Report

20 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
Fig 1.9 Exports and Imports as a percentage of GDP in
Nepal: 1999–2004
Source: National Accounts, Central Bureau of Statistics.
plummeted by 40% in the first ten months of 2005
compared to same period of 2004.
Nepal’s trade with India has increased substantially.
Within a decade, share of India in Nepal’s trade has
more than doubled. It reached about 68% of the trade
in 2007 against 28% in 1995. Trade with India is facilitated
by free and unlimited convertibility of the Nepalese
rupees against Indian currency. Trade treaty with
India allows duty-free market access to primary goods
and selected manufacturing goods to Indian market.
Imports from India are also subject to low tariff.
Nepal became the member of the WTO in 2004,
as the first LDC to join the WTO since its inception on
1 January 1995. It has opened up trade opportunities
for Nepal as a member of multilateral trading system.
Nepal is a founding member of SAARC, under which
SAFTA has been launched from January 2006. Nepal
is also part of BIMSTEC. With the signing of the
framework agreement, Nepal has agreed to enter into
negotiations for eliminating tariff and NTBs with a
provision of maintaining negative list and dual tracks
(fast and normal) for liberalisation. Nepal’s entry into
liberal global trading regime through WTO, SAFTA
and BIMSTEC has widened its export opportunities.
Pakistan
Pakistan is a nation with a diverse economy that
includes textiles, chemicals, food processing, agriculture
and other industries. It is the 25th largest economy in
the world. Pakistan is witnessing a growing middle class
population and poverty levels have declined by 10%
since 2001.
Pakistan was predominately an agricultural country
when it gained independence in 1947. Pakistan’s
average economic growth since independence has been
higher than the average growth rate of the world
economy during the period. Historically, Pakistan’s
overall GDP has grown every year since its 1951
recession. Despite this record of sustained growth,
Pakistan’s economy, until a few years ago, had been
characterised as unstable and highly vulnerable to
external and internal shocks. However, the economy
proved to be unexpectedly resilient in the face of
multiple adverse events like the Asian financial crisis,
global recession and a severe drought.
Average annual real GDP growth rates were 6.8%
in the 1960s, 4.8% in the 1970s, and 6.5% in the
1980s. Average annual growth rate fell to 4.6% in the
1990s with significantly lower growth in the second
half of that decade. Between 1997 and 2002, the real
GDP grew by a meager 3% on average. The near stagnant
economy grew steadily after 2002 (Table 1.17).
Pakistan’s economy has grown by more than 6.5% per
year since 2003. While income inequality has increased
somewhat, poverty has declined significantly. A wideranging
program of economic reforms launched in 2000
(fiscal adjustment, privatisation of energy, telecommunications,
and production, banking sector reform and
trade reform) have played a key role in the country’s
economic recovery. The external environment of low
interest rates, abundant liquidity, and robust external
demand, has also been favourable for the country’s
growth.
The contribution of agriculture to GDP declined
from 25.9% in 1999–2000 to 21.3% in 2005–06,
whereas the share of manufacturing increased from
14.7% in 1999–2000 to 18.9 in 2005–06 (Fig 1.10).
The major stimulus to economic growth has come from
service sector with its share in GDP rising over 50%.
Trade Policy Regime in Pakistan: Pakistan has made
substantial progress over the past decade in constructing
a more open and transparent trade policy regime. The
trade policy in Pakistan, like in many other developing
Table 1.17 Growth rates of GDP, 1997–2005 (%)
Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005
Real GDP(at factor cost) 3.5 4.2 3.9 1.9 3.1 4.7 7.4 8.9 6.6
Source: Federal Bureau of Statistics