Foreign Trade, FDI, and Capital Flows Study
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Publication Digital Pakistan: A Business and Trade Assessment(World Bank, Washington, DC, 2020-05) Rizwan, Nadeem; Saez, Sebastian; van der Marel, ErikThis report analyses the recent trends in Pakistani Information Technologies (IT) and InformationTechnologies enabled Services (ITeS), as well as obstacles confronted by firms. The authors assess the importance of trade costs as a barrier to services growth and development in Pakistan’s domestic market and to seizing the opportunities of global trade. The report also aims to understand and examine the impact of obstacles (i.e., trade costs) confronted by firms. These obstacles increase the costs of selling services and may reduce capacity to compete both in the local market (Pakistan) as well as overseas (exports). These obstacles include direct costs generated by policy barriers that limit market entry, but can also include infrastructure deficiencies, geographical location, and institutional capacities, and/or obstacles imposed by regulatory measures. Among the latter obstacles, examples include difficulties in accessing the information necessary to operate in a market, the predictability and stability of the business environment in a market, and the quality of the decision-making process and administrative procedures of competent authorities in the domestic and export markets. The focus of the report is the trade costs confronted by IT and ITeS firms. IT and ITeS operations are the backbone to provide digital services, digital goods and depend on digital technologies, conform an integral part of the overall ecosystem. The report relies on a survey conducted on 782 IT and ITeS firms across different cities. The objective of the survey was to examine the importance of these factors for Pakistani firms and to provide advice to policymakers. To complement the survey results, the main findings were discussed in focus group structured interviews. Firms interviewed covered different services activities beyond software companies and included both exporters (534 firms) and non-exporters (248 firms), reflecting the export competitiveness as well as domestic competitiveness of Pakistan's IT services sector. The analysis aims to improve our understanding of Pakistan's IT performance and the obstacles confronted in this field.Publication Pakistan: Unlocking Private Sector Growth through Increased Trade and Investment Competitiveness(World Bank, Washington, DC, 2018-10) Rocha, Nadia; Varela, GonzaloEvidence suggests that Pakistan has the potential for much faster and more diversified economic growth. Energizing trade can help Pakistan to realize its growth potential. Pakistan’s inward-oriented trade policies have had the effect of stalling Pakistan’s integration into regional and global value chains (GVCs). Pakistan’s failure to reform its trade policy to better foster export competitiveness can be attributed in part to institutional fragmentation within the government. This fragmentation has resulted in different agencies sometimes working at cross purposes. Efforts to reduce tariffs have been offset by the introduction of alternative protection instruments such as regulatory duties (RDs) and firm-specific special regulatory orders (SROs). In addition to tariffs, RDs and SROs, other obstacles to global integration include a heavy regulatory burden and perceived risks to investing and operating in the country, which have hurt efforts to attract foreign direct investment (FDI). Growth and competitiveness are also inhibited by inefficient trade facilitation policies, weak logistics services, and underdeveloped infrastructure. These constraints have made it difficult for Pakistan to fully exploit its proximity to China, a trade powerhouse, with which it has a free trade agreement. All in all, the anti-export bias of Pakistan’s trade policy has made it more difficult for outward-looking firms to grow by accessing global markets. A series of actions in the areas of trade policy, trade facilitation and connectivity, and institutional coordination could potentially stimulate Pakistan’s growth through increased trade and investment competitiveness. Integration with other countries in the region and neighboring regions, particularly East Asia, will allow Pakistan to diversify both its product basket and markets. Finally, full normalization of trade relations with India would allow Pakistan to benefit from India’s fast growth and promote complementarities, including valuechain activities and investment potential.