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Impact Of Food Exports And Agricultural Raw Material Economics Essay

In this project a study is conducted on exports of Pakistan. This research is conducted to see the impact of food exports and agricultural raw material exports on the net exports of Pakistan. For this purpose, net exports are taken as dependent variable while food exports and agricultural raw material exports are taken as independent variables. Secondary data is collected from World Bank site from the year 1981 to 2010. To test its relationship ordinary least square method is used. Results show that there is negative role of independent variables towards the dependent variable. One unit change in independent variable X1 a change of 0.44 in dependent variable one unit change in independent variable X2 changes dependent variable by 0.53 %. It is suggested that Pakistan should export finished goods instead of primary products to increase its net exports.

Introduction

The theoretical sense of export is to ship the goods & services out of the port of a country. In easy words exports quantify the amount of goods and services supplied by the domestic producers to the overseas consumers. Exports are that quantity of goods which are sent to the other country for sale. An export of a good occurs when there is a transfer of ownership from a resident to a non-resident this does not necessarily imply that the good in question physically crosses the border. Export of services consists of all services rendered by residents to non-residents. In national accounts any direct purchases by non-residents in the economic territory of a country are recorded as exports of services; therefore all expenditure by foreign tourists in the economic territory of a country is considered as part of the exports of services of that country.

International trade is growing every day. Countries who want to export goods produce additional than what they can use so that they can be easily able to trade them in the foreign market. The top exporting countries play a very vital role in the international trade. The main goods exported by some of the top exporting countries consist of textiles, clothing, consumables, petroleum and petroleum products, machinery, electrical and plastics etc. The most important exporting countries of the world are Germany, China, USA, Japan, France, Italy, Netherlands, Russia, United Kingdom and Canada is among major exporting countries. Exports play a critical role in economic development of country. The mounting exports provide foreign exchange for the increased imports which is very important to economic development. Higher exports assist to spend more in the other sectors of the economy proficiently and increasing efficiency. The industries that make profit from exports make new investment bring in new technology and managerial skills and stimulate increased consumption and create employment opportunities in the country.

There are different types of exports of every country. Pakistan mostly exports raw materials instead of finished goods which is a main cause of low exports for Pakistan. Pakistan is also exporting food items, sports items, surgical instruments, marbles and other different valuable products. Most of the Pakistan’s exports come from the agriculture sector as it contributes 22 % to the GDP and it employs 45% of the labor associated with this sector. The agriculture is a main sector of Pakistani economy and it has a major share in the net exports of Pakistan and this sector mainly exports agricultural raw materials and food items such as rice, cotton, wheat out of Pakistan. So the research in this project will be on the agricultural raw material exports on Pakistan and on food exports from Pakistan. For this purpose we have taken net exports as a dependent variable and agricultural raw material exports & food exports as the independent variables. The purpose is to see the effect of increase or decrease in these exports on the net exports and also to see the relative share of these exports in the net exports of Pakistan. Agricultural raw material exports have a large share in net exports of Pakistan. Food exports of Pakistan have also increased very much in the last several years. Pakistan is the major exporter of fruits and different types of food items in the Middle East and different European countries and food exports are also a major source of foreign exchange earnings of Pakistan. This research will be helpful for the students, researchers and people of different fields of life to understand the concept of exports and importance of different types of along with major focus on agricultural raw material exports and food exports and to analyze the contribution of these sectors towards economy of Pakistan. At last recommendations will also be helpful to increase the net exports of Pakistan.

Literature Review

The objective of the study was to see the effects of those factors that affect mango exports from Pakistan. The data was collected from a list of 40 mango exporters. After the collection of data it was thus modeled through double log form of regression analysis. The results of the study showed that different factors like education of mango exporters, experience of mango exporters, average purchase price, average marketing cost, average sale price and ISO certificate significantly affected mango exports however government policies affected positively and hot water treatment was found to be non significant variables. The finding suggested that there is a need to build up the domestic production and targeting high price markets and there should be a diversification in mango production with value addition.

Another research is made on the challenges faced by the Pakistan’s textile industry in the modern world. The textile industry contributes about 60 % to Pakistan’s total exports but now this industry is facing a decline in its growth rate. The major reasons for this decline are global recession, internal security concerns, high cost of production due to increase in cost of inputs. Devaluation of Pakistani rupee increased the cost of imported input and the high interest rate proved to be another setback. However textile can be once again brought up to its level if government takes serious actions in normalizing the above mentioned hurdles. The government should lower the interest rates withdraw the withholding and sales taxes. Further purchase of new machinery can be bought to increase the growth of textile industry. However this research has some limitations as well as no regression model or statistical technique is not applied in this study.

(Mustafa, 2000) A research was conducted to analyze the negative effects of Phytosanitary (SPS) requirements under WTO. It is quite evident that Pakistan has a potential comparative advantage over developed countries in the production of many agricultural products, such as cotton, rice, fruits, flowers etc but the ability of the country to expand its world market share is based on its abilities to meet the demands of the world trading system, not only in terms of prices but also quality of exportable products and their safety standards. It is argued that Pakistan lacks the needed resources to participate effectively in the institution of WTO, and thus may be unable to fully exploit the opportunities provided by the Sanitary and Phytosanitary (SPS) agreement. The paper seeks to identify means by which any negative effects of SPS measures on Pakistan can be reduced. This paper suggests that advance study on impact of SPS events on export of agricultural products and food products from Pakistan, should be conducted to create exact and, if possible, quantified estimation.

(Siddiqui, 2007) This paper studies dynamic effects of agriculture trade in the context of domestic and global liberalization. Being the largest sector of the economy, the agriculture sector contributes substantially to the growth process. Using a small CGE model for Pakistan and a 2002 Pakistan Social Accounting Matrix as data base, the simulations are conducted to measure the effects of domestic agriculture trade liberalization in isolation and in conjunction with changes in the world economy. The novelty of this paper is that it introduces dynamics in the Pakistani CGE model through capital accumulation. The results illuminate the greater effectiveness of agriculture trade liberalization in promoting the overall growth process, given increased market access because of liberalization in the world economy.

(Malik, 2007) This research has seen the trade prospects for Pakistan’s textile and clothing exports in the international market at the time when it has been decided in the WTO Agreement on Textiles and Clothing that the trade in this sector from the developing to developed countries should be completely free from quantitative restrictions and governed by the normal GATT rules by 2005. The paper has also reviewed the current status of Pakistan’s textile industry. Textile and clothing is the major contributor to our total exports. But in the international market the share is marginal. The reason is the increasing world competition. The quality as well as the range of goods produced is the major weakness for our textile exports. Therefore, to survive in a more liberalized and more competitive world in which we are going to enter we need to go for modern technology and for the production of high value added goods.

(Syed Ali Raza, 2012) A recent research was conducted to see the impact of agriculture on GDP of Pakistan. For this purpose data was collected from 1980 t0 2010 from authentic websites. Simple regression was applied to see the significance of agricultural sub sectors with economic growth of Pakistan. Different variables used for this research were GDP, major crops, minor crops, livestock, fisheries and forestry’s. The results showed a significant role of agricultural sub sectors with GDP except forestry. The results also showed that both crops and livestock contribute 91 % to the total agricultural amount while fisheries and forestry have very less contribution. The reasons of less contribution found were low investment, no government support and untrained labor.

Theory

3.1 Exports of Pakistan

Pakistani exports were about 2240 million dollars in April 2012. In the era of 2003 to 2012 Pakistan’s exports remained at an average of 1529.7400 million dollars with the highest of 2660.0000 million dollars in June 2011 and a record low of776.4000 million dollars in February of 2003. Pakistan exports rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, sports goods, surgical instruments, electrical appliances, software, carpets and rugs and food products. Pakistan now is being very well recognized for producing and exporting cements in Asia and Mid-East. Main exports partners are European Union (UK), United States, UAE, and Afghanistan. The exports of Pakistan are increasing but there is a decline in some sectors of exports because of energy crisis and unfavorable government policies. The textile producers are expecting a decrease in textile exports of Pakistan due to lack of electricity and gas shortage. They say that decline of textile exports would hit the overall exports which might lead the country towards economic bankruptcy. Other main reasons of decreased exports international trade are restrictions on Pakistan and the quality of goods exported by Pakistan. Exports of Pakistan mainly consist of raw material goods not the finished goods which are main cause of less export.

The balance of trade is the difference between the monetary value of exports and imports in an economy over a certain period of time. A positive balance of trade is known as a trade surplus and consists of exporting more than is imported; a negative balance of trade is known as a trade deficit or, informally, a trade gap. Pakistan reported a trade deficit equivalent to 1517 Million USD in April of 2012. Historically, from 2003 until 2012, Pakistan Balance of Trade deficit averaged 818.6 Million USD reaching all time high of 9.6 Million USD in August 2003 and a record low of -1878 Million USD in October of 2008. There is a huge and severe need to increase exports in Pakistan. Pakistan should emphasize on exporting finished goods rather than exporting raw material. Moreover Pakistan should explore and exploit its oil and gas resources to enhance its exports. Political stability and law & order situation should be improved so that foreign investment can be made by the international companies. Pakistan should make friendly relations with India and should increase bilateral trade relations with India and other neighboring countries like China, Iran and Afghanistan. The reduction in export taxes can motivate exporters to export more out of Pakistan. Moreover the organizations which promote the export of Pakistan in international markets should be made like export promotion bureau. Strict quality control should be ensured along with packaging of Pakistani products to increase the demand of Pakistani products in international markets.

3.2 REVIEW ON PAKISTAN EXPORTS

Pakistan’s exports during July-June 2008-09 were US$ 17.688 billion as compared to US$ 19.052 billion in 2007-08 and US$ 16.976 billion in 2006-07 reflecting a decrease of (7.16%), (12.2%) and (3.19%) respectively.

3.3 SECTOR WISE EXPORTS

TEXTILE & GARMENTS CATEGORIES

Textile & Garments Sector contributed 54.16% in Pak-exports and declined at US$ 9.579 billion in 2008-09 from US$10.670 billion worth exports in 2007-08 registering a decrease of (-10.22%). Major categories that increased over the previous year were Towels, Knitwear (Hosiery) and other Textile Material etc. A decrease was witnessed in Textile items such as Cotton fabrics, Textile made-ups, Cotton yarn, Garments, Readymade garments and Synthetic textile.

3.4 PRODUCT WISE ANALYSIS

Cotton Fabrics

Export of Cotton Fabrics declined at US$ 1.955 Billion from US$ 2.011 billion in the year 2008-09 as compared with 2007-08 showing a decrease of ( -2.75% ) and quantity showed also decrease to 1882 million SQM from 2035 million SQM. Major buyers of the product were Bangladesh, China, UAE, Russian federation, Egypt and Mexico.

Textile Made-ups including Towels

Bed ware fetched US$ 480.138 million in 2008-09 as against exports of US$ 537.868 million in 2007-08, showing a decrease of (-10.60%). Major buyers of the product were UAE, Canada, Saudi Arabia, Chile, Malaysia and Sri Lanka.

Towels exports increased at US$ 643 million in the year 2008-09 as compared with 2007-08 exports of US$ 613 million which recorded an increase by (4.86%). The quantity of the product increased to 165.638 million kg from 152.323 million kg. Major buyers of the product were USA, UAE, Saudi Arabia, South Africa, Netherlands and Belgium.

Cotton Yarn

During 2008-09 exports decreased by (-14.31%) of US$ 112 million as against exports of US$ 131 million in 2007-08. Quantity decreased by (-5.59%) from 554.817 million kg to 523.790 million kg, however AUP came down (-9.96%). China remained number one among the major buyers of the product, while Bangladesh obtained number two position followed by Egypt, Philippines and Australia respectively.

Garments

Export of garments decreased by (-23.26%) during the year 2008-09 and detail analysis of Knitwear and Readymade garments is given as follows:-

Knitwear (Hosiery) witnessed increasing trend touching US$ 1741 million in the review period 2008-09 as compared to US$ 1732 million last year. Upward trend was also seen in exports to United Kingdom, Belgium, UAE, Saudi Arabia and Sweden, while decreasing trend was seen in the market of USA, Germany, Netherlands, Spain and Canada.

Readymade garments there was a decrease of US$ 362 million (-22.76%) over the previous year. During the period under review exports came down to US$ 408 million from US$ 1442 million. However, it showed increased trend in the exports to Belgium, Turkey, Saudi Arabia, Sweden and Denmark. Major decreases were witnessed in the markets of USA, Germany, UK, Spain and France.

Synthetic textiles

There was a decrease of US$ 139 million i.e. (-32.23%) over the previous year. During the period under review exports came down to US$ 278 million from US$ 410 million. Quantity is also decreased by (-18.77%) from 442.5 million SQM of the previous year to 359.4 million SQM. AUP was US$ 0.89 per SQM while it was US$ 0.93 per SQM in 2007-08, thus showed a decrease (-4.14%). Moreover, Mexico, Malaysia, Indonesia, Srilanka and Kuwait were higher export markets. On the contrary, minor decline in UAE, USA, South Africa, Saudi Arabia and UK were observed.

3.5 OTHER CORE CATEGORIES

This head Contributed (25.60%) in Pak-Exports and came down to US$ 4.528 billion from US$ 5.177 billion showing a decrease of (-12.20%) over the last year. The items witnessed increased trend in Rice, Leather & leather products, leather manufactures and leather footwear. However, decreased trend appeared in the products of Leather garments (excluding gloves), Leather gloves and Surgical Instruments and Sport goods. Therefore, it further shown high trend in the Molasses item.

Rice

This Commodity witnessed an increasing trend by US$ 1983 million from US$ 1836 million showing an increase of 8.02%. Quantity felt down by (-8.87%). In terms of Quantity total export of Rice which was 2809 thousand/MT in 2007-08 and in 2008-09 came down to 2560 thousand MT. However, AUP, which was US$ 653.60/MT in 2007-08, went up to US$ 776.06/MT in 2008-09.

Rice Basmati

Contributed US$ 1070 .338 million in total export of Rice, export of basmati was US$ 1068.86 million in 2007-08. Quantity exported 868577 MT in 2008-09 as against 1138093 MT in 2007-08. AUP sowed increase by 26.86% per MT from US$ 939.17 per MT to US$ 1191.41 per MT.

Rice Non-Basmati

Its share is US$ 912.89 million in 2008-09 from US$ 767.200 million of 2007-08. AUP increased by 22.58% and quantity went up to 169.535 MT from 167.055 MT showing an increase of 1.23%. The buyer of the Rice and Rice others was Iran obtained number one followed by Afghanistan, Saudi Arabia, Qatar, Kenya and Mozambique.

Leather and leather products

Showed decrease of (-22.65%) exports of leather and leather products which came down to US$ 943.788 million from US$ 1220.119 million. Leather tanned contributed 2.18%; Leather garments/manufactured 2.77% and leather footwear 0.65% in the group of leather & leather products.

Leather showed a decrease of (-27.88%). The export of Leather fetched US$ 299 million as against US$ 415 million in previous year. Quantity also decreased by (-21.57%) from 24,258 thousand SQM to 19, 026 thousand SQM. Major buyers of the product were Bangladesh, Indonesia, Sri Lanka, Thailand and UAE.

Leather garments (Excluding gloves) registered decrease of (-25.68%) to US$ 392.537 million from US$ 528.154 million. The major buyers of this product were Germany, USA, Spain, France, Turkey and Brazil.

Leather gloves a downward trend of (-5.53%) from US$ 161.168 million to US$ 152.258 million. The major buyers of the product were Belgium, Saudi Arabia, UAE, Norway and Poland. The product market of USA, Germany and Sweden and France registered decrease during 2008-09.

Leather Manufacture registered increase of 17.66% from US$ 10.177 million 2007-08 to US$ 11.974 million 2008-09. The major buyers of the product were USA, Germany, UK, Netherlands, France and South Africa.

Leather footwear obtained increase by 3.54% from US$ 124.135 million of the previous year to US$ 128.531 million. The major markets of the product were UAE, Germany, Italy, Afghanistan, Oman and South Africa.

Carpet

Exports during 2008-09 were US$ 145.77 million as Compared to US$ 216.620 million of the previous year, showing a decrease of (-32.71%). Major Buyers of the product were Afghanistan, Thailand, Mexico and China while USA, Germany, Italy, Turkey, France & UK remained on decreasing side during 2008-09. Pertinently, only ten Countries were buyers in the export arena of Carpet from Pakistan in the year 2008-09.

Petroleum & its Products

Decreased (35.41%) in value and (4.57%) in term of AUP. Value has varied between US$ 1259.33 million to US$ 813.458 million and AUP from US$ 804.85 MT to 768.05 MT. However, Quantity wise is also decrease from 592,758 MT to 583,827 MT. The major buyers of the products were also six Countries i.e. India, Korea, Netherlands, Singapore, Kenya and South Africa.

Surgical Instruments

The exports which were US$ 261.072 million in 2007-08 came down to US$ 253.554 million in 2008-09 showed a decrease of (-2.88%), although exports to USA, Australia, India, Korea, China & Turkey have increased. The top buyer of this product was USA.

Sports Goods

Exports from US$ 302.723 million in 2007-08 declined to US$ 273.318 million in 2008-09, showed a decrease of (-9.71%) while export increase took place in USA, Belgium, Italy, UAE and Turkey. Offset in markets of Germany, UK, Spain, Netherlands and Denmark where declining trend has appeared.

3.6 DEVELOPMENTAL AND OTHER CATEGORIES

This head Contributed 15.51%) in Pak-Exports and went-up to US$ 2.743 billion in 2008-09 from US$ 2.365 billion showing an increase of (16.01%) over the last year 2007-08. Major categories that increased over the previous year were fish & fish preparations, fruits & vegetables, engineering goods, jewellery, marble stones and onyx manufactures, cement and oil seeds. A decrease was witnessed in same developmental categories such as chemical and its products, cutlery, gems (Precious Stones) and furniture.

Fish & Fish Preparation

In terms of Quantity and value exports increased by (1.58%) and (10.41%) respectively and AUP is also increased from US$ 1.60/Kg to US$ 1.76/Kg. Exports of fish and fish preparation came-up to US$ 234 million 2008-09 from US$ 213 million 2007-08. Major buyers were Thailand, China, Malaysia, Saudi Arabia, Korea and Egypt. Decline was noticed in buyer Countries i.e. UAE, Kuwait, Japan, Sri Lanka and Hong Kong.

Fruits

Exports were US$ 157 million during the period under review, compared to US$ 146 million in the previous Corresponding period showing an increase of 7.84%. The major buyers of the fruits were India, Afghanistan, Russia, Germany and USA.

Vegetables (Excl: Leguminous)

Exports were US$ 72.92 million during 2008-09 as against US$ 56.39 million of the year 2007-08 showed an increase by 29.31%. The major buyers of the Vegetables were Afghanistan, Malaysia, Saudi Arabia, Qatar and Canada.

Chemical and its Products

The exports which were US$ 619 million in 2007-08 have decreased to US$ 604 million in 2008-09 showing a decrease of (2.40%). However, exports of Pharmaceutical Products rose to US$ 116.286 million from US$ 110.531 million. Italy, Afghanistan, Philippines, China, USA and Sri Lanka are the major buyers of the Product and among these major buyers decreases are recorded in the markets of Netherlands, UAE, Turkey, Korea and France.

Engineering goods (Machinery & Transport equipment)

There was an increase of (25.35%) and exports came-up to US$ 264.898 million from US$ 211.329 million. Imports in the markets like Afghanistan, Djibouti, Bangladesh, Sudan and Iran were higher over last year. However there was a major decline in UAE, Saudi Arabia, USA and UK.

Cutlery

Export of this item is US$ 48.681 million during 2008-09 compared to the US$ 54.856 million in the previous year showing a decrease of (11.26%).The major buyers of cutlery were France, Italy, Saudi Arabia, China and Netherlands.

Gems & Jewellery

Precious & Semi Precious Stones (Gems)

Decreased by (-54.84%) during 2008-09 and export was US$ 3.386 million from US$ 7.497 million (2007-08). The major markets of Gems were Canada, Japan, Russian federation, Belgium and Iran while declined trend was witnessed in USA, Hong Kong, Germany, UAE and Thailand.

Jewellery

The exports increased by 33.90%. Export came up to US$ 285.684 million in 2008-09 from US$ 213.364 million 2007-08. The exports of jeweler major buyers were UAE, UK, Afghanistan, Turkey France, Netherlands and India.

Marble & Stones / Onyx Manufactures

Exports increased by 46.35% from US$ 22.119 million 2007-08 to US$ 32.371 million (2008-09). However the major buyers of the products were China, Russian federation, Ukraine, UAE, Saudi Arabia, Malaysia and Germany.

Cement

There was an increase of 39.21%. Export grew up from US$ 416.977 million during 2007-08 to US$ 580.479 million in 2008-09. Major buyers of the product were Afghanistan, Qatar, Oman, Iraq, Djibouti and Sri Lanka.

Oil Seeds

The Exports were US$ 39.379 million in 2007-08, came up to US$ 41.746 million in 2008-09, showing an increase of 6.01%. Increase took place in exports to Korea, Turkey, Iran, China, India, UAE, Singapore, Netherlands and Saudi Arabia.

Furniture

The Exports were US$ 11.035 million in 2007-08 came down to US$ 8.455 million in 2008-09, showing a decrease of (-23.38%). The main buyers of the product were Afghanistan, Italy, Germany, Netherlands, Poland, Australia and Denmark.

3.7 Geographical Analysis

JULY-JUNE (2008-09)

Pakistan’s exports during July-June 2008-09 as compared to the corresponding period of the last year decreased by (-7.16 %) to Middle East Region, (-9.60%), to Eastern European Region (-14.78 %), to African Region, grew by (+5.55%), Asian Region, increased by 5.28% Oceania region and Western European Region decreased by (-9.47%) and (-14.49%) respectively. Decrease is recorded in exports to American region by (-10.63%).

American Region

This region accounted for US$ 3,941.128 million showing a decrease of (-10.63%) over the last year’s exports.

North America

Accounted for US$ 3,587.674 million, which is less by (-10.07 %) over last year. Decrease in exports took place in the countries of North America (-10.07%). Exports to Central America decreased by US$ 109.160 million (15.49%) in 2008-09.

South America

Shown decrease in exports by (-16.18 %) in this region over the previous year, the value, which was US$ 244.294 million during 2008-09 whereas the exports in 2007-08 were US$ 291.464 million.

Western Europe

The exports to this region were US$ 4299.722 million. 16 EU Countries accounted for (-14.53 %) at US$ 4234.844 million and showed a decrease of (-14-.49%) as well over previous year’s exports. In terms of value exports decreased to US$ 4234.844 million from US$ 4954.684 million. Major contributing countries are UK US$ 874 million, Germany US$ 738 million, Italy US$ 580 million, Netherlands US$ 465 million, Spain US$ 404 million, Belgium US$ 393 million and France US$ 313 million. EFTA decreased to US$ 63 million from US$ 72 million, showed a decrease of (-12.50%), whereas Norway and Switzerland were remained major buyers among the EFTA Countries.

Eastern Europe

Export in this region accounted for US$ 324.401 million which declined at (-14.78%) over the corresponding period of last year. Russian federation, Poland, Ukraine, Lithuania, Estonia, Hungary and Czech Republic were major contributing markets to US$ 105.5 million, US$ 45.09 million, US$ 32.43 million, US$ 23.89 million, US$ 19.80 million, US$ 15.48 million and US$ 16.19 million respectively.

Middle East Region

In this region Exports accounted for US$ 3491.468 million. UAE exports was US$ 1469.990 million in 2008-09 and US$ 2070.953 million was in 2007-08 which decreased at (-29.02%). Exports to Iraq came up to US$ 71.75 million from US$ 23.95 million which recorded increase up to 199.59% in 2008-09. Saudi Arabia, Turkey, Iran, Oman, Qatar and Kuwait were the major markets contributed US$ 455.634 million, US$ 403.198 million, US$ 399.619 million, US$ 187.545 million, US$ 172.112 million and US$ 104.220 million respectively.

African Region

Exports in this region were US$ 1197.247 million in 2008-09 and gained 5.55% over the corresponding period of last year. In the African Region, South Africa contributed US$ 193.742 million from US$ 318.461 showing decrease of (-39.16%) followed by Kenya US$ 119.939 million, Egypt US$ 101.685 million, Sudan US$ 60.596 million, Mozambique US$ 60.104 million, Benin US$ 58.328 million, Co, TE D’Ivoire US$ 55.837 and Somalia US$ 50.737 million respectively.

Asian Region

Exports in this region accounted for US$ 4272.615 million in 2008-09 which showed increase of 5.28% over the last year. Afghanistan contributed US$ 1397.518 million, China US$ 701.043 million, Bangladesh US$ 383.373 million, Hong Kong US$ 378.658 million, India US$ 319.619 million and Malaysia US$ 124.378 million respectively.

Oceania Region

In this region the exports were US$ 161.426 million in 2008-09 and shown decrease of (-9.47%) over the previous year. Austria and New Zealand are major buyers of the region which contributed US$ 128.926 million and US$ 29.640 million during 2008-09 respectively.

Top 20 Countries

The top 20 countries / major buyers export accounted for US$ 13,645 million and grew by +8.44%. Exports to 6 of these countries increased, to Afghanistan by +22.20%, China by +2.37%, Saudi Arabia by +19.88%, Iran by +86.91%, Bangladesh by +12.11%, India by +25.41% and Korea Republic by +22.77% whereas decline trend was noticed in USA by 10.21%, UK 15.09% and UAE by 29.02% respectively.

Top 5 Countries Analysis

U.S. America

Exports have decreased by US$ (-379.907 million) or (-10.21%) in the year 2008-09. However, USA, contributed US$ 3339.453 million during 2008-09, whereas it was increased by +19.52% in 2007-08. Decline was recorded in Knitwear (US$ 1069 million), Bed ware (US$ 625 million), Readymade garments (US$ 404 million), Textile made up (US$ 302 million), Cotton cloth (US$ 97 million), Wool Carpet & Rugs (US$ 51 million ), Leather gloves (US$ 32 million), Cotton yarn (US$ 28 million), Rice Basmati (US$ 19 million), Art Silk & Synthetic textile (US$ 17 million), Footballs complete (US$ 14 million), Cutlery (US$ 12 million), Guar and Guar products (US$ 7 million) and Jewellery (US$ 7 million).

United Arab Emirates

Exports have decreased by US$ 600.963 million or -29.02% in 2008-09 and fetched total exports US$ 1469.990 million compared US$ 2070.953 million of 2007-08. Main decline was recorded in Petroleum Products (US$ 234.488 million), Rice Basmati (US$ 215.408 million), Readymade garments (US$ 39 million), Art Silk & Synthetic Textile (US$ 32 million), Fruits (US$ 16 million), Plastic material (US$ 9 million) and Vegetables (US$ 6 million).

Afghanistan

During 2008-09, the total exports to Afghanistan were US$ 1397.518 million showed an increase by 22.20%. Exports increased in the items like Rice other varieties (US$ 142.686 million), Rice Basmati (US$ 82.25 million), Article of Plastic (US$ 46.78 million), Vegetables (US$39.76), Wheat (US$ 39.41 million), Fruits (US$ 27.64 million), other Chemicals (US$ 25.12 million), Pharmaceutical Products (US$ 18.44 million). However, significant decreases appeared in exports of Petroleum Products (US$ 363.7 million), Household equipments (US$ 8.43 million), Fruits & Vegetables (US$ 8.32 million), Electric fans (US$ 2.640 million) and Paper & Products (US$ 1.01 million).

United Kingdom

During the year 2008-09 the exports to UK came down by (-15.09%) worth US$ 874.588 million compared to US$ 1030.028 million (+5.41%) over the previous year. Exports decreased in the items like Bed ware (US$ 185.502 million), Readymade garments (US$ 136.027 million), Textile made ups (US$ 53.01 million), Cotton Cloth (US$ 46.064 million), Rice Basmati (US$ 35.868 million), Towels (US$ 32.88 million), Apparel and Clothing (US$ 32.73 million), Surgical goods (US$ 27.07 million), Art Silk & Synthetic Textile (US$ 12.088 million) and fruits (US$ 10.76 million).

Germany

Germany contributed US$ 737.988 million exports with decrease of (-9.63%) during 2008-09 compared with last year US$ 816.615 million (+4.29%). Declining trend in exports was recorded in Readymade garments (US$ 174.50 million), Bed ware (US$ 114.103 million), Cotton Cloth (US$ 72.96 million), Knitwear (US$ 72.22 million), Surgical goods (US$ 36.60 million), Towels (US$ 23.74 million), Footballs complete (US$ 18.21 million), Leather gloves (US$ 16.23 million), Textile made ups (US$ 15.60 million), Wool Carpets & Rugs (US$ 15.135 million), Leather (US$ 12.79 million) Leather footwear (US$ 11.05 million) and Rice Basmati (US$ 9.39 million). However, increase was seen in Apparel and Clothing (US$ 59.883 million), Gloves Sports (US$ 9.03 million), Fruits (US$ 7.56 million), Crude animal material (US$ 6.55 million), Other leather manufacture (US$ 2.535 million) and other machinery (US$ 2.015 million).

3.8 Agricultural Raw Material Exports

Agriculture is the solo leading sector of Pakistan’s economy. Agriculture sector contributes 21 % of GDP and employs almost half of the labor force. Agriculture contributes to GDP as it supplies raw materials for the industrial production and is a large source of Pakistan’s foreign exchange earnings. Agricultural raw material exports have a large share in Pakistan’s exports. The Agricultural raw materials exports (% of merchandise exports) in Pakistan was last reported at 1.80 in 2010, according to a World Bank report released in 2011. The Agricultural raw materials exports (% of merchandise exports) in Pakistan was 1.72 in 2009, according to a World Bank report, published in 2010. The Agricultural raw materials exports (% of merchandise exports) in Pakistan were reported at 1.21 in 2008, according to the World Bank. Agricultural raw materials comprise SITC section 2 (crude materials except fuels) excluding divisions 22, 27 (crude fertilizers and minerals excluding coal, petroleum, and precious stones), and 28 (metalliferous ores and scrap).

3.9 Food Exports

The Food exports (% of total exports) in Pakistan were last reported at 16.79 in 2010, according to a World Bank report released in 2011. The Food exports (% of total exports) in Pakistan were 16.67 in 2009, according to a World Bank report, published in 2010. The Food exports (% of merchandise exports) in Pakistan were reported at 18.20 in 2008, according to the World Bank. Food comprises the commodities in SITC sections 0 (food and live animals), 1 (beverages and tobacco), and 4 (animal and vegetable oils and fats) and SITC division 22 (oil seeds, oil nuts, and oil kernels).

3.10 Reasons of Exports Instability

There are various reasons of exports instability in Pakistan. Pakistan mainly exports primary nature goods to the world. This is one of the main reasons of instability in the exports of Pakistan. Primary commodities often experience supply side commodity. Various sectors play a role in these supply shifts. In case of agricultural products a major reason is crop failure due to adverse weather changes, pest attacks, diseases and cobweb supply effects. Changes in commercial policies arising due to tariffs and taxes can also cause supply shifts. In the case of agricultural commodities Pakistan specializes in agricultural and primary products. The reliance of agricultural sector on the nature causes fluctuations in supply conditions of primary products, which makes export receipts unstable. Primary products are known to have little supply and demand elasticity’s, thus making the export receipts unstable. These are divided into food and raw materials. The food items are known to have low income elasticity’s whereas these items have different food and supply circumstances. The food items are known to have low income elasticity’s however cyclical variations in income levels affect demand for raw materials. According to a report, countries with more dependence on raw material exports tend to experience above the average instability in their export receipts. However food exporting countries experience less instability in their earnings. The import demand conditions of primary and agricultural products also cause the export receipts of a country variant. Every country in the world faces a net foreign demand curve which is based on aggregate world supply and demand. This demand curve may shift due to price changes of competing goods, or due to the cyclical variations in the income of importing countries. The product attention is regularly regarded as the main reason of export earnings in diverse economies. It is understood that because of the deliberation, fluctuations in several exports in one route may not be balance by counter-fluctuations by other commodities in the other way. The unsteadiness of export earnings also depends on the instability of individual commodities as well as the relationship among different pairs of commodities. Goods that are exaggerated by related market forces have a propensity to move together. However, dissimilar goods may vary autonomously. A country whose export consists of only a few commodities is projected to have unsteady export earnings. However, a country with diversified exports will experience greater export earnings immovability. Also if a countries exports are going only to a few countries export earnings may vary a lot. However, if exports go to many different countries, demand shifts in some importing countries can be equalize by contrasting demand shifts in other countries, thereby making the total export revenue more firm.

In short, Pakistan has focused in primary goods exports, and it is assumed that the exports of primary goods are subject to greater short-run fluctuations as compared to finished goods. Secondly, countries that export primary products tend to have a high commodity deliberation than industrialized countries. Finally, the geographic concentration also makes export earnings unstable.

Data & Methodology

The following methodology will be used to see the impact of independent variables on dependent variables.

Y = β0 + β1 X1 + β2 X2 + €

The above explanatory variables have been selected for the measurement of the impact of food exports and agricultural raw materials exports on net exports. The data is taken in time series from the period of 1981 to 2010. Two independent variables are selected for this purpose which is denoted by X1 and X2 in this model while Y is the independent variable. The independent and dependent variables are denoted as such:

Y = Net Exports

X1 = Food Exports

X2 = Agricultural Raw Material Exports

The data for this purpose is taken from the websites of the World Bank from1981 to 2010.

Computation on Data

Computation on data has been done with the help of application software “EVIEWS”. And following results are obtained:

Dependent Variable: Y

Method: Least Squares

Date: 07/20/12 Time: 00:01

Sample: 1981 2010

Included observations: 30

Variable

Coefficient

Std. Error

t-Statistic

C

2.750873

0.219182

12.55063

X1

-0.441811

0.201499

-2.192618

X2

-0.538271

0.058936

-9.133183

R-squared

0.799429

    Mean dependent vary

Adjusted R-squared

0.784572

    S.D. dependent var

S.E. of regression

0.131616

    Akaike info criterion

Sum squared reside

0.467714

    Schwarz criterion

Log likelihood

19.84826

    F-statistic

Durbin-Watson stat

0.728772

    Probe(F-statistic)

Estimation Command:

=====================

LS Y C X1 X2

Estimation Equation:

=====================

Y = C (1) + C (2)*X1 + C (3)*X2

Substituted Coefficients:

=====================

Y = 2.750873464 - 0.4418110012*X1 - 0.5382713213*X2

Null Hypothesis: D(X1) has a unit root

Exogenous: Constant

Lag Length: 2 (Automatic based on SIC, MAXLAG=7)

t-Statistic

Augmented Dickey-Fuller test statistic

-1.807979

Test critical values:

1% level

-3.711457

5% level

-2.981038

10% level

-2.629906

*MacKinnon (1996) one-sided p-values.

Augmented Dickey-Fuller Test Equation

Dependent Variable: D(X1,2)

Method: Least Squares

Date: 07/20/12 Time: 00:03

Sample (adjusted): 1985 2010

Included observations: 26 after adjustments

Variable

Coefficient

Std. Error

t-Statistic

D(X1(-1))

-0.705303

0.390106

-1.807979

D(X1(-1),2)

-0.228274

0.289904

-0.787412

D(X1(-2),2)

-0.461347

0.214775

-2.148049

C

0.001050

0.013105

0.080106

R-squared

0.632492

    Mean dependent var

Adjusted R-squared

0.582378

    S.D. dependent var

S.E. of regression

0.064836

    Akaike info criterion

Sum squared resid

0.092481

    Schwarz criterion

Log likelihood

36.41266

    F-statistic

Durbin-Watson stat

2.156449

    Prob(F-statistic)

Graphical Analysis

Interpretations of the Results

The value of β1 = -0.44 is negative so it shows the negative relation between net exports and food exports of Pakistan. If food exports changes 1 percent net exports will show a change of 0.44 percent.

The value of β2= -0.5382 so it shows negative relation between net export and agricultural raw material exports. If agricultural raw material exports changes 1 percent net exports will show a change of 0.5382.

β0 is 2.75 which show that value of exports will be 2.75 % if there is no independent variable.

R2 tells that what percent of variations in dependent variable are due to independent variables. It also tells us that whether a model is a good fit or not. If value of R2 is less than 30 percent we can say that model is not a good fit but if value of R2 is more than 30 percent we can say that model is a good fit.

The value of R2 is 79.9 percent, which shows that 79.9 % of the variations are coming from independent variables in the dependent variable and remaining are due to error term. As value of R2 is more than 30 % so we can say that model is a good fit.

T-statistic represents that either an independent variable is significant or not. If value of T-statistic is greater than 2, the variable will be significant. And if the value of T-statistic is less than 2 the variable will be insignificant.

T-statistic value for X1 or food exports is less than 2 so we can say that this variable will be insignificant.

T-statistic value for X2 for agricultural raw material exports is less than 2 so this variable is also insignificant.

F-statistic tells us about the overall significance of a model. If F-statistic value is greater than 10, our model will be significant, but if value of F-statistic is less than 10, it shows that our model is insignificant.

As the value of F-statistic is more than 10 so we can say that our model is significant.

Durbin-Watson test tells us that either auto correlation is present in the model or not. If value of Durbin-Watson test is less than 2, it shows that model has positive auto correlation. If the value of Durbin-Watson test is greater than 2, it represents that negative auto correlation exists in the model. And if the value of Durban-Watson test is near to 2, it shows that no auto correlation is in the model.

Durban-Watson stat value is less than 2; it means positive auto correlation is present in the model.

Standard error shows the accuracy of the model. The standard error of X1 is 0.2014 where as standard error of X2 is 0.0589.

Conclusion

In this research project our results have showed negative relation between our independent and dependent variables. However in real life food exports and agricultural raw materials exports are part of net exports and must have a positive relation between them. This is due to so much variations and manipulations in the data of Pakistani exports. Pakistan is exporting mostly primary products or raw products which do not get high market value in the international market which is a main cause of low export earnings. Secondly Pakistan exports raw agricultural products and there is always high variability in their production due to difficult conditions of Pakistan like weather conditions, less rain fall or governmental policies towards a particular crop. Another major reason of fewer exports is less production as compared to its population and Pakistan itself consumes most of its production and there is very less left of production to exports in the international market. Pakistan major exports goes into only a few areas or regions of the world and due to changes in their internal conditions like income of people or changes in their behavior affects its export earnings and stability. Pakistan should increase its exports through improving methods of production and should also look to export finished goods after processing so that net exports value can be increased. Pakistan should also focus on building new ties with other European countries and should explore new markets in the world.

Reference

http://www.google.com.pk/

http://www.docstoc.com/docs/19885525/factors-that-influence-exports-of-pakistan

http://www.blurtit.com/q592935.html

http://www.technologytimes.pk/2011/04/02/food-problem-in-pakistan/

http://www.indexmundi.com/pakistan/

http://www.cssforum.com.pk/css-optional-subjects/group-b/agriculture/41777-pakistan-agriculture-economy-policy.html

http://databank.worldbank.org/ddp/home.do?CNO=2&Step=12&id=4

Bibliography

Aftab A Khan, M. K. (May 2010). Pakistan textile industry facing new challenges. Riyadh: College of Business Administration, King Saud University.

(2005 - 06). Determinants of mango exports from Pakistan. Faisalabad: Faculty of agricultural economics and rural sociology.

Malik, A. (2007). Demand for textile and clothing exports from Pakistan.

Mustafa, D. K. (2000). barriers against agricultural exports from Pakistan .

Siddiqui, R. (2007). Dynamic effects of Agricultural trade wrt domestic & global liberalisation. Islamabd: Pakistan institute of development economics.

Syed Ali Raza, Y. A. (2012). Impact of agricultre ON GDP. Karachi: International Research Journal of Finance and Economics.

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