| Introduction The objective of this report is to

Transcript:| Introduction The objective of this report is to:
| Introduction The objective of this report is to identify potential non-traditional export sectors within manufacturing for short to medium-term growth. Pakistan's economy faces significant challenges, including low growth rates ranging between 2-3%, coupled with persistently high inflation averaging 25% and record-high interest rates reaching 22%. These economic difficulties are a result of structural weaknesses, which were exacerbated by the catastrophic floods in 2022, supply chain disruptions due to Covid-19 pandemic, global recession impacts, and domestic political uncertainty. Pakistan's export basket has remained undiversified and low in complexity, primarily concentrated on textile and agricultural products. The manufacturing sector reflects these challenges, experiencing a notable 3.94% decrease in growth during FY23, alongside a stagnant investment-to-GDP ratio at 14%. Export diversification reduces economic vulnerability and fosters growth by minimizing dependency on a few products. Three stages of export diversification include Shifting from a few primary commodities to a larger variety of products, Transitioning to manufacturing exports, and Expand exports into tertiary sectors like communication services. Between 2005 and 2020, Pakistan’s global export share declined from 0.19% to 0.16%. Successful export-oriented policies in Korea, Taiwan, and China shifted economies from agriculture to competitive manufacturing, leading to middle- and high-income status. Bangladesh's export-led industrialization led to impressive growth, specially in ICT Policies supporting export-oriented sectors, such as tax exemptions, contributed to Bangladesh's economic success. | Export Diversification – Global Best Practices Pakistan's total exports in 2021 were USD 36.7 billion, ranking 63 out of 133 countries, with a predominantly undiversified export basket of textiles, rice, and ICT. The complexity of Pakistan's export basket is low, with major exports in moderate and low complexity categories, such as textiles and agriculture. Export growth has primarily come from less complex products like apparel and knitwear, with limited growth in more complex sectors like pharmaceuticals and medical apparatus. Over the past 15 years, Pakistan has introduced only 26 new products to its export basket. Most Pakistani exports are in non-competitive sectors, with declining global growth, and only a few products are in competitive regions. Pakistan's export destinations are limited, with small shares beyond the US and China. Significant export potential exists in the EU, North America, East Asia, and Southeast Asia, requiring focused diplomatic trade missions and compliance with new EU sustainability requirements by 2025. | Pakistan’s case of Inadequate Diversification Higher tariffs and complicated tariff structures along with manufacturers' easy access to the large domestic market contribute