was completed.
Jordan In June 2006, the 8th Pakistan Jordan Joint Ministerial Committee agreed to start FTA
negotiations.
Brunei In August 2008, the third meeting for FTA was held in Islamabad.
Morocco In December 2009, negotiations on PTA started.
Turkey In September 2015, negotiations on PTA began. FTA negotiations have been held six times.
Saudi Arabia In October 2018, both parties agreed to enter FTA negotiations.
Source: JETRO website
12 https://www.tdap.gov.pk/pdf/trade_policy_18.pdf 13 https://tribune.com.pk/story/1840613/2-pakistan-indonesia-pta-upgraded-fta/
62
（２）Trends in Trade between Pakistan and FTA Partner Countries
China
For Pakistan, China is the third largest export destination following the United States and the U.K.,
and the top importer in 2017. Cotton cloth and cotton thread account for about 60% of Pakistan’s
export to China, and there are other major export items such as chromium ore, rice, fishes and
crustaceans, medical instruments, etc. Top 10 items (HS 6-digit) of Pakistan’s export items account
for about 70% of all export.
There are two phases in Pakistan’s FTA with China: the first phase started from 2007 to 2012 (signed
in January 2006 and put into effect July 2017) whereas the second phase was originally scheduled to
start from 2012. In the first phase, Pakistan gave concession to 6711 items while China gave
concession to 6,418 items14 . The second phase is still under negotiation and it has not reached a
consensus as of February 2019.
Of the items subject to tariff reduction by the FTA, only 4% of items are exported from Pakistan to
China whereas there are more than 60% of items exported from China to Pakistan. This suggests that
diversification of Pakistan’s export items is not enough.
Table5-3 Top10 products (HS6 digits）in Pakistan’s Trade with China(HS6
digits)
14 http://www.commerce.gov.pk/about-us/trade-agreements/pak-china-free-trade-agreement-in-goods-investment/
Exports (2007) US$ thousand Exports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
123,802 20% '520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
623,960 41%
'261000 Chromium ores and concentrates 86,606 14% '261000 Chromium ores and concentrates 94,097 6%
'520532
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
64,398 10% '100630Semi-milled or wholly milled rice, whether or
not polished or glazed79,456 5%
'520522
Single cotton yarn, of combed fibres,
containing >= 85% cotton by weight and with
a linear ...
45,997 7% '520511
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
74,744 5%
'520511
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
36,391 6% '520912
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
41,524 3%
'520531
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
14,011 2% '520532
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
33,975 2%
'410449
Hides and skins of bovine "incl. buffalo" or
equine animals, in the dry state "crust",
without ...
13,121 2% '520522
Single cotton yarn, of combed fibres,
containing >= 85% cotton by weight and with
a linear ...
30,964 2%
'030379
Frozen freshwater and saltwater fish
(excluding salmonidae, flat fish, tunas,
skipjack or stripe-bellied ...
12,005 2% '520812
Plain woven fabrics of cotton, containing >=
85% cotton by weight and weighing > 100 g to
200 ...
28,771 2%
'521211
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
11,277 2% '901580
Instruments and appliances used in geodesy,
topography, hydrography, oceanography,
hydrology, ...
23,652 2%
'520819
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing <= 200 g/m²,
unbleached ...
11,175 2% '251512
Marble and travertine, merely cut, by sawing
or otherwise, into blocks or slabs of a square
...
20,959 1%
194,976 32% 455,978 30%
613,759 100% 1,508,080 100%Total Total
Others Others
63
Source：ITC TRADE MAP
Imports (2007) US$ thousand Imports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'852520
Transmission apparatus incorporating
reception apparatus, for radio-telephony,
radio-telegraphy, ...
392,506 9% '854140
Photosensitive semiconductor devices, incl.
photovoltaic cells whether or not assembled
in ...
627,009 4%
'852510
Transmission apparatus for radio-telephony,
radio-telegraphy, radio-broadcasting or
television
221,551 5% '851712Telephones for cellular networks "mobile
telephones" or for other wireless networks513,253 3%
'999999 Commodities not elsewhere specified 126,277 3% '310530
Diammonium hydrogenorthophosphate
"diammonium phosphate" (excluding that in
tablets or similar ...
450,289 3%
'310530
Diammonium hydrogenorthophosphate
"diammonium phosphate" (excluding that in
tablets or similar ...
115,100 3% '840211Watertube boilers with a steam production >
45 t/hour430,161 3%
'270400
Coke and semi-coke of coal, of lignite or of
peat, whether or not agglomerated; retort
carbon
101,528 2% '722530
Flat-rolled products of alloy steel other than
stainless, of a width of >= 600 mm, not
further ...
401,977 3%
'550320Staple fibres of polyesters, not carded,
combed or otherwise processed for spinning58,913 1% '850231 Generating sets, wind-powered 319,029 2%
'310430
Potassium sulphate (excluding that in tablets
or similar forms, or in packages with a gross
...
58,517 1% '851762
Machines for the reception, conversion and
transmission or regeneration of voice, images
or ...
257,144 2%
'070320 Garlic, fresh or chilled 58,154 1% '401120
New pneumatic tyres, of rubber, of a kind
used for buses and lorries (excluding typres
with ...
168,723 1%
'310540
Ammonium dihydrogenorthophosphate
"monoammonium phosphate", whether or not
mixed with diammonium ...
51,153 1% '841430 Compressors for refrigerating equipment 148,750 1%
'401120
New pneumatic tyres, of rubber, of a kind
used for buses and lorries (excluding typres
with ...
50,952 1% '850239
Generating sets (excluding wind-powered and
powered by spark-ignition internal
combustion piston ...
124,519 1%
2,929,579 70% 11,942,544 78%
4,164,230 100% 15,383,398 100%
Others Others
Total Total
64
Indonesia
The negotiations of PTA began in August 2003, and the tariff rate of palm oil had been a point of
contention for Indonesia while that of Kinnow had been an issue for Pakistan. After the negotiations
of eight rounds, both parties agreed to sign PTA in February 2012 and thereafter PTA was put into
force in September 2013. Consequently, Indonesia’s 216 items and Pakistan’s 287 items were subject
to either tariff elimination or tariff reduction measures.
Table5-4 Top10 products (HS6 digits）in Pakistan’s Trade with Indonesia
Exports (2013) US$ thousand Exports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'520100 Cotton, neither carded nor combed 39,864 28% '520100 Cotton, neither carded nor combed 28,051 17%
'100640 Broken rice 19,921 14% '100640 Broken rice 18,950 11%
'520932
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
14,143 10% '481159
Paper and paperboard, surface-coloured,
surface-decorated or printed, coated,
impregnated or ...
17,641 11%
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed7,095 5% '080529
Fresh or dried wilkings and similar citrus
hybrids17,235 10%
'100590 Maize (excluding seed for sowing) 5,043 3% '100630Semi-milled or wholly milled rice, whether or
not polished or glazed11,418 7%
'740500
Master alloys of copper (excluding
phosphorus-copper compounds copper
phosphide" containing ...
4,482 3% '731029Tanks, casks, drums, cans, boxes and similar
containers, of iron or steel, for any material, ...10,759 6%
'030339
Frozen flat fish "Pleuronectidae, Bothidae,
Cynoglossidae, Soleidae, Scophthalmidae and
Citharidae" ...
4,327 3% '520932
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
9,440 6%
'740400
Waste and scrap, of copper (excluding ingots
or other similar unwrought shapes, of
remelted ...
3,943 3% '080521Fresh or dried mandarins incl. tangerines and
satsumas (excl. clementines)3,616 2%
'230120
Flours, meals and pellets of fish or
crustaceans, molluscs or other aquatic
invertebrates, ...
3,549 2% '410712
Grain splits leather "incl. parchment-dressed
leather", of the whole hides and skins of
bovine ...
3,498 2%
'520839
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing <= 200 g/m²,
dyed ...
2,933 2% '030339
Frozen flat fish "Pleuronectidae, Bothidae,
Cynoglossidae, Soleidae, Scophthalmidae and
Citharidae" ...
3,222 2%
39,080 27% 41,758 25%
144,380 100% 165,588 100%
Others
Total
Others
Total
65
Source：ITC TRADE MAP
Malaysia
The Early Harvest Program (EHP) was implemented from January 1, 2006. Malaysia abolished
tariff on 114 items whereas Pakistan abolished tariff on 125 items 15 . In November 2007, a
comprehensive free trade agreement (FTA) was concluded and it came into effect in January 2008.
For trade in Goods Pakistan will eliminate tariff on 43.2% of the current imports from Malaysia by
2012. On the other hand, Malaysia will eliminate tariff on 78% of imports from Pakistan16. Malaysia
FTA is the first comprehensive FTA for Pakistan, including trade in goods, service trade, investment
and economic cooperation, and both countries agreed to review the agreement every five years.
Among Pakistan’s top five export items (6th digit HS) to Malaysia, rice accounts for 13% of the
total export value, while fish accounts for 7%, bed linen for 6%, apparel for (5%), and light vessel for
5%. Although rice is the largest item exported to Sri Lank, preferential tariff is not applied to rice.
15 http://www.commerce.gov.pk/about-us/trade-agreements/pak-malaysia-early-harvest-programme/ 16 http://www.commerce.gov.pk/about-us/trade-agreements/pak-malaysia-trade-agreements/
Imports (2013) US$ thousand Imports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'151190
Palm oil and its fractions, whether or not
refined (excluding chemically modified and
crude)
953,605 50% '151190
Palm oil and its fractions, whether or not
refined (excluding chemically modified and
crude)
392,500 36%
'271019
Medium oils and preparations, of petroleum
or bituminous minerals, not containing
biodiesel, ...
385,463 20% '151110 Crude palm oil 84,341 8%
'151110 Crude palm oil 191,804 10% '271019
Medium oils and preparations, of petroleum
or bituminous minerals, not containing
biodiesel, ...
40,833 4%
'890800Vessels and other floating structures for
breaking up29,939 2% '230660
Oilcake and other solid residues, whether or
not ground or in the form of pellets, resulting
...
34,986 3%
'540247Filament yarn of polyester, incl. monofilament
of < 67 decitex, single, untwisted or with a ...14,446 1% '540247
Filament yarn of polyester, incl. monofilament
of < 67 decitex, single, untwisted or with a ...26,253 2%
'841430 Compressors for refrigerating equipment 13,912 1% '890800Vessels and other floating structures for
breaking up18,794 2%
'382319
Fatty acids, industrial, monocarboxylic; acid
oils from refining (excluding stearic acid,
oleic ...
13,581 1% '151620
Vegetable fats and oils and their fractions,
partly or wholly hydrogenated, inter-
esterified, ...
16,954 2%
'540233Textured filament yarn of polyester
(excluding that put up for retail sale)10,511 1% '847130
Data-processing machines, automatic,
portable, weighing <= 10 kg, consisting of at
least a ...
13,609 1%
'390230 Propylene copolymers, in primary forms 9,892 1% '293040 Methionine 13,465 1%
'841510Window or wall air conditioning machines,
self-contained or "split-system"9,531 0% '441193
Fibreboard of wood or other ligneous
materials, whether or not agglomerated with
resins or ...
12,840 1%
287,053 15% 446,430 41%
1,919,737 100% 1,101,005 100%
Others
Total Total
Others
66
Table 5-5 Top10 products (HS6 digits）in Pakistan’s Trade with Malaysia
Source：ITC TRADE MAP
Exports (2008) US$ thousand Exports (2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed23,721 17% '100630
Semi-milled or wholly milled rice, whether or
not polished or glazed16,294 13%
'100590 Maize (excluding seed for sowing) 11,581 8% '030339
Frozen flat fish "Pleuronectidae, Bothidae,
Cynoglossidae, Soleidae, Scophthalmidae and
Citharidae" ...
9,417 7%
'030374Frozen mackerel (Scomber scombrus,
Scomber australasicus, Scomber japonicus)6,479 5% '630239
Bedlinen of textile materials (excluding of
cotton and man-made fibres, printed, knitted
or ...
7,311 6%
'420310
Articles of apparel, of leather or composition
leather (excluding clothing accessories,
footware ...
4,881 4% '620322
Men's or boys' ensembles of cotton
(excluding knitted or crocheted, ski
ensembles and swimwear)
6,554 5%
'630231Bedlinen of cotton (excluding printed, knitted
or crocheted)4,401 3% '890590
Light-vessels, fire-floats, floating cranes and
other vessels, the navigability of which is ...6,481 5%
'630260
Toilet linen and kitchen linen, of terry
towelling or similar terry fabrics of cotton
(excluding ...
4,304 3% '310229
Double salts and mixtures of ammonium
sulphate and ammonium nitrate (excluding
goods of this ...
5,394 4%
'110423
Hulled, pearled, sliced, kibbled or otherwise
worked maize grains (excluding rolled, flaked,
...
4,054 3% '070310 Fresh or chilled onions and shallots 5,083 4%
'100640 Broken rice 3,669 3% '630260
Toilet linen and kitchen linen, of terry
towelling or similar terry fabrics of cotton
(excluding ...
4,318 3%
'520532
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
3,135 2% '350300
Gelatin, whether or not in square or
rectangular sheets, whether or not surface-
worked or coloured, ...
4,049 3%
'030379
Frozen freshwater and saltwater fish
(excluding salmonidae, flat fish, tunas,
skipjack or stripe-bellied ...
3,112 2% '070190 Fresh or chilled potatoes (excluding seed) 3,905 3%
68,731 50% 60,260 47%
138,068 100% 129,066 100%Total Total
Others Others
Imports (2008) US$ thousand Imports (2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'151190
Palm oil and its fractions, whether or not
refined (excluding chemically modified and
crude)
901,924 9% '151190
Palm oil and its fractions, whether or not
refined (excluding chemically modified and
crude)
392,500 4%
'151110 Crude palm oil 314,615 5% '151110 Crude palm oil 84,341 3%
'847130
Data-processing machines, automatic,
portable, weighing <= 10 kg, consisting of at
least a ...
24,392 3% '271019
Medium oils and preparations, of petroleum
or bituminous minerals, not containing
biodiesel, ...
40,833 3%
'390110Polyethylene with a specific gravity of < 0,94,
in primary forms19,088 3% '230660
Oilcake and other solid residues, whether or
not ground or in the form of pellets, resulting
...
34,986 3%
'400110Natural rubber latex, whether or not
prevulcanised18,234 2% '540247
Filament yarn of polyester, incl. monofilament
of < 67 decitex, single, untwisted or with a ...26,253 3%
'540247Filament yarn of polyester, incl. monofilament
of < 67 decitex, single, untwisted or with a ...16,165 1% '890800
Vessels and other floating structures for
breaking up18,794 2%
'390120Polyethylene with a specific gravity of >=
0,94, in primary forms14,685 1% '151620
Vegetable fats and oils and their fractions,
partly or wholly hydrogenated, inter-
esterified, ...
16,954 2%
'841430 Compressors for refrigerating equipment 13,681 1% '847130
Data-processing machines, automatic,
portable, weighing <= 10 kg, consisting of at
least a ...
13,609 1%
'291521 Acetic acid 12,992 1% '293040 Methionine 13,465 1%
'291612 Esters of acrylic acid 11,948 1% '441193
Fibreboard of wood or other ligneous
materials, whether or not agglomerated with
resins or ...
12,840 1%
1,693,664 70% 446,430 78%
4,164,230 100% 1,101,005 100%
Others Others
Total Total
67
Sri Lanka
FTA between Pakistan and Sri Lanka was concluded in August 2002 and it came into operation in
July 2005. Immediately after FTA being into force, immediate elimination of tariffs was conducted for
Pakistan’s 206 products and for Sri Lanka’s 102 items (HS6 digits). Except for the items not subject
to tariff reduction (HS 6 digits), namely Sri Lanka’s 607 items and Pakistan’s 540 items, Pakistan and
Sri Lanka aim at eliminating tariffs of other items by 2010 and 2008, respectively17. In 2017, top 10
Pakistan’s export items (HS6 digits) to Sri Lanka are cement, cotton fabrics, medicaments, salt, rice,
and ethyl alcohol and others, all of which account for over 50% of Pakistan’s total export to Sri Lanka.
Table5-6 Top10 products (HS6 digits）in Pakistan’s Trade with Sri Lanka
17 http://www.commerce.gov.pk/about-us/trade-agreements/pak-srilanka-free-trade-agreement/
Exports (2005) US$ thousand Exports (2017) US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'520819
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing <= 200 g/m²,
unbleached ...
22,645 15% '252329Portland cement (excluding white, whether or
not artificially coloured)24,988 9%
'521213
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
20,980 14% '520932
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
24,147 9%
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed6,613 4% '100630
Semi-milled or wholly milled rice, whether or
not polished or glazed15,883 6%
'730610
Line pipe of a kind used for oil or gas
pipelines, of iron or steel, of an external
diameter ...
6,527 4% '310229
Double salts and mixtures of ammonium
sulphate and ammonium nitrate (excluding
goods of this ...
15,309 6%
'520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
5,079 3% '300490
Medicaments consisting of mixed or unmixed
products for therapeutic or prophylactic
purposes, ...
13,134 5%
'300490
Medicaments consisting of mixed or unmixed
products for therapeutic or prophylactic
purposes, ...
4,672 3% '730690Tubes, pipes and hollow profiles "e.g., open
seam, riveted or similarly closed", of iron or ...10,954 4%
'630621 Tents of cotton (excluding fly sheets) 4,374 3% '520942
Denim, containing >= 85% cotton by weight
and weighing > 200 g/m², made of yarn of
different ...
10,638 4%
'030559Dried fish, even salted but not smoked
(excluding fillets, offal and cod)3,923 3% '070190 Fresh or chilled potatoes (excluding seed) 7,527 3%
'390410Poly"vinyl chloride", in primary forms, not
mixed with any other substances3,858 3% '300439
Medicaments containing hormones or
steroids used as hormones but not
antibiotics, put up in ...
7,268 3%
'521223
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
3,435 2% '220710Undenatured ethyl alcohol, of actual alcoholic
strength of >= 80%6,576 2%
71,556 47% 132,494 49%
153,662 100% 268,918 100%Total Total
Others Others
68
Exports (2005) US$ thousand Exports (2017) US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'520819
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing <= 200 g/m²,
unbleached ...
22,645 15% '252329Portland cement (excluding white, whether or
not artificially coloured)24,988 9%
'521213
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
20,980 14% '520932
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
24,147 9%
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed6,613 4% '100630
Semi-milled or wholly milled rice, whether or
not polished or glazed15,883 6%
'730610
Line pipe of a kind used for oil or gas
pipelines, of iron or steel, of an external
diameter ...
6,527 4% '310229
Double salts and mixtures of ammonium
sulphate and ammonium nitrate (excluding
goods of this ...
15,309 6%
'520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
5,079 3% '300490
Medicaments consisting of mixed or unmixed
products for therapeutic or prophylactic
purposes, ...
13,134 5%
'300490
Medicaments consisting of mixed or unmixed
products for therapeutic or prophylactic
purposes, ...
4,672 3% '730690Tubes, pipes and hollow profiles "e.g., open
seam, riveted or similarly closed", of iron or ...10,954 4%
'630621 Tents of cotton (excluding fly sheets) 4,374 3% '520942
Denim, containing >= 85% cotton by weight
and weighing > 200 g/m², made of yarn of
different ...
10,638 4%
'030559Dried fish, even salted but not smoked
(excluding fillets, offal and cod)3,923 3% '070190 Fresh or chilled potatoes (excluding seed) 7,527 3%
'390410Poly"vinyl chloride", in primary forms, not
mixed with any other substances3,858 3% '300439
Medicaments containing hormones or
steroids used as hormones but not
antibiotics, put up in ...
7,268 3%
'521223
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
3,435 2% '220710Undenatured ethyl alcohol, of actual alcoholic
strength of >= 80%6,576 2%
71,556 47% 132,494 49%
153,662 100% 268,918 100%Total Total
Others Others
69
Iran
Pakistan signed PTA with Iran in 2004 and was in force in 2006. Pakistan reduced tariff on 338
items and Iran reduced tariff on 309 items (HS6 digits). Pakistan’s imports from Iran rapidly increased,
but thereafter due to the impact of UN sanctions against Iran, trade volumes shrank sharply18.
In 2017, Pakistan's exports of top 10 products at HS6 digit account for 96% of total export. Paper
and paperboard have a large share of exports, accounting for 68%, followed by rice accounts of 10%.
Meanwhile, Pakistan’s import of petroleum from Iran accounts for 57% of total import, whereas fruits
and ceramics products accounts for 10% and 7%, respectively.
Table 5-7 Top10 products (HS6 digits）in Pakistan’s Trade with Iran
18 http://www.commerce.gov.pk/about-us/trade-agreements/pak-iran-preferential-trade-agreement/
Exports (2006) US$ thousand Exports （2017） US$ thousand
HS Product Labe Value ％ HS Product Labe Value ％
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed109,954 62% '481159
Paper and paperboard, surface-coloured,
surface-decorated or printed, coated,
impregnated or ...
18,170 68%
'420310
Articles of apparel, of leather or composition
leather (excluding clothing accessories,
footware ...
12,570 7% '100630Semi-milled or wholly milled rice, whether or
not polished or glazed2,720 10%
'721420
Bars and rods, of iron or non-alloy steel, with
indentations, ribs, groves or other
deformations ...
6,229 3% '392350Stoppers, lids, caps and other closures, of
plastics1,043 4%
'550330
Acrylic or modacrylic staple fibres, not
carded, combed or otherwise processed for
spinning
5,930 3% '392010
Plates, sheets, film, foil and strip, of non-
cellular polymers of ethylene, not reinforced,
...
1,037 4%
'080520
Fresh or dried mandarins incl. tangerines and
satsumas, clementines, wilkings and similar
citrus ...
4,917 3% '630140
Blankets and travelling rugs of synthetic
fibres (excluding electric, table covers,
bedspreads ...
680 3%
'190110Food preparations for infant use, put up for
retail sale, of flour, groats, meal, starch or ...3,881 2% '901890
Instruments and appliances used in medical,
surgical or veterinary sciences, n.e.s.675 3%
'531090
Woven fabrics of jute or of other textile bast
fibres of heading 5303, bleached, dyed, made
...
3,109 2% '890190
Vessels for the transport of goods and
vessels for the transport of both persons and
goods ...
552 2%
'550690
Synthetic staple fibres carded, combed or
otherwise processed for spinning (excluding
acrylic, ...
1,895 1% '050790
Tortoiseshell, whalebone and whalebone hair,
horns, antlers, hooves, nails, claws and
beaks, ...
317 1%
'521213
Woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
other than those ...
1,757 1% '841480
Air pumps, air or other gas compressors and
ventilating or recycling hoods incorporating a
...
238 1%
'100640 Broken rice 1,262 1% '120740 Sesamum seeds, whether or not broken 124 0%
27,278 15% 978 4%
178,782 100% 26,534 100%Total Total
Others Others
70
Source：ITC TRADE MAP
Mauritius
In 2017, Pakistan's export to Mauritius account for 0.09% of the Pakistan’s total export whereas
Pakistan’s import to Mauritius account for 0.1% of the Pakistan’s total import, and thus the value of
trade between two countries is small. In July 2007, Pakistan signed a PTA with Mauritius and was put
into operation in November 2007.
Table 5-8 Top10 products (HS6 digits）in Pakistan’s Trade with Mauritius
Imports (2006) US$ thousand Imports （2017） US$ thousand
HS Product Labe Value ％ HS Product Labe Value ％
'270900Petroleum oils and oils obtained from
bituminous minerals, crude151,913 34% '271119
Gaseous hydrocarbons, liquefied, n.e.s.
(excluding natural gas, propane, butane,
ethylene, ...
55,816 17%
'720449
Waste and scrap of iron or steel (excluding
slag, scale and other waste of the production
of ...
80,146 18% '271012
Light oils and preparations, of petroleum or
bituminous minerals which >= 90% by
volume "incl. ...
44,685 14%
'290243 P-Xylene 26,073 6% '271320 Petroleum bitumen 37,864 12%
'260111Non-agglomerated iron ores and concentrates
(excluding roasted iron pyrites)19,332 4% '271600 Electrical energy 33,099 10%
'720810Flat-rolled products of iron or non-alloy steel,
of a width of >= 600 mm, in coils, simply ...10,382 2% '690723
Ceramic flags and paving, hearth or wall tiles,
of a water absorption coefficient by weight ...24,268 7%
'790112Unwrought zinc, not alloyed, containing by
weight < 99,99% of zinc8,367 2% '890800
Vessels and other floating structures for
breaking up15,408 5%
'390120Polyethylene with a specific gravity of >=
0,94, in primary forms7,202 2% '271019
Medium oils and preparations, of petroleum
or bituminous minerals, not containing
biodiesel, ...
13,947 4%
'721420
Bars and rods, of iron or non-alloy steel, with
indentations, ribs, groves or other
deformations ...
5,962 1% '080810 Fresh apples 13,921 4%
'410510
Skins of sheep or lambs, in the wet state
"incl. wet-blue", tanned, without wool on,
whether ...
5,838 1% '720449
Waste and scrap of iron or steel (excluding
slag, scale and other waste of the production
of ...
7,121 2%
'843049
Boring or sinking machinery for boring earth
or extracting minerals or ores, not self-
propelled ...
5,466 1% '252329Portland cement (excluding white, whether or
not artificially coloured)5,948 2%
122,496 28% 75,103 23%
443,177 100% 327,180 100%
Others Others
Total Total
Exports (2007) US$ thousand Exports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'100630Semi-milled or wholly milled rice, whether or
not polished or glazed22,663 64% '100630
Semi-milled or wholly milled rice, whether or
not polished or glazed5,515 28%
'520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
2,777 8% '520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
2,658 14%
'520532
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
1,277 4% '520522
Single cotton yarn, of combed fibres,
containing >= 85% cotton by weight and with
a linear ...
1,673 9%
'520511
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
880 2% '411310
Leather further prepared after tanning or
crusting "incl. parchment-dressed leather", of
goats ...
875 4%
'521031
Plain woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
mixed ...
680 2% '630260
Toilet linen and kitchen linen, of terry
towelling or similar terry fabrics of cotton
(excluding ...
868 4%
'190531 Sweet biscuits 478 1% '190531 Sweet biscuits 814 4%
'520819
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing <= 200 g/m²,
unbleached ...
411 1% '520612
Single cotton yarn containing predominantly,
but < 85% cotton by weight, of uncombed
fibres ...
772 4%
'520531
Multiple "folded" or cabled cotton yarn, of
uncombed fibres, containing >= 85% cotton
by weight ...
409 1% '520942
Denim, containing >= 85% cotton by weight
and weighing > 200 g/m², made of yarn of
different ...
403 2%
'520522
Single cotton yarn, of combed fibres,
containing >= 85% cotton by weight and with
a linear ...
349 1% '080529Fresh or dried wilkings and similar citrus
hybrids323 2%
'521051
Plain woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
mixed ...
305 1% '300420
Medicaments containing antibiotics, put up
in measured doses "incl. those in the form of
transdermal ...
265 1%
5,314 15% 5,294 27%
35,543 100% 19,460 100%Total Total
Others Others
71
Source：ITC TRADE MAP
5-3-3 Possible Impact of FTA on Japanese and Pakistani Economies
（１）Impacts on Japanese Economy
As for the impact on FTAs by Japan, Pakistan's export items to Japan are mainly cotton yarn, cotton
fabrics, garments and according to the questionnaire survey on Japanese companies as shown in
chapter 4, there are some requests from textile companies to sign FTA whereas Pakistan’s textile
industry has strong demands for FTAs. As shown in table 5-13, in terms of the top ten items, cotton
yarn (HS 520512), cotton fabrics (HS 520812, HS 520912), and apparels (HS 620342, HS 620462)
accounted for 13% of imports from Pakistan.
In terms of non-textiles, ethyl alcohol (HS 227010) accounts for 35.3% of agricultural products
exported to Japan in Pakistan, showing an increase of 5% per annum over the past five years.
While imports to Pakistan have been on decreasing trend in the past five years from 2013 to 2017,
major agricultural products show an increasing trend although the share of total import value remains
small. Except for frozen fish meat (HS 030449), overall agricultural top 10 agricultural products at
HS6 digits show an increasing trend as illustrated in Table 5-14.
Imports (2007) US$ thousand Imports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
720449
Waste and scrap of iron or steel (excluding
slag, scale and other waste of the production
of ...
94 17% '890800Vessels and other floating structures for
breaking up2,411 60%
'400219
Styrene-butadiene rubber "SBR";
carboxylated styrene-butadiene rubber
"XSBR", in primary forms ...
74 14% '340111
Soap and organic surface-active products and
preparations, in the form of bars, cakes,
moulded ...
810 20%
'292429
Cyclic amides, incl. cyclic carbamates, and
their derivatives; salts thereof (excluding
ureines ...
52 10% '290513 Butan-1-ol "n-butyl alcohol" 218 5%
'999999 Commodities not elsewhere specified 37 7% '290512Propan-1-ol "propyl alcohol" and propan-2-ol
"isopropyl alcohol"170 4%
'400220Butadiene rubber "BR", in primary forms or in
plates, sheets or strip36 7% '261900
Slag, dross, scalings and other waste from
the manufacture of iron or steel (excluding
granulated ...
118 3%
'521051
Plain woven fabrics of cotton, containing
predominantly, but < 85% cotton by weight,
mixed ...
35 6% '720441
Turnings, shavings, chips, milling waste,
sawdust, filings, trimmings and stampings of
iron ...
71 2%
'720430
Waste and scrap of tinned iron or steel
(excluding radioactive, and waste and scrap
of batteries ...
33 6% '340119
Soap and organic surface-active products and
preparations, in the form of bars, cakes,
moulded ...
66 2%
'720441
Turnings, shavings, chips, milling waste,
sawdust, filings, trimmings and stampings of
iron ...
29 5% '470790
Recovered "waste and scrap" paper or
paperboard, incl. unsorted waste and scrap
(excluding ...
59 1%
'400231Isobutylene isoprene rubber "IIR", in primary
forms or in plates, sheets or strip28 5% '720430
Waste and scrap of tinned iron or steel
(excluding radioactive, and waste and scrap
of batteries ...
48 1%
'470790
Recovered "waste and scrap" paper or
paperboard, incl. unsorted waste and scrap
(excluding ...
27 5% '720449
Waste and scrap of iron or steel (excluding
slag, scale and other waste of the production
of ...
20 0%
95 18% 42 1%
540 100% 4,033 100%
Others Others
Total Total
72
Table 5-9 Japan’s Top10 Products (HS6 digits）in Trade with Pakistan
Source：ITC TRADE MAP
Table 5-10 Japan’s Imports of Major Agricultural Products from Pakistan（HS6
digits）in 2017 (Japanese Report）
Source：ITC TRADE MAP
Exports （2017） US$ thousand Imports （2017） US$ thousand
HS Product Label Value ％ HS Product Label Value ％
'870321
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
274,615 12% '220710Undenatured ethyl alcohol, of actual alcoholic
strength of >= 80%152,354 35%
'870340Motor cars and other motor vehicles
principally designed for the transport of ...179,785 8% '271012
Light oils and preparations, of petroleum or
bituminous minerals which >= 90% by
volume "incl. ...
67,054 16%
'720839Flat-rolled products of iron or non-alloy steel,
of a width of >= 600 mm, in coils, simply ...173,220 7% '520512
Single cotton yarn, of uncombed fibres,
containing >= 85% cotton by weight and with
a linear ...
20,101 5%
'870422
Motor vehicles for the transport of goods,
with compression-ignition internal
combustion piston ...
152,915 7% '740400
Waste and scrap, of copper (excluding ingots
or other similar unwrought shapes, of
remelted ...
15,383 4%
'840991
Parts suitable for use solely or principally
with spark-ignition internal combustion
piston ...
95,285 4% '520812
Plain woven fabrics of cotton, containing >=
85% cotton by weight and weighing > 100 g to
200 ...
13,483 3%
'870840
Gear boxes and parts thereof, for tractors,
motor vehicles for the transport of ten or
more ...
87,756 4% '620342
Men's or boys' trousers, bib and brace
overalls, breeches and shorts, of cotton
(excluding ...
9,005 2%
'870324
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
74,813 3% '740200Copper, unrefined; copper anodes for
electrolytic refining8,808 2%
'870323
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
62,556 3% '620462
Women's or girls' trousers, bib and brace
overalls, breeches and shorts of cotton
(excluding ...
8,347 2%
'720838Flat-rolled products of iron or non-alloy steel,
of a width of >= 600 mm, in coils, simply ...61,436 3% '520912
Woven fabrics of cotton, containing >= 85%
cotton by weight and weighing > 200 g/m², in
three-thread ...
6,461 1%
'870423
Motor vehicles for the transport of goods,
with compression-ignition internal
combustion piston ...
54,869 2% '030617
Frozen shrimps and prawns, even smoked,
whether in shell or not, incl. shrimps and
prawns in ...
6,368 1%
1,107,679 48% 124,600 29%
2,324,929 100% 431,964 100%
Others Others
Total Total
US$ thousand
HS Product Label Value
Share in Japan's
Imports from
Pakista
Pakistan's Product
Share in Japan's
Import from World
CAGR
（2013-3017）
1 220710Undenatured ethyl alcohol, of actual
alcoholic strength of >= 80%152,354 35.3% 33% 5%
2 030617
Frozen shrimps and prawns, even
smoked, whether in shell or not, incl.
shrimps and prawns in . . .
6368 1.5% 0.4% 43%
3 050610 Ossein and bones treated with acid 4,952 1.1% 24% 77%
4 030499Frozen fish meat n.e.s. (excluding
fillets)3313 0.8% 1% -15%
5 120740Sesamum seeds, whether or not
broken2,974 0.7% 2% 9%
6 252610
Natural steatite, whether or not
roughly trimmed or merely cut, by
sawing or otherwise, into . . .
2700 0.6% 8% 4%
7 250100
Salts, incl. table salt and denatured
salt, and pure sodium chloride,
whether or not in aqueous . . .
2,556 0.6% 1% 26%
8 252620Natural steatite and talc, crushed or
powdered1414 0.3% 2% 14%
9 030389 Frozen fish, n.e.s. 743 0.2% 0.1% 6%
10 100630Semi-milled or wholly milled rice,
whether or not polished or glazed731 0.2% 0.04% 10%
431,964 100% - -4%Total
73
（２）Impacts on Pakistani Economy
Pakistan's imports from Japan are mainly vehicles. 8 out of the top 10 items are vehicles, and the
rest is excavators (HS 8429) and flat-rolled products (HS 720839). Top ten import items account for
57% of Pakistan's total imports from Japan. As Pakistan’s high economic growth stimulates the
demand for vehicles, the growth rate of different type of vehicles far exceeds the average growth rate
of imports of 4%.
Products imported from Japan are mainly auto-parts, medical equipment, and precision instruments
or capital goods to support Pakistan’s textile and automotive industries. Imported items vary; for
example, imported items below 11th include parts used for engines (HS840991) for US$ 32 million,
long fibers of recycled fibers and semisynthetic fibers (HS550200）for US$ 28 million, looms
（HS844630）for US$ 22 million, measuring instrument（HS901580）for US$ 12 million, X ray
equipment/tomography equipment（HS902214）and others.
Table 5-11 Pakistan’s Top 10 products （HS6 digits）imported from in 2017
(Japanese Report）
Source：ITC TRADE MAP
Imports （2017） US$ thousand
HS Product Label Value ％CAGR
（2013-3017）
'870321
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
385,105 17% 19
'720839Flat-rolled products of iron or non-alloy steel,
of a width of >= 600 mm, in coils, simply ...221,928 10% 26
'870322
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
179,303 8% 17
'870323
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
143,182 6% 19
'870422
Motor vehicles for the transport of goods,
with compression-ignition internal
combustion piston ...
98,347 4% 59
'870120 Road tractors for semi-trailers 90,988 4% 62
'870390
Motor cars and other vehicles principally
designed for the transport of persons, incl.
station ...
47,345 2% 69
'870210
Motor vehicles for the transport of >= 10
persons, incl. driver, with compression-
ignition ...
45,564 2% 22
'842959
Self-propelled mechanical shovels,
excavators and shovel loaders (excluding
self-propelled ...
44,895 2% 87
'870324
Motor cars and other motor vehicles
principally designed for the transport of
persons, incl. ...
42,693 2% 13
994,601 43% -
2,293,951 100% 4
Others
Total
