External market conditions, competitiveness, diversification, and Pakistan's export performance

Abstract

Pakistan's exports evolve broadly in line with total world imports. Accordingly, Pakistan's share in world imports was remarkably stable during the last 20 years, ranging between a minimum of 0.12 percent in 1980 and a maximum of 0.18 percent in 1992. In 1999-2000, the share was 0.15 percent. This would suggest that Pakistan's export performance was not worse than that of the world on average. Compared to regional competitors, however, the performance was unimpressive. In light of the growing awareness about the importance of exports in the overall economy of Pakistan and in view of the unimpressive export performance of Pakistan vis-à-vis other countries in the region it would be interesting to study the export performance of Pakistan and analyse the possible reasons for this poor performance and see whether it is due to demand deficiency or is it something to do with the supply side of the issue The paper has developed a model which permits analysis of the determinants of trade performance. The results obtained suggest that export performance is sensitive to both domestic factors, particularly the ability to compete in the world markets, as well as external market conditions. Comparison of the supply-side and demand-side variables indicate that export performance of Pakistan is relatively more sensitive to demand-side variable than to other factors.