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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
I NTRODUCTION 21 Fig 1.10 Share of Agriculture, Manufacturing and Services in GDP in Pakistan: 2000–03 (%) Source: Federal Bureau of Statistics. countries, has changed over time. In the initial phase after independence in 1947, import substitution policies were adopted to expand limited industrial base and establish non-existent consumer goods industries. However, industrial base remained weak, inefficient, and concentrated, and it increased the vulnerability of economy to external shocks. The policy focus changed to export expansion. Imports licensing, foreign exchange controls and bilateral trade agreements were used to regulate imports. In recent years, the trade policy has changed significantly. The emphasis is on import liberalisation and opening of the domestic market. Also, with a view to diversify exports of goods and of trading partners, to generate exportable surplus and with focus on exportoriented industries, various measures were undertaken. The measures included compensatory rebates on various items, standardisation of tariff rates, excise and sales tax rebates, export financing scheme, duty-free imports of machinery for balancing, moderanization, and replacement (BMR) for export units and setting up export processing zone (EPZ) in Karachi and Lahore. Trade regime later changed and exports of high value-added products were again priority. Pakistan’s long-term growth depends on export diversification but limited success has been achieved in this direction. Textile and clothing still accounts for around 60% of its exports. Many trade policy initiatives and related measures have been adopted like rise in availability of finances for exporters, trade facilitation services, and simplification of duty draw back system and rationalisation of tariff rates with lowering of the tariff slabs to four with maximum tariff rate of 25%. Pakistan is a founding WTO member. The government has reduced tariff rates across the board. Quantitative restrictions, exchange controls, and other direct state interventions into trade have been largely eliminated. Many special regulatory orders that provided discretionary exemptions to firms or industries have been eliminated, thus leveling the playing field and making the trade regime less complex. Trade is an important part of Pakistan’s development and poverty reduction strategy. Trade policy has been focused on reducing protection, achieving a more outward oriented trade regime, obtaining better market access for Pakistan’ exports, and promoting greater integration into the global economy through increased economic efficiency, and thus international competitiveness , which would contribute to export led growth. The trade policy of 2007–08 with a view to facilitate imports, focused on improving the registration and standardisation of imports, facilitation of trade fairs, provision for imports of used machinery and pharmaceuticals and chemical products for domestic industry. Despite various efforts, the gains in terms of import- GDP ratio remain modest. The ratio declined from 18.6% in 1989–90 to 13.7% in 2002–03 and increased to 17.1% in 2004–05. However, the composition has changed over time. The share of consumer goods in total imports witnessed a decline. However, the share of capital goods in total imports saw upward trend. Despite fluctuations in the export-GDP and import- GDP ratios, the overall trade-GDP remained stagnant around 30% indicating no significant openness of economy despite liberalisation of trade and reduction in quantitative and qualitative trade barriers. Pakistan has participated actively in the Doha round and attaches high priority to an effective rule based trading system. Nevertheless, its trade policy has focused recently on regional trade liberalisation by deepening and expanding existing plurilateral commitments, e.g. with SAFTA, Organisation of the Islamic Conference (OIC), the Developing 8 (D8) and Economic Cooperation Organisation (ECO). At the same time, it has been expanding its network of bilateral FTAs, including with the People’s Republic of China, Iran, Malaysia, Mauritius and Sri Lanka. Sri Lanka With an economy of $27.4 billion and a per capita GDP of about $4,700, Sri Lanka has enjoyed strong growth rates in the post-2000 period. The main economic sectors of the country are tourism, tea export, apparel, textile, rice production and other agricultural products.
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Page 7: Preface Our consultations with seni
Page 10 and 11: viii CONTENTS 7. Revenue and Welfar
Page 13 and 14: Executive Summary OBJECTIVE This st
Page 15 and 16: EXECUTIVE SUMMARY xiii Table 1 EAMA
Page 17 and 18: EXECUTIVE SUMMARY xv India A full S
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Page 23: Part I BENEFITS FROM TRADE, INVESTM
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Page 46 and 47: 2 Literature Review and Rationale f
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9 Quantification of Benefits from T
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Part II BENEFITS FROM DEEPENING INT
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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