Mehmood ul Hasan Qadir — Economist & Financial Analyst | Dubai, UAE

The Pakistan Ledger | Opinion

In the early 2000s, Pakistan’s merchandise exports stood at approximately $9 billion. By the mid-2020s, they stand at approximately $27–30 billion. In nominal terms, that represents a tripling. In real terms — adjusted for global price inflation across Pakistan’s primary export categories — the increase is substantially more modest. And in comparative terms, it is an economic indictment. Vietnam’s merchandise exports in the early 2000s were comparable to Pakistan’s in absolute dollar terms. By 2023, Vietnam’s merchandise exports exceeded $350 billion. Bangladesh grew from $7 billion to over $55 billion in the same period. Pakistan’s export performance over two decades is not a story of growth. It is a story of stagnation dressed in nominal dollar figures.

The Export Complexity Problem

The Export Complexity Index — developed by the Harvard Growth Lab, measuring the sophistication and diversity of a country’s export basket — ranks Pakistan consistently in the lower quartile of exporting nations. Pakistan’s export structure is heavily concentrated in low-complexity products: cotton textiles, rice, leather goods, and sports equipment. These products have low income elasticity of demand — they do not benefit as much from global economic growth — and face severe price competition from other low-cost producers. They also offer limited scope for productivity-driven wage growth, because the technology barriers to entry are low and cost competition is the dominant competitive dynamic.

Vietnam’s export transformation is a masterclass in export complexity upgrading. Starting from a predominantly agricultural export base in the 1990s, Vietnam systematically attracted FDI into electronics manufacturing — Samsung, Intel, LG, and hundreds of component suppliers — building an export structure that now includes high-value electronics, precision components, and machinery. The knowledge spillovers from this FDI have created a Vietnamese manufacturing ecosystem with technological capabilities well beyond its income level. Pakistan has made no comparable investment in export complexity upgrading.

The Tariff Structure — Protecting the Wrong Industries

Pakistan’s import tariff structure has historically provided high protection to domestic industries — particularly in consumer goods manufacturing — while imposing input costs on export sectors. The effective rate of protection for many domestic industries creates a policy-induced bias toward selling in the captive domestic market rather than competing internationally. Industries that can earn comfortable margins behind tariff walls have weaker incentives to invest in the productivity improvements and quality certifications necessary for export market competition.

The cascading tariff structure — where raw material imports face lower duties than processed goods — creates perverse incentives at different stages of the value chain that do not consistently support export competitiveness. WTO Trade Policy Reviews of Pakistan have documented these structural tariff distortions across successive review cycles without generating comprehensive reform. The political economy of tariff protection — the industries and employment that benefit from import barriers — has consistently outweighed the export competitiveness argument in the policy calculus.

Rupee Overvaluation — The Export Tax Nobody Names

Pakistan’s exchange rate policy has, across multiple governments, permitted the rupee to remain overvalued relative to purchasing power parity and current account equilibrium, primarily to manage inflation and import costs. Rupee overvaluation is, in economic effect, a tax on exporters — it makes Pakistani goods more expensive in international markets in dollar terms and reduces the rupee earnings per dollar of export revenue. The sudden and sharp rupee depreciations that inevitably follow — when balance of payments pressure forces exchange rate adjustment — create planning uncertainty for export-oriented businesses that discourages long-term investment in export capacity.

The 2022–23 rupee depreciation from approximately Rs. 180 to Rs. 280–300 per dollar was not an export stimulus — it was a crisis response that came with collateral damage to imported input costs, inflation, and business uncertainty that largely offset the competitive pricing improvement for exporters. A rules-based, market-determined exchange rate managed within a predictable band would serve exporters’ planning needs far better than the boom-and-bust cycle of overvaluation and crisis depreciation that has characterised Pakistan’s exchange rate management for decades.

The GSP+ Opportunity — Still Underutilised

Pakistan’s GSP+ preferences — discussed in the context of textiles but equally applicable across a broader range of products — represent an export market opportunity that systematic compliance investment and export market intelligence could dramatically expand. The EU market for which GSP+ provides preferential access absorbs over $5 trillion in annual imports. Pakistan’s total exports to the EU, despite GSP+ preferences, remain a fraction of what full GSP+ utilisation with an optimised export product portfolio could generate. The constraint is product diversification, quality certification, and supply chain compliance — all of which require institutional investment that Pakistan’s export promotion infrastructure has not consistently delivered.

Breaking out of the $25–35 billion export band requires the policy courage to dismantle the protection that keeps Pakistani industries comfortable in the domestic market, the infrastructure investment to make export logistics competitive, and the exchange rate discipline to provide exporters with the stable, competitive pricing environment they need to invest in export capacity. These requirements are well understood. The implementation remains, as it has for two decades, the missing element.

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Mehmood ul Hasan Qadir is an Economist and Financial Analyst based in Dubai, UAE. He writes on Pakistan’s economic structure, policy failures, and reform pathways for The Pakistan Ledger.