Exports of goods and services from Pakistan to Afghanistan—the major trading partner in the region—fell to $1.189 billion in July-June FY2018/19 from $1.494 billion in the preceding year. Exports to India stood at $312.032 million during the last fiscal year 2018-19, compared with $419.773 million in July-June FY2017/18. Pakistan exported $4.293 million worth of goods and services to Iran in FY2018/19, compared with $17.530 million in the previous fiscal 2018-19.
The political tensions with India and Afghanistan played important role in the drop of exports to these countries. The American sanctions against Iran and strained relations hampered the exports to Iran. Analysts said the exports to India remained low as it had raised custom duty on all goods sent from Pakistan to 200 percent in February 2019. “Strained political relations, tariff and nontariff barriers and high cost of doing business also drag on Pakistan’s exports to India. “An ongoing political tension is impeding Pakistan’s exports to Afghanistan,” said one market expert.
The exports to Sri Lanka also fell. The SBP’s data showed that exports to Sri Lanka fell to $303.817 million from $340.018 million.
The World Bank, in its report titled “Glass Half Full: The Promise of Regional Trade in South Asia”, said Pakistan’s trade with South Asia could rise eight-fold. “Regional trade can create many more jobs and make the country prosperous if trade barriers with South Asia are removed,” the report added. Pakistan’s trade with South Asia accounts for only eight percent of its global trade, despite the region being the world’s fastest growing. However, intraregional trade in South Asia is among the lowest at about five percent of total trade, compared with 50 percent in East Asia and the Pacific.
The report argues that the costs of trade were much higher within South Asia compared to other regions. The average tariff in South Asia was more than double the world average. South Asian countries have greater trade barriers for imports from within the region than from the rest of the world.
The report identifies four critical barriers to regional trade: tariffs and Para tariffs, real and perceived nontariff barriers, connectivity costs, and a broader trust deficit.