The study adopts a multilateral framework to analyze REER behavior and its interaction with export performance, inflation differentials, capital flows, and industrial profitability. Pakistan’s historic experience shows that sustained real overvaluation has generally weakened exports, while periods of real adjustment have tended to support competitiveness. This perspective is particularly relevant in an environment where exchange-rate dynamics are influenced not only by trade flows but also by external financing, reserve accumulation, and policy credibility.

Recent exchange-rate stability has been underpinned by IMF-anchored inflows, bilateral rollovers, strong remittance growth, and improved foreign-exchange market functioning. These factors have helped contain volatility and anchor expectations even as import demand recovered. At the same time, higher domestic inflation relative to trading partners has kept the real exchange rate mildly elevated, indicating that nominal stability has not translated into a corresponding improvement in external competitiveness.

The study situates these trends within Pakistan’s broader macroeconomic context, in which exchange-rate outcomes reflect persistent trade-offs between inflation control, growth, and competitiveness. While reserve accumulation has strengthened short-term buffers and reduced near-term volatility, structural trade imbalances and continued reliance on external financing continue to shape the real exchange rate. Experience suggests that delaying real adjustment increases the risk of abrupt and disruptive corrections.

Overall, the study underscores the importance of distinguishing between nominal exchange-rate stability and real competitiveness when assessing Pakistan’s external position. By focusing on REER dynamics, it provides a clearer framework for understanding how inflation differentials and external inflows influence trade performance and external sustainability over time.

Expert Input and Policy Recommendations

These recommendations, informed by expert input from a prominent Pakistani economist and a former Governor of the State Bank of Pakistan, supported by secondary research, emphasize that exchange-rate management must be complemented by stronger fiscal transparency, reduced reliance on debt-driven inflows, and structural reforms to improve export competitiveness.

Maintain a Market-Based Exchange Rate with Gradual Adjustment

• Support a managed-float regime where market forces determine direction while the SBP smooths excessive volatility.
• A gradual, market-aligned depreciation path should reflect underlying conditions, shifting policy focus toward export-led foreign exchange generation.

Strengthen Transparency of External Liabilities and Fiscal Risks

• Pakistan’s cash-based accounting framework obscures liabilities from SOEs and government guarantees not fully reflected in official figures. Recognizing and consolidating these liabilities is critical for realistic REER assessment and external sustainability analysis.

Adopt a Broader Framework Beyond REER for Policy Assessment

• REER should not be used as a standalone indicator; structural distortions limit its ability to reflect the true equilibrium exchange rate.
• Structural reforms in energy pricing, taxation, logistics, and productivity are essential to support export growth.

Rationalize Domestic Cost Structures to Support Exports

• Higher tariffs on industry raise production costs, offsetting gains from exchange-rate adjustment.
• Reforming subsidy structures, particularly for domestic consumers, addresses cross-subsidization and improves competitiveness more sustainably than depreciation alone.

Allow Exchange Rate Adjustment to Reflect Underlying Fundamentals

• A moderate exchange-rate adjustment (around 5-10%) may be required to align the currency with underlying fundamentals.

Strengthen Trade Facilitation and Global Value Chain Integration

• Competitiveness depends on logistics, cost efficiency, and trade facilitation, not just exchange-rate levels.
• Policy should enable firms to integrate into international production networks and diversify export markets.

Improve Data Transparency and Institutional Capacity

• Ministries lack accurate data on external obligations, with some relying on external agencies for verification.
• Strengthening data systems is essential for credible macroeconomic and exchange-rate policy.

Transition to Accrual-Based Fiscal Accounting

• Shifting from cash-based to accrual accounting will ensure liabilities, including guarantees, are recorded when incurred rather than when paid.
• This will improve decisions related to debt sustainability and exchange-rate management.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

The European Union and India

On January 27, 2026, India and the EU finalized a historic FTA at the 16th India-EU Summit in New Delhi, concluding negotiations that began in 2007. The agreement creates a free trade zone of nearly 2 billion people with a combined market of over €22 trillion, accounting for one-fifth of global GDP and one-quarter of the world’s population. With bilateral goods trade already at €120 billion annually (plus €59.8 billion in services), the FTA is expected to double EU goods exports to India by 2032. This agreement represents the most ambitious trade liberalization India has ever granted and one of the largest trade agreements ever negotiated.

In August 2025, the US imposed punitive tariffs of up to 50% on 70% of Indian exports—including textiles, auto parts, steel, gems, pharmaceuticals, and chemicals—due to India’s Russian oil imports. The Kiel Institute estimated this would reduce India’s output by 1.64% (≈€53 billion annually). Meanwhile, the US also threatened tariffs on European goods in early 2025 over Greenland-related disputes, prompting India-EU collaboration.

The agreement provides unprecedented market access on both sides, with the EU eliminating tariffs on over 90% of tariff lines (99.3% by value) and India eliminating tariffs on 86% of tariff lines (96.6% by value). Overall, the tariff reductions will save around €4 billion per year in duties on European products.

The European Union and Pakistan

The EU is Pakistan’s third largest export destination and second-largest trading partner overall. Total bilateral trade stood at approximately €12 billion in 2025. Pakistan’s exports to the EU reached €8.69 billion in 2025. Since 2014, Pakistan has benefited from the EU’s GSP+ scheme, which grants duty-free access to approximately 66% of its tariff lines.

Export Portfolio Diversification (EPD) Matrix

The Export Portfolio Diversification (EPD) Matrix is a tool used to evaluate the performance and potential of export products across different markets. The EPD Matrix below represent the analysis of the products with import value greater than €10 million on the HS-02 Level.

Rising Stars (High EU & Pakistan growth), led by textile articles (HS 63) and niche sectors like medical instruments (HS 90), are Pakistan’s top priority for investment. Lost Opportunities (High EU growth / Low Pakistan growth), including pharmaceuticals (HS 30) and machinery (HS 84) reveal critical underperformance in fast-growing EU markets. Falling Stars (Low EU growth / High Pakistan growth): mainly traditional textiles like cotton (HS 52) serve as stable cash cows needing efficiency and market defense. Retreat (Low EU & Pakistan growth) such as iron and steel (HS 72) and raw hides (HS 41) represent declining sectors with little strategic value.

Key Findings

1. Pakistan is the world’s largest beneficiary of the GSP+ scheme. Approximately 86% of its exports to the EU use these preferences, with a 95% utilization rate. This creates a “single-point-of-failure” risk; any change in GSP+ status would immediately jeopardize a significant volume in trade.
2. With the India-EU Free Trade Agreement finalized in early 2026, India’s current 12% tariff disadvantage in textiles is being phased out. Once India reaches zero-duty access, Pakistan will lose its tariff edge unless it improves quality and sustainability.
3. Pakistan has worked on improving its regional industrial competitiveness by implementing a major tariff reform in February 2026. By reducing electricity rates from a high of 11.9 Euro cents/kWh (which caused 150+ factory closures) to approximately 7.9–8.1 Euro cents/kWh. The revised tariffs are however officially notified to remain in effect only until December 31, 2026.
4. A critical layer of uncertainty is the expiration of Pakistan’s current GSP+ scheme in December 2027. This creates a “cliff-edge” scenario:
   1. Scenario 1 (Renewal with Conditions): Even if GSP+ is renewed, Pakistan will face continued compliance costs and periodic reviews, while India enjoys unconditional FTA access. The playing field will be tilted in India’s favor on certainty, if not on tariffs.
   2. Scenario 2 (Non-Renewal): If GSP+ is not renewed, Pakistan’s exports to the EU would revert to Standard GSP (with partial preferences) or Most Favored Nation (MFN) terms, facing duties of approximately 9–12%. In this scenario, Indian goods would have a 9–12% price advantage over Pakistani goods in the EU market.
5. Foreign Direct Investment (FDI): The India-EU FTA acts as a powerful magnet for investors, offering a stable, rules-based framework and access to a massive market. With 6,000 European companies already in India and goals to double bilateral trade, European firms are “preparing for a post-ratification phase” by expanding manufacturing in India.

Recommendations

1. Pakistan must stop futile comparisons with India and pivot inward, focusing on what it can uniquely offer the world. The India-EU FTA signals that relying on tariff preferences is outdated; instead, Pakistan needs a competitive, diversified export sector through energy cost reduction, compliance upgrades, market diversification, and securing GSP+ beyond 2027. Competitiveness, not fear, is the only durable defence.
2. Pakistan’s heavy reliance on cotton-based textiles (over 70% of exports) ignores the market reality that man-made fibers (MMF) now account for 74% of global fiber consumption. Shifting to MMF would break the climate-vulnerable “Cotton Trap,” reduce water footprints, and open high-value technical textile markets like medical gowns and automotive airbags—diversifying exports beyond shrinking traditional apparel segments.
3. Pakistan must launch an urgent diplomatic offensive to secure GSP+ renewal beyond 2027 by demonstrating compliance with 32 EU conventions and negotiating for ‘Single Transformation’ rules to access high-growth MMF segments. Resources should shift from declining products (basic bedlinen) to high-demand categories like athletic wear and medical textiles, while institutionalizing factory-level labor and environmental monitoring to pass the 2026 EU inspection.
4. Creating sector-specific credit guarantee schemes for high-potential export industries: Commercial banks often refuse to lend to exporters, especially in new or “high-potential” sectors (like IT, engineering, or pharmaceuticals) because they view them as risky. A credit guarantee scheme acts as a government-backed safety net. Pakistan already has the SME Asaan Finance (SAAF) scheme. This concept can be extended and refined specifically for “Export to EU” sectors, requiring less fiscal outlay than a bank and providing immediate liquidity to high-growth areas.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

The study examines the major trade corridors linking Pakistan with Afghanistan, the Central Asian Republics (CARs), Russia, and beyond into Europe. It identifies key border crossings, transit routes, and road networks that facilitate regional trade flows, while also highlighting existing bottlenecks and inefficiencies affecting cross-border connectivity.

As part of this analysis, the study explores opportunities to enhance trade integration with Afghanistan, Central Asian Republic, (Turkmenistan, Uzbekistan, Tajikistan, Kazakhstan, Kyrgyzstan) Russia, and Europe focusing on both current infrastructure and future connectivity prospects. It also evaluates the long-term potential of developing these corridors into a more efficient and integrated regional trade network. The study is undertaken within the broader framework of promoting Pakistan’s role as a regional trade and transit hub. By identifying strategic opportunities and constraints, it aims to provide actionable insights and policy recommendations to strengthen connectivity, improve transit trade efficiency, and support regional economic integration between Pakistan, Afghanistan, Central Asia, Russia, and Europe.

Demographic and Economic Foundations

Pakistan’s large and growing population—exceeding 251 million in 2024—provides both a substantial domestic market and a labor base that can support trade-led growth. Although population growth has gradually moderated, urbanization is accelerating, reinforcing demand for infrastructure, logistics, and trade-related services. Economically, Pakistan showed signs of stabilization in 2024, with a GDP of US$380 billion and growth recovering to 2.26 percent, alongside a sharp decline in inflation. However, persistent trade deficits underscore structural weaknesses in export competitiveness and highlight the importance of leveraging transit trade as a complementary growth channel.

Pakistan–Afghanistan Trade Routes Connecting Major Cities

Pakistan’s overland corridors with Afghanistan serve as critical gateways for bilateral and regional trade, enabling access to Central Asian markets. Key routes—including Peshawar–Kabul, Ghulam Khan–Kabul, Quetta–Kandahar, Kamr-din-karez–Moqar and Angoor Adda–Ghazni—enhance cross-border connectivity, strengthen trade integration, and promote regional economic cooperation. Major border crossings such as Torkham, Chaman, and Ghulam Khan link Pakistani cities to key commercial hubs like Kabul, Kandahar, and Herat, facilitating efficient transit trade and supporting Pakistan’s role as a regional trade hub.

Figure: 1 Map of Pakistan’s Trade Routes to Afghanistan

Source: USAID| PREIA -Pakistan Regional Economic Integration Activity

Pakistan Transit Trade Corridor to Central Asia Via Afghanistan

Pakistan’s transit trade routes to Central Asia, using Afghanistan as a land bridge, are vital for enhancing regional connectivity and expanding economic opportunities. Key corridors—including Torkham, Ghulam Khan, Chaman, Badini Trade Terminal, and Zhob (Kamr-ud-Din Karez)—link Pakistan with major Afghan hubs such as Kabul and Kandahar, from where road networks extend to Turkmenistan, Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan. These routes facilitate the movement of goods, strengthen Pakistan’s regional trade presence, and support broader economic integration across South and Central Asia.

Pakistan– Afghanistan–Tajikistan Transit Trade Route

The Pakistan–Afghanistan-Tajikistan transit trade route provides an important regional trade link. The primary route originates in Peshawar, enters Afghanistan via the Torkham border, passes through Kabul, and continues to Sher Khan Bandar before crossing into Tajikistan and reaching Dushanbe. An alternative route runs from Pul-e-Khumri to the Hairatan border, transits through Uzbekistan, and then connects to Tajikistan, while also leading to Dushanbe as an alternate. Together, these routes enhance bilateral and regional trade connectivity and provide Pakistan with strategic access to Central Asian markets.

Figure: 2 Map of Pakistan’s Trade Routes to Tajikistan Via Afghanistan

Source: USAID | PREIA

Export Opportunities for Pakistan in the Central Asian Republics and Russia

Untapped Market Potential

The analysis reveals significant gaps between Central Asian Republics’ imports from the world and from Pakistan, indicating substantial untapped export potential. Despite strong global export performance, Pakistan’s market share in CARs remains limited, particularly in high-demand products.

High-Potential Product Categories

Key export opportunities exist in pharmaceuticals, citrus fruits, rice, potatoes, sugar, textiles, sports goods, soaps, and processed foods. Products such as medicaments, mandarins, rice, and sugar show high demand in the CARs markets, while Pakistan has proven export capacity in these sectors.

Priority Markets in Central Asia

Uzbekistan and Kazakhstan emerge as the largest and most promising markets, followed by Tajikistan and Kyrgyzstan, where Pakistani exports have shown gradual growth. Turkmenistan, although smaller, also presents opportunities in selected products.

Pakistan’s Export Opportunities, Potential, and Comparison of Key Economic Indicators with Central Asia and Russia (2024)

Pakistan’s exports to the Central Asian Republics (CARs) remain limited despite considerable potential. The estimated export potential is about $436 million, while current exports are only around $202 million, indicating a large untapped market. Among the CARs, Kazakhstan and Uzbekistan offer the greatest opportunities due to their larger economies, higher purchasing power, and sizeable populations. Beyond Central Asia, Russia represents an even larger market in the Eurasian region, with a GDP of about $2.09 trillion, a population exceeding 143 million, and relatively high per capita income, making it an important potential destination for Pakistan’s exports.

Table: 1 Pakistan’s Export Potential and Key Economic Indicators (2024)

Challenges

Worsening Internal Security Conditions in Pakistan

Border Provinces, particularly Khyber Pakhtunkhwa and Balochistan, have experienced rising security challenges due to increased militant activity. This has disrupted trade routes, heightened transportation risks, and increased the cost of doing business, negatively affecting trade with Central Asia.

Cross-Border Tensions and Regional Security Risks

Ongoing tensions between Pakistan and Afghanistan have resulted in periodic border closures, causing delays and supply chain disruptions. Persistent security concerns and the presence of militant groups continue to undermine the reliability of regional trade corridors.

Collapse of Transit Trade and Regional Connectivity

Transit traffic through Pakistan to Afghanistan and Central Asia has declined sharply, weakening Pakistan’s credibility as a transit hub. The near halt in trade with Afghanistan has further encouraged regional partners to seek alternative routes.

Loss of Export Markets and Trade Volumes

Trade disruptions have led to a significant decline in Pakistan’s exports to Afghanistan and Central Asia, particularly in cement, pharmaceuticals, and perishable goods. Export volumes have fallen sharply, reducing Pakistan’s presence in regional markets.

Payment and Financial Transaction Barriers

Pakistani exporters face serious payment constraints due to restrictions on the repatriation of foreign currency. The current limit of USD 5,000 per individual creates major difficulties for businesses involved in large-value transactions.

Recommendations

Strengthening Transit Trade Governance

Establish a National Transit Trade Coordination Mechanism under a central authority to ensure alignment among federal and provincial stakeholders, harmonize transit regulations, and streamline decision-making. A clear institutional ownership will reduce fragmentation and improve efficiency in transit operations.

Improving Border Management and Customs Facilitation

Upgrade border infrastructure at key crossings such as Torkham, Chaman, and Ghulam Khan, as well as emerging terminals like Zhob Kamr-Ud-Din Karez and Badini Trade Terminal. Introduce risk-based inspections, digital customs clearance, pre-arrival processing, and electronic documentation to reduce transaction costs and improve corridor reliability.

Upgrading Transport and Logistics Infrastructure

Enhance intermodal connectivity and logistics services by upgrading roads linking border terminals to national highways and ports. Invest in rail freight, dry ports, and logistics hubs along transit routes to support bulk and long-haul cargo movement. Public–private partnerships can accelerate these investments.

Enhancing Regional Agreements and Trade Diplomacy

Strengthen bilateral and regional transit agreements with Afghanistan, Central Asian Republics, Iran, China, Turkey, and Russia. Address non-tariff barriers, promote mutual recognition of standards and transit documents, and position Pakistan as a reliable regional transit partner.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

The Study is part of the PBC’s SME outreach program in which it works in collaboration with the EDB & respective sector associations in the engineering sectors which have some export footprint. The major opportunities and challenges in export markets are identified and policy recommendations developed to help each sector achieve its export potential.

This study, analyzes the competitiveness of Pakistan’s aluminum utensils sector across the production, trade, and export value chains. The study evaluates market dynamics, the product mix, labor and raw material dependencies, and export potential in key international markets. It further seeks to identify structural and policy-related challenges faced by the industry and recommends measures to improve quality standards, promote technology upgradation, support SMEs, and facilitate a shift towards value-added and an export-oriented growth.

According to the All-Pakistan Aluminum Utensils Manufacturers Association (APAUMA), the total number of units engaged in the manufacture of aluminum utensils is estimated at between 500 & 600 with an annual production of 140,000 tons. The sector is estimated to provide employment to about 25,000 workers. Most units are medium to small sized with only a few units employing between 500 – 600 employees.

Top 10 Global Exporters of Aluminum Utensils

The global exports of aluminum utensils increased from $4.53 billion in 2015 to $6.40 billion in 2024, recording a CAGR of 0.04 percent during this period. China ranks first, with its exports rising from $2.32 billion in 2015 to $3.91 billion in 2024. Meanwhile, Pakistan was ranked 23rd, with exports increasing from $25.97 million in 2015 to $26.76 million in 2024.

Top Global Exporters of Aluminum Utensils

Opportunities for Enhancing Exports

Based on industry discussions and review of secondary data, the aluminum utensils sector in Pakistan presents several important opportunities, primarily driven by export presence, and unmet international demand for specialized aluminum utensil products.

• Current exports include aluminum cookware, anodized products, and metal-finished utensils.
• Key export markets are the UAE, Saudia Arabia, the UK, Belgium, France, the USA, Afghanistan, and some European countries.
• There is potential to expand into regional markets such as Bangladesh, Sri Lanka, and selected Central Asian countries.

Challenges

1. Limited Access to Technology and Finance:

Most firms lack affordable financing for machinery and automation, keeping production labor-intensive; reducing productivity, and leading to increasing quality inconsistencies. Manufacturers are also hesitant to use bank financing due to religious considerations and collateral issues. This limits access to support programs like the SBP’s TERF.

2. A Developing shortage of Skilled Labor:

The sector suffers from a growing shortage of skilled labor. Existing workers rely on outdated machinery and traditional methods, while younger workers avoid the physically demanding work, leading to a gradual loss of critical skills.

3. Limited Research & Development (R&D):

R&D receives minimal attention, with only 5–6% of manufacturers investing in innovation or monitoring global demand patterns. Most firms prioritize operational costs over product development, resulting in low innovation and reliance on copying large firms’ designs.

4. Weak Institutional Support and Service Delivery:

Despite contributions to social security schemes; healthcare and welfare services for workers remain inadequate, increasing operational costs and weakening trust between industry and government.

Recommendations

1. Enhancing Product Variety and Innovation: Industry needs to modify existing products and introduce advanced varieties of pressure cookers, anodized, and die-cast aluminum utensils to meet global demand for healthier and more durable products.

2. Encouraging Technological Upgradation: Promote automation in family-owned businesses, replace old machinery with environmentally friendly equipment, and improve production efficiency.

3. Promoting Export-Focused Growth: Focus on innovation aligned with international demand and increase the share of production dedicated to exports.

4. Limit Export of Recycled Aluminum Ingots: Restrict export of aluminum ingots in primary form to ensure availability for domestic manufacturers while allowing imports intended for re-export.

5. Upgrading Common Facility Centers (CFCs): Improve technology and machinery at CFCs, introduce circle-cutting facilities, and provide access to advanced tools for standardized production.

6. Skilled Labor Development: Establish vocational and technical training programs focused on modern production techniques, machinery operations, and safety standards.

7. Market Access and International Exhibitions: Support participation in TDAP and single-country exhibitions, organize B2B meetings, and provide guidance for visas and marketing in international markets.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

Africa’s Economic Profile and Strategic Importance

Africa is characterized by a 1.5 billion strong population, growing trade volumes, and increasing integration into global markets. The continent’s population growth rate exceeds 2%, significantly outpacing both India and Pakistan’s.

North African economies generally exhibit higher per capita incomes and stronger human development indicators, while Sub-Saharan Africa accounts for the bulk of the continent’s population and potential for trade expansion.

Africa’s economic structure reflects a combination of primary resource extraction and expanding services and industrial sectors. The continent holds approximately 30% of the world’s mineral reserves, including critical minerals essential for modern technologies. Simultaneously, rising urbanization and infrastructure development are driving demand for manufactured goods, pharmaceuticals, construction materials and consumer products.

The continent is, additionally, characterized by its many regional economic blocs, many with overlapping memberships and varying degrees of integration and operationalization.

Diplomatic and Economic Engagement: Pakistan vs India

A central finding of the report is the disparity between Pakistan and India in the depth and breadth of engagement with Africa. While both countries share historical linkages with parts of the continent, India has institutionalized its Africa outreach through sustained high-level diplomacy, concessional credit lines, development cooperation initiatives and extensive private-sector participation.

Pakistan, by contrast, has historically maintained more limited diplomatic coverage and commercial outreach. Although recent initiatives under the “Look Africa” and “Engage Africa” frameworks indicate renewed interest, the scale of engagement remains modest. Pakistan’s aggregate trade with Africa is significantly smaller than India’s, reflecting both structural economic differences and institutional limitations.

Current Trade Patterns and Structural Imbalances

Figure: Pakistan & India’s shares in Africa’s exports & imports

Source: ITC Trade Map

Pakistan’s trade with Africa has grown in recent years, with exports increasing at a compound annual growth rate of 11.3% since 2020. However, export structure reveals significant concentration. 61.9% of Pakistan’s exports to Africa consist of semi- or wholly-milled rice, broken rice and worn clothing. Together, these categories account for a disproportionate share of total export value indicating limited integration into higher value-added manufacturing segments.

In contrast, India’s export profile to Africa is markedly diversified. Its leading exports include refined petroleum products, motor vehicles, construction machinery, pharmaceuticals, vaccines and electronics.

Another structural issue is the mismatch between Pakistan’s global export strengths and African import preferences. While textiles form a dominant share of Pakistan’s global exports, Africa does not represent a particularly large market for these categories. India’s export mix, on the other hand, aligns more closely with African demand for fuels, transport equipment, machinery and pharmaceuticals.

Geographically, Pakistan’s export footprint in Africa remains limited, with insufficient penetration into wealthier and more industrialized markets in North Africa and major sub-Saharan economies. India has achieved stronger presence in markets such as South Africa, Nigeria, Kenya and Tanzania, reflecting sustained commercial engagement and regulatory adaptation.

Sectoral Potential and Strategic Opportunities

The report identifies several sectors where Pakistan has the potential, whether due to favourable demand-side tailwinds or existing production capacities, to meaningfully scale up exports and penetrate new markets in the medium and long terms.

Pharmaceuticals
Africa’s growing disease burden, population expansion and underdeveloped local manufacturing capacity generate substantial demand for generic pharmaceuticals with market demand slated to reach 9,290.0 USD Mn by 2030. Pakistan possesses manufacturing capabilities in generic medicines and can leverage its existing production base along with regulatory harmonization, quality certifications and sustained marketing efforts to compete effectively with established suppliers, particularly India.

Plastics and Manufactured Goods
Industrial expansion and urbanization drive demand for plastics and intermediate goods, with the continent importing 28,349.3 USD Mn worth of plastics in 2024. Pakistan’s domestic production capacity provides scope for expanding exports, considering the relative absence of India from this sector, provided cost competitiveness and logistical efficiency are improved.

Copper and Articles of Copper
Africa’s copper imports have grown steadily, rising to 5,731.4 USD Mn in 2024, particularly in refined copper cathodes and wires. Although Pakistan’s current presence in this segment is negligible, expected investments in mining, extraction and logistics combined with additional smelter and electro-refining facilities could position the country to capture emerging demand linked to infrastructure and renewable energy development.

Livestock and Meat
Africa’s rising meat consumption presents opportunities in livestock, frozen and value-added meat products, with the continent importing 1,647.5 USD Mn worth of livestock and 4,963.7 USD Mn worth of meat in 2024. Pakistan’s experience with halal exports to the Gulf and expanding cold-chain investments create potential entry points pending compliance with diverse sanitary and veterinary standards.

Cement and Clinker
Rapid urbanization and infrastructure projects across the continent sustain demand for cement and clinker, with the continent importing 1,239.5 USD Mn worth of cement and 1,454.9 USD Mn worth of clinker in 2024. Pakistan has recorded growth in cement and clinker exports to Africa holding a measurable but modest market share. Further strengthening competitiveness would entail enhancing port mechanization and reducing freight costs.

Surgical Instruments
Pakistan’s established surgical instruments sector offers potential, though exports to Africa only constituted 3.6% of global sales for Pakistan. Pakistan has a strong case for its exports in the North, South and East African markets pending improvements in domestic logistics, direct shipping and improved brand marketing.

Rice
Rice exports have performed strongly, benefiting from competitive pricing and regional demand, with exports to Africa surging to 942.6 USD Mn in 2024. With inroads into the African market made in India’s absence, Pakistan has significant potential for ramping up exports, contingent on reduced costs.

Stakeholder Engagement
As part of the report, stakeholders represented by appointed trade officers/attaches, exporters and experts with insight into the African space were interviewed regarding the opportunities and challenges faced by Pakistan in the African market and their observations and recommendations are included in the study.

• Orient private sector interest towards Africa by sponsoring African delegations to build B2B rapport and offer diversity and professional conduct training sessions for Pakistani exporters.
• Reduce transport costs and times by expediting direct shipping routes between Karachi and Mombasa and Djibouti, upgrading port mechanization and rationalizing port tariffs in line with regional peers.
• Bolster commercial and diplomatic presence in the country by intensifying diplomatic engagements, participating in African-delegate-attended trade fairs and pursuing joint venture in domains of Pakistani expertise.
• Improve trade financing by signing re-insurance treaties between EXIM Pakistan and global re-insurers and expanding product offerings to include buyer’s credit, working capital finance and sector specific products.
• Improve business mobility by pursuing G2G cooperation to introduce e-Visa facilities for exporters and investors, expanding diplomatic missions and conducting feasibility studies for direct flights between underserved destinations.
• Prioritize the resolution of non-tariff barriers including logistics, business networking, trade financing, mobility restrictions, and diplomatic and commercial presence over negotiating trade pacts solely for tariff relief.
• Improve bilateral business prominence and advocacy by establishing joint business councils in un-served countries and re-activating dormant councils.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

Global Importance of Midwives

The global Maternal Mortality Rate (MMR) fell from 391 to 197 per 100,000 live births (1990–2023), while the Neonatal Mortality Rate (NMR) dropped from 36.7 to 17.3 per 1,000. Studies show that midwives can prevent over 80% of maternal and neonatal deaths, with every $1 invested returning $16 in economic and social gains. Despite this, the world faces a shortage of about 980,000 midwives.

Key Global Statistics on Midwives as per 2025

Source: Midwives’ Data Hub (2025)

Midwifery in Pakistan

Pakistan has one of the highest NMRs globally (37.6) and an Infant Mortality Rate (IMR) of 50.1. Midwife density remains critically low at 0.7 per 10,000 population (2.2 when including CMWs, LHVs, and midwifery-trained nurses). Heavy reliance on legacy cadres, weak regulation, delayed International Confederation of Midwives (ICM) alignment, and limited clinical authority constrain the profession. Provincial disparities persist—Punjab shows MMR progress but remains a major contributor to NMR, while Balochistan faces stagnation. A rapidly widening shortage (3,100 in 2021 to 81,900 in 2024) reflects chronic underinvestment and weak workforce planning.

2023 Global Health Standings in Maternal and Child Health & Pakistan’s Position

Pakistan ranks among the highest-burden countries: 50th for MMR (155), 2nd for NMR (37.6), and 14th for IMR (50.1). These rankings highlight the urgent need to expand access to skilled midwifery care.

Major Findings

• High Prevalence of Missed Antenatal Care (ANC) Visits
  Many women miss ANC due to financial and decision-making barriers, reinforcing the need for accessible, community-based midwifery care.
• A Doctor-Centric and Costly System
  Dependence on physicians limits rural reach and undermines primary midwife-led models.
• Medicalization and Status-Driven Choices
  Urban families prefer doctor-led births for social status, reducing trust in midwives even for normal pregnancies.
• Rising C-Sections & Lower Physiological Birth Rates
  High elective C-section rates reflect systemic medicalization and weakened demand for safe midwife-led birth.
• Historical Nurse-Midwife Model Inefficiencies
  Dual training have produced nursing professionals who seldom practice midwifery, leading to skill dilution and resource wastage.
• Cadre Overlap & Community Confusion
  Blurred roles between CMWs, LHVs, and FWWs reduce clarity and weaken service delivery.
• Educational Misalignment with Global Standards
  Outdated curricula, weak assessments, and limited faculty reduce clinical competence and global mobility.
• Career Stagnation & Low Motivation
  Poor career progression, corruption in licensing , and inadequate pay tend to push midwives out of the profession.
• Marginalization and Mislabelling
  Midwives face disrespect and are often equated with dais, undermining professional identity.
• Weak Regulation & Lack of Representation
  PNMC reforms remain incomplete; midwives lack leadership presence and regulatory autonomy.
• Suspended Prescription Rights
  Without authority to administer essential drugs, midwives’ ability to manage emergencies is compromised.
• Legal Grey Areas in Clinical Practice
  Midwives frequently perform emergency tasks without legal protection or resources.
• Severe Shortages & Burnout
  High workloads and insufficient staffing compromise care quality.
• Governance and Leadership Gaps
  Nursing-dominated systems exclude midwives from decision-making and institutional leadership.
• Sanctioned Post & Title Disparities
  Midwifery posts remain disproportionately low within health facilities.
• Leadership Instability
  Lack of succession planning results in recurring leadership gaps.
• Abolished Community Midwives (CMW) Stipends
  Withdrawal of stipends has left thousands of CMWs without employment or community practice support.
• Balochistan Midwifery Crisis
  Licensing gaps, absence of posts, and weak deployment systems prevent effective service delivery.
• Donor Dependency & Exclusion from Policy
  Donor-funded programs overshadow structural government reforms, often sidelining midwives.
• Weak MAP Institutional Capacity
  MAP lacks permanent staff and stable funding to act as a national professional body.
• Fragmented NGO Efforts
  Uncoordinated NGO projects create duplication and unsustainable initiatives.
• Male Engagement & Three Delays
  Men’s influence on household decisions affects ANC attendance and emergency referrals.

Recommendations

Educational & Faculty Advancement

• Standardize 2-year associate and 4-year BSM programs to replace fragmented cadres.
• Launch master’s programs to build faculty and leadership capacity.
• Ensure training institutions partner with high-volume maternity facilities.
• Modernize curricula, textbooks, and assessments to reflect global competency standards.
• Recruit and strengthen specialist midwifery faculty through structured development programs.

Governance & Leadership Reform

• Create independent midwifery directorates for equal authority and budgeting.
• Implement structured mentorship and succession planning.
• Integrate donor efforts into government systems and strengthen midwifery data registries.
• Provide stable funding to MAP to function as a national voice for midwives.
• Improve donor accountability and alignment with midwifery priorities.

Regulatory & Legal Empowerment

• Immediately restore prescription rights by finalizing SOPs.
• Provide legal protection for midwives performing recognized BEmONC functions.
• Introduce emergency licensing measures for Balochistan.
• Ensure dedicated midwife seats in PNMC leadership.

Operational Sustainability & Professional Growth

• Convert donor-funded skills labs into permanent government facilities.
• Create clear, transparent career pathways and ensure appropriate deployment.
• Conduct national campaigns to differentiate midwives from dais and build public trust.
• Offer financial and safety incentives for midwives in remote regions.
• Strengthen monitoring systems to ensure adherence to training and quality standards.
• Expand male engagement programs to reduce the Three Delays.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

Despite being involved in diplomatic missions and cooperation forums since the late nineties, Pakistan’s trade profile with ASEAN has not matured. In a region that has a population of almost 700 million and a combined economy worth 3.9 trillion USD, Pakistan’s exports stood at 2.24 billion USD in 2024 (only 0.12 percent of the global exports going to ASEAN), 60 percent of which comprise cereals, vegetables and mineral fuels. Out of which the export of rice is uncertain in the coming years given Indonesia’s rising self-sufficiency and the Philippines’ protectionist policies, so the current dependance on a single crop should clearly not be Pakistan’s leading export strategy.

Pakistan has also persistently been in a trade deficit with ASEAN that now stands at 4.5 billion USD out of 9 billion USD of total trade. ASEAN’s exports have a high complementarity with Pakistan’s import needs -particularly palm oil imported from Indonesia and Malaysia which makes up 43 percent of the imports- but the converse is not true. The Free Trade Agreement with Malaysia that came into effect in 2008 and the Preferential Trade Agreement with Indonesia that came into effect in 2013, have both been underutilized and as a result have failed to provide the expected export-led growth. Following the traditional textile blueprint is riddled with its own issues as listed below.

Challenges in Textile-led Exports to ASEAN:

• From the demand-side, ASEAN generally speaking is a market that prefers low-cost, medium quality garments and home textiles. The textiles that Pakistan exports to the US and the EU are premium, 100 percent cotton that are unable to fetch the same prices from consumers with a low-cost of living.
• Competition on price by China and other intra-ASEAN textile strongholds like Vietnam and Cambodia, as well as Bangladesh has become incredibly fierce. Undocumented textile trade by China as well as those by fast fashion e-commerce giants like Temu and Shein further hurt Pakistan’s chances to win on customization.
• The high energy costs, labor costs and duties on yarn and fabric through the EFS scheme would cancel out the effect of any tariff concessions.
• Not to mention demand is also evolving towards iron-free, wrinkle-free clothing that come from using synthetic fibers like polyester- a material that Pakistan is falling behind in
• Cotton yarn, denim and fabrics have a strong and stable demand in Vietnam and Cambodia due to their textile value chains and insufficient local supplies. But volatile cotton output and outdated ginning methods have placed the sector in jeopardy for Pakistan.

This report focuses on the missing potential in current exports and explores possible new exports that Pakistan should make inroads to diversify given ASEAN’s market dynamics.

Some Policy Recommendations Include:

• Surpassing the Technical Barriers of Pharmaceutical Exports. The two tariff lines for medicines (HS-300490 and HS-300439) had a combined market size of 43 billion USD in 2024 and is expected to grow given the demand for low-cost, generic medicines. However long booking and inspection periods by ASEAN authorities stand as hurdles and collaboration with Pakistani authorities like DRAP needs to be further facilitated to harmonize regulations between the partners.
• Penetrating Software Designs for Semiconductors. Given the established semiconductor manufacturing industries in Malaysia and other ASEAN members, the demand for this segment in tech-exports should be explored. Networking events between NECOP and the relevant stakeholders in ASEAN should be further pushed to fill in the knowledge gap
• Planning for Continuity in Halal Meat Exports at the beginning of the supply chain by reducing the cost of animal feed and improving cattle genetics for better weight gain will aid in being price competitive with other suppliers like India.
• Investing in the Branding of Surgical Instruments. Pakistan has performed very well in global exhibitions, and given ASEAN’s market size of 8 billion USD, the gap can be further bridged by enhanced packaging and marketing.
• Exploring Opportunities in Heritage Tourism by inviting ASEAN travel and tour companies to Buddhist heritage sites in Taxila and Khyber-Pakhtunkhwa alongside Pakistan’s natural landscapes.
• Investing in Kinnow Exports as Forex Earners by negotiating lower concessions with the Philippines, opening up the necessary air cargo routes so they retain their colour and freshness, and by pushing MRAs to make the certification of SPS standards easier.
• Complying with the SPS Standards of Rice and Maize. Problems of high moisture content, aflatoxin and the khapra beetle do arise in maize consignments. Short-shipments and more than 5 percent broken rice content occur in rice orders and must be monitored.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

This report examines the potential of a Free Trade Agreement (FTA) between the Islamic Republic of Pakistan and the Southern Common Market (MERCOSUR). The bloc, comprising founding members Argentina, Brazil, Paraguay and Uruguay, along with its newest full member, Bolivia (accession completed in 2024), represents a major global economic force, with a combined market of over 282 million people and a total GDP of approximately $2.98 trillion in 2024.

Figure 1 shows the trade balance of MERCOSUR from 2020 – 2025.

Pakistan signed the trade framework agreement with MERCOSUR in 2006 with the aim of initiating negotiations to signing a Preferential Trade Agreement (PTA). However, the two sides could not make significant progress in that direction in subsequent years or significantly enhance bilateral economic cooperation.

In early 2019, Pakistan explored the possibility of moving toward a Free Trade Agreement (FTA) with the bloc, saying it could help bridge the trade deficit with the Latin American states, but the initiative once again did not progress far.

Trade volume is significantly low, with Pakistan’s share in MERCOSUR’s overall trade being less than 0.06%. The trade balance has consistently favored MERCOSUR, which primarily exports agricultural goods and machinery to Pakistan, while Pakistan’s main export to the bloc is textiles. Figure 2 shows Pakistan’s Bilateral trade with MERCOSUR from 2020 – 2024.

Figure 3 illustrates the significant untapped export potential for Pakistan within the MERCOSUR bloc, with Brazil standing out with an export potential exceeding $140 million, followed by Argentina at approximately $60 million. Pakistan’s exports to the bloc show steady and consistent growth. The total value increased from $174.52 million in 2022 to $209.41 million in 2024, a growth of nearly 20%.

Pakistan’s exports are heavily concentrated in textiles. The top 3 categories at the HS-02 level (Cotton, Other made-up textiles, and Knitted apparel) alone consistently account for one-third of Pakistan’s exports to MERCOSUR. Surgical Instruments (HS 901890), Inflatable Balls (HS 950662) and Truck/Bus Tires (HS 401120) were amongst the top export products at the detailed HS-06 level.

The report identifies Cotton (HS code ‘520100) as the top export, constituting the majority of MERCOSUR’s exports to Pakistan. In 2024, cotton exports ($169 million) represented 30.5% of all MERCOSUR exports to Pakistan. Soybean oil (HS code ‘150710’) is the second most important export product. Despite a dip in 2024, it remains a key commodity, highlighting MERCOSUR’s role in supplying Pakistan with essential food/edible oil products. Beyond this, MERCOSUR has successfully carved out niche roles in specific Pakistani markets such as Pepper (‘090411’) and Wood Pulp (‘470329’).

The report also provides a consolidated overview of India’s PTA with MERCOSUR and lessons Pakistan can learn from that. Pakistan must establish a clear strategy based on offensive and defensive interests, informed by the India-MERCOSUR precedent. Its offensive interests should focus on securing deep tariff preferences for its value-added textile and apparel sectors (HS 50-63), particularly home textiles, garments, and specific cotton fabrics, where India has gained little. For unique agricultural products like Basmati rice (HS 100630) and mangoes (HS 080450), Pakistan should aim for high preference margins or Tariff Rate Quotas (TRQs).

Services Trade Potential

The services trade relationship between Pakistan and the Southern Common Market MERCOSUR is currently negligible but poised for growth. It represents a large untapped frontier for Pakistan to diversify its exports beyond traditional goods and rebalance its trade deficit with the bloc.

Pakistan’s IT services exports are growing rapidly overall but remain negligible in MERCOSUR, despite the bloc’s large and growing IT import market. Uruguay, though a small market, serves as Pakistan’s current entry point, while Brazil offers the highest potential value. However, barriers like restrictive visa rules, data privacy laws, and language constraints hinder market access. Without a focused trade strategy, Pakistan risks missing a key opportunity to diversify exports and reduce its trade deficit with the bloc.

Barriers to Trade

1. Currency Volatility and Exchange Rate Considerations in MERCOSUR: Traders must account for Argentina’s high inflation and parallel exchange rates, which complicate financial dealings. The other member states maintain more predictable currencies, but the wide range of exchange rates (e.g., 1 USD = 5.4 BRL vs. 6,700 PYG) requires careful financial planning for Pakistani exporters and importers.
2. MERCOSUR’s Structural and Political Barriers to Trade: A major roadblock to trade expansion in MERCOSUR is the official rule of the Customs Union, which mandates that no single member country (like Brazil or Argentina) can sign its own Free Trade Agreements (FTAs) with non-bloc countries. Instead, all external trade agreements must be negotiated by MERCOSUR as a whole to protect the shared tax on imports (CET).
3. Textile Trade Barriers: The MERCOSUR bloc, anchored by Brazil stands as a global powerhouse in textiles and apparel. The domestic industry meets the vast majority of local textile demand itself. Consequently, the market opportunity for major textile exporters like Pakistan remains limited, as Brazil’s self-sufficiency creates a significant barrier to entry for external competitors.
4. Geographical Barrier: The great physical distance between Pakistan and MERCOSUR, over 13,000 kilometers, is a major barrier to trade. It causes two main problems: high shipping costs and long delivery times. The long shipping route results in freight costs that are 30-50% higher than those of competitors closer to the market, like those in Asia or the Americas. This makes Pakistani goods expensive in the region. Shipping times are long, often 65 to 90 days
5. Country-Specific Laws and Non-Tariff Barriers: Brazil’s tax and regulatory system is a major barrier. The main problem is a system of taxes that add up, making imported goods much more expensive. Beyond taxes, regulatory rules are a major trade barrier. Agencies like ANVISA for health products and INMETRO for technical standards have strict rules. These are time consuming requirements and can prevent products from entering the market.

Argentina uses government rules to protect its foreign currency and local businesses. A main method is requiring special import licenses for many goods, like textiles. Furthermore, the government often limits access to foreign currency, making payments difficult and risky for exporters. Heavy paperwork, having documents approved by an Argentine consulate, adds more delays and costs.

Recommendations

1. Primary Objective: Based on the analysis, it is therefore recommended that Pakistan adopt a calibrated approach by initially pursuing a limited-scope Preferential Trade Agreement (PTA) with MERCOSUR. This strategy would enable targeted access to key imports such as essential raw materials, energy products, and agricultural inputs, while safeguarding domestic industries from exposure to competitive pressures.
2. Systematically Dismantle Non-Tariff Barriers:

• Negotiate the terms of the “legal representative” requirement to provide more flexibility for exporters, such as shorter contract terms or clearer processes for changing representatives.

• Negotiate mutual recognition of Pest Risk Assessments (PRA) with SENASA and other regional bodies to unblock agricultural exports.
• The Government of Pakistan must urgently invest in creating internationally accredited certification bodies to overcome a major technical barrier.
• Given that textiles form the backbone of Pakistan’s exports, securing meaningful tariff concessions in this sector must be a negotiating objective, learning from the precedent set in the EU-MERCOSUR talks and the shortcomings of the India-MERCOSUR PTA.

3. Address Internal Policy Misalignment and Enhance Support:

• Review and align Pakistan’s own tariff policy to ensure it does not penalize export-oriented industries by making raw materials more expensive than finished goods.
• Pakistan must bolster its own cotton production. As the textile industry grows and consumes more cotton, it is important to become more self-sufficient. Policy should help local seed companies create high-yield, pest resistant cotton varieties. It must also leverage the 18% sales tax on local cotton to encourage, not hurt, domestic growers.
• Support should be provided for R&D to develop new products and adapt existing ones to specific foreign market trends, addressing the fundamental lack of innovation highlighted in the supply-push model.
• Support should be provided to industries in obtaining organic and eco-certifications to compete with rivals like India on the evolving standards of the South American market.

4. Leverage Immediate Opportunities and Facilitate Engagement

• Negotiations should immediately capitalize on the current liberal economic policies in Argentina to secure strong initial terms. Argentina’s market can serve as a gateway and a positive precedent for engaging with the wider MERCOSUR bloc.
• Actively work to streamline the visa process for Pakistani businessmen and support initiatives that improve Pakistan’s commercial image in South America.

5. Unlock Services Trade with MERCOSUR: Pakistan should immediately pursue a targeted strategy to unlock services trade with MERCOSUR.

• Upgrade the existing PTA discussion with a dedicated chapter on services to secure defined market access.
• Prioritize Mutual Recognition Agreements (MRAs) for qualified sectors (e.g., IT) and negotiate a bilateral visa facilitation agreement to ease the movement of professionals.
• To overcome the language barrier in the services sector, mandate the learning of at least one major foreign language (e.g., Spanish, Portuguese, Mandarin) during undergraduate studies. This will create a future workforce capable of building trust, understanding client needs, and directly accessing regional markets, drastically improving the competitiveness of Pakistan’s services exports.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk

Pakistan’s Trade with the ASEAN Region in 2024

Thailand ranks as Pakistan’s 6th largest export partner and 4th largest import partner. In terms of total trade value, Thailand is the 4th biggest trading partner for Pakistan among ASEAN countries. In 2024, Pakistan’s exports to Thailand amounted to $251.28 million and imports were around $845.44 million. Resulting in a deficit for Pakistan of -$594.16 million. Seafood dominated exports with $86.23 million (34.32% share). Pakistan ranked as 14th largest seafood supplier to Thailand (2.5% share).

Figure 1: Pakistan’s Trade with ASEAN in 2024

Trade Balance Trends (2015-2024)

Pakistan has consistently run a trade deficit with Thailand, at least from 2015 to 2024. Exports to Thailand grew at 8.52% annually, while imports decreased slightly by 0.10%. Despite export growth, the deficit remained as imports were much higher. The deficit peaked in 2018 at nearly $1,500 million.

Figure 2: Pakistan – Thailand Trade Balance from 2015-2024

Pakistan’s Existing Trade Agreements with ASEAN Member Countries

Pakistan has an FTA with Malaysia (MPCEPA – 2008) and a PTA with Indonesia (IP-PTA – 2013). In both cases, imports surged while exports showed limited growth, leading to persistent trade deficits. Under the Malaysia FTA, Pakistan received concessions on 10,593 lines and granted concessions on 6,803 lines, however, exports like rice face a 40% tariff, possibly to protect Malaysia’s domestic agriculture. However, for India the tariff is 20% due to India’s FTA with ASEAN. The Indonesia PTA also led to higher imports, with a minor improvement in exports after 2023. Findings show that Pakistan’s concessions often favour imports over exports, reducing revenue and hurting local industry.

India-Thailand, India-Asean Free Trade Agreement – Lessons for Pakistan

Thailand-India trade grew after the 2004 Early Harvest Scheme and the AIFTA agreement, but India’s trade deficit with Thailand has steadily widened because Thailand exports higher-value products while India mostly sends low-value goods. India also struggles to benefit fully due to non-tariff barriers, weak rules of origin, low utilization of the FTA, and competitiveness challenges at home. Thailand’s investment presence is much stronger in India than in Pakistan, but the irregular pattern of these investments shows that long-term capital depends heavily on clear rules, good infrastructure, and economic stability. For Pakistan, the key takeaway is to boost export competitiveness, tighten rules of origin, tackle NTMs, and negotiate more balanced trade agreements.

Figure 3: India – Thailand Trade Balance

Challenges for Pakistan

Overlapping Commodity Matrix: The products that Pakistan exports globally are similar to those that Thailand already produces and exports. Thailand has greater expertise in these sectors, which leaves very little gap or complementarity between the two economies.

Thailand’s ASEAN Relations and RCEP Membership: Thailand prioritizes trade within ASEAN and the RCEP framework, which includes major economies like Australia, China, Japan, South Korea, and New Zealand. Its geographical proximity and zero-tariff agreements with these countries make Pakistan a lower priority market for Thailand.

Limited Export Strength and Low Value-Added Goods: Pakistan’s export base is narrow, focused mainly on fisheries, textiles, rice, and fruits. Most of these products are low-value or intermediate goods and often do not meet Thai quality standards. Thailand already imports similar items from nearby countries like Vietnam and China, leaving Pakistan with little competitive edge.

Lack of Government Effort and Engagement: Pakistan has not actively engaged with the Thai government or business sector. The focus has largely remained on markets in the Middle East, Europe, North America and China. As a result, Thai businesses have limited awareness and understanding of Pakistan’s market potential. This lack of formal interaction and promotion has restricted trade opportunities.

Poor Preparation for Trade Negotiations: Pakistan’s trade agreements often lack preparation and result in unequal concessions, as seen in FTAs with Malaysia and Indonesia. A similar approach with Thailand could lead to a surge in Thai imports without a proportional rise in Pakistan’s exports.

Lessons from Existing Trade Agreements: Experiences with China, Malaysia, and Indonesia show that FTAs can widen trade deficits when not properly negotiated. Imports rise sharply while exports stagnate, hurting domestic industries. A similar case could be with Thailand, as it is a highly advanced economy with expertise in many areas and high value-added goods that are already being imported by Pakistan.

Thailand’s Efficiency and Competitiveness: Thailand enjoys strong foreign investment, especially from Japan, and has high levels of automation and, lower energy costs. Pakistan cannot match Thailand’s efficiency, scale, or competitiveness.

Issues with Pakistan’s Industrial Base: Pakistan’s industries face high energy costs, poor infrastructure, and rising input costs. The textile sector, which accounts for half of exports, faces tough competition from Bangladesh, India, and Vietnam. The leather industry is also declining because artificial leather has replaced natural leather, reducing demand.

Differences in Market Demand: Consumer preferences differ between the two countries. For example, Thailand’s demand for sticky and jasmine rice does not align with Pakistan’s export of long-grain basmati, creating limited market compatibility.

Illegal Trade and Weak Regulation: Illegal exports and poor regulation result in heavy revenue losses, it is estimated that in the case of Pakistan, around $5 billion annually is lost especially in the gemstone sector. Courier services like DHL and FedEx avoid gemstone shipments due to legal uncertainties, forcing traders to rely on informal channels.

Stringent Thai Import Requirements: Thailand’s strict food safety and phytosanitary standards, such as HACCP certification for seafood, make it difficult for Pakistani exporters to qualify. The approval process is lengthy and limits exporters to specific importers, and reduces market access.

Threat to Local Industry: An FTA could harm domestic industries, as cheaper Thai machinery, engineering goods, auto parts and other manufactured goods could potentially enter Pakistan easily, making it difficult for local producers to compete.

Visa Issues: Thailand’s stricter visa policy for Pakistanis has made business travel difficult. The online visa system is time-consuming, limiting long-term or multiple-entry visas. This restricts business interactions and hampers trade and investment opportunities.

Potential and Opportunities for Collaboration and Investment

Textiles: Pakistan’s textile exports to Thailand remain minimal despite its strong global standing. Thailand’s growing imports of apparel offer Pakistan opportunities to supply niche fabrics, value-added garments, and used clothing. Aligning with sustainability and compliance standards can help Pakistan tap into Thailand’s expanding tourism and retail sectors.

Gems and Minerals: Pakistan has vast reserves of gemstones and minerals, but much of the trade with Thailand is informal. Thailand’s expertise in gem cutting, polishing, and design can support Pakistan through joint ventures, training, and technology transfer. Improved infrastructure, certification, and formalized trade mechanisms can boost exports and attract investment.

Tourism: Thailand’s tourism earns around $50–60 billion annually, supported by strong infrastructure and management. Pakistan has high potential for tourism but lacks facilities, promotion, and training. Pakistan can also export medicines, surgical instruments, and medical textiles to support Thailand’s growing health tourism.

Food and Canning: Pakistan produces high-quality fruits like mangoes, while Thailand has advanced canning and food-processing industries. Joint ventures can help Pakistan reduce waste, improve yields, and produce value-added items like freeze-dried fruits. Adopting Thailand’s technology for drying mangoes, bananas, and peaches can boost exports.

Seafood and Meat: Pakistan’s seafood exports, particularly shrimp and fish, are increasing. Thailand already offers aquaculture consultancy, but deeper joint ventures could help Pakistan modernize processing, add value, and strengthen export competitiveness.

Automobile and Machinery: Thailand’s established automobile industry offers Pakistan opportunities to gain technical assistance and parts manufacturing knowledge.

Investments: Pakistan can attract Thai investments in fisheries, canned food, dry fruits, and cosmetics. With its large domestic market, Pakistan offers opportunities for local production, job creation, and mutual industrial growth.

Petrochemicals, Fertilizers, and Rubber: Thailand’s petrochemical sector produces materials like ethylene and propylene that Pakistan lacks. Thailand can fulfill industrial demand at competitive prices. Thailand’s fertilizer industry can support Pakistan’s agriculture through technology transfer, while its strong rubber production sector offers scope for expanding trade.

Way Forward on the FTA:

A full-scale Free Trade Agreement (FTA) between Pakistan and Thailand is not advisable at this stage as it could increase Pakistan’s trade deficit and harm local industries. While reduced duties might make essential imports cheaper, the overall impact would likely be negative because Thai products, especially automobiles, spare parts, and processed foods, would become more competitive than local ones.

Both countries export similar goods such as rice, seafood, textiles, fruits, and vegetables, which limits trade opportunities. Thailand’s larger industrial capacity, modern technology, and production efficiency make it difficult for Pakistan to compete. Pakistan’s exports are mostly low value-added and often fail to meet international quality standards.

Trade agreements with countries like China and Malaysia have shown that such agreements tend to increase imports while exports remain stagnant, widening the trade gap and hurting local industries. Therefore, instead of a full FTA, Pakistan should consider a cautious approach by negotiating limited concessions or preferential trade arrangements for essential goods. This would help reduce costs while protecting domestic manufacturers. A selective approach is therefore recommended which would not only open the Thai market for some of Pakistan’s major global exports such as textiles, but also allow Pakistani exporters to adapt their existing products and develop new offerings for the Thai market.

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk