1. EU Market Access & Regional Peace May 10, 2012

2. Pakistan Business Council: Who we are? PBC is a non-political, private sector funded not-for-profit business policy advocacy platform. Established in 2005, as a Section 42 Company Objectives are to: Improve the general business climate, with pragmatic implementation of international/regional best practices Improve the competitiveness of Pakistani industry. Help Pakistani companies integrate in regional and international markets Further the economic, social and human resource development of Pakistan At PBC, we view Government as a partner 2

3. PBC Members - Pakistan’s Marquee Brands 3

4. PBC Composition by Sectors of the Economy SectorCompanies Large Scale Manufacturing 31 Services Including Financial Services 07 Total Members of Pakistan Business Council 38 4

5. PBC Members’ Contribution to the Economy 5

6. Why are we here today? We are here to seek the Trade Counselors' & the Commission's support for greater and a more secure long term access for Pakistani goods and services to the EU markets. We appreciate that at the moment the EU may not be in a position to give Pakistan specific concessions PBC however firmly believes country specific concessions only hamper competitiveness of partner country’s industry in the long run. PBC WOULD LIKE YOUR SUPPORT FOR ENSURING A LEVEL PLAYING FIELD FOR PAKISTANI INDUSTRY. NOTHING EXTRA – SIMPLY THE SAME TERMS OFFERED TO THE EU’S OTHER TRADING PARTNERS. 6

7. First the hard numbers

8. Pakistan’s GDP Growth Rate is lower than that required to create employment opportunities for an increasing youth population Source: International Monetary Fund (www.imf.org/external/data) and calculations 8

9. The “War on Terror” has affected Foreign Direct Investment Source: World Bank Development Indicators (data.worldbank.org) 9

10. With stagnating growth rates and lack of investment, a current account balance crisis threatens Source: International Monetary Fund (www.imf.org/external/data) 10

11. Pakistan has been unable to export itself out of poverty! Major trading partners – EU & USA – have mostly restricted market access for Pakistani exports. Diversifying export products & markets not possible in near to medium-term. Majority of the population has low education & skill levels – ideal for textiles and agro products. Textiles will continue to be the major export item for Pakistan. EU measures in the past were mostly short term and do not allow companies to fully exploit the concessions. 11

12. While Pakistan’s exports stagnate, competitors continue to do well in the EU 12

13. Textiles however continue to be the major component of Pakistan’s exports M. US $ Mar 2012 M. US $ Mar 2011 % Change Cotton Textiles916.61,230.6(25.52) Raw Cotton68.446.646.61 Synthetic Textiles55.892.531,22 Sub-total1,040.81,319.4(21.14) Wool & Woolen Textiles10.112.7(20.23) Total1,050.91,332.5(21.14) Total Export All (Mar ‘12)2,000.92,463.2(18.77) Textiles as % of Total52.52%54.10% 13

14. The global textile and clothing scenario.

15. Export Textiles 2000 – 2010 - top 13 countries Billion USD Source: WTO, International Trade Statistics 20002001200220032004200520062007200820092010 China 16.13516.82620.56326.90133.42841.05048.68356.02565.36159.82476.900 Extra-EEU 17.27222.14023.14326.37124.33423.65124.60223.78524.19018.85420.748 Hong Kong 13.44112.21412.37413.08414.29613.83013.91013.41712.2569.97611.307 USA 10.95210.49110.69810.91711.98912.37912.66512.42612.4969.93112.168 Korea 12.71010.94110.71310.12210.83910.39110.11010.37310.3719.15510.968 India 5.5705.3756.0286.5107.0098.4629.3309.81210.4479.10512.872 Taiwan 11.8919.9049.5329.32110.0389.7069.7639.7209.2537.8919.753 Pakistan 4.5324.5254.7905.8116.1257.0877.4697.3717.1866.5107.484 Turkey 3.6723.9434.2445.2446.4287.0767.5938.9409.3967.7238.964 Indonesia 3.5053.2022.8962.9232.9613.3533.6053.8293.6753.2084.150 Vietnam 0.2990.3500.4200.4700.5340.7001.0001.3211.5631.8152.660 Mexico 2.5712.0912.2122.1022.0712.1382.1922.2161.9931.6241.928 Bangladesh 0.3930.4690.4900.5050.5970.6960.7500.8441.0901.0711.263 Total 13 102.943102.471108.103120.281130.649140.519151.672160.079169.277146.687181.165 Total World 157.400146.870152.760169.420195.541205.135218.594241.335253.359211.054250.652 Rest World 54.45744.39944.65749.13964.89264.61666.92281.25684.08264.36769.487 Share % 65.469.870.871.066.868.569.466.366.869.572.3 Global Trade in Textile & Clothing (Yarn & Fabric) 15

16. Export Clothing 2000 – 2010 - top 13 countries (minus China, Hong Kong & Extra-EEU) Billion USD Source: WTO, International Trade Statistics Global Trade in Textile & Clothing 16

17. Export Clothing 2000 – 2010 - top ten countries Billion USD Source: WTO, International Trade Statistics 20002001200220032004200520062007200820092010 China 36.07136.65041.30252.06161.85674.16395.388115.516120.399107.261129.838 Extra-EEU 13.54415.74216.59019.04419.13020.01821.89524.79527.69921.80922.305 Hong Kong 24.21423.44622.34323.15225.09727.29228.39128.76527.90822.82624.049 Turkey 6.5336.6618.0579.93711.19311.83311.88213.88613.59011.55512.760 India 5.9605.4836.0376.4596.6329.21210.1929.93211.49511.45411.246 Bangladesh 5.0674.2614.0054.3266.2967.7518.2118.85510.92012.52015.660 Vietnam 1.8211.8672.6333.5555.0594.9984.8767.4008.7248.62910.839 Indonesia 4.7344.5313.9454.1054.2854.9595.6995.8706.2855.9156.820 USA 8.6297.0126.0325.5375.0594.9984.8764.3204.4494.1864.694 Mexico 8.6318.0127.7517.3437.4907.3066.3255.1394.9114.1654.363 Pakistan 2.1442.1362.2282.7103.0263.6043.9073.8063.9063.3573.930 Korea 5.0274.3063.9153.6053.3912.5812.1831.9141.7411.3961.610 Taiwan 3.0152.4842.1872.1131.9501.9511.5611.3931.1940.9040.963 Total 13 125.390122.591127.025143.947160.464180.666205.386231.591243.221215.977249.077 Total World 197.570194.490202.310225.940260.569277.971311.410347.059364.914315.622351.464 Rest World 72.18071.89975.28581.993100.10597.305106.024115.468121.69399.645102.387 Share % 63.563.062.863.761.665.066.066.7 68.470.9 Global Trade in Textile & Clothing 17

18. Export Textiles & Clothing 2000 – 2010 - top 13 countries (without China, Hong Kong and Extra-EEU) Billion USD Source: WTO, International Trade Statistics Global Trade in Textile & Clothing 18

19. Export Textiles & Clothing 2000 – 2010 - top ten countries - Billion USD Source: WTO, International Trade Statistics 20002001200220032004200520062007200820092010 China 52.20653.47661.86578.96295.284115.213144.071171.541185.760167.085206.738 Extra-EEU 30.81637.88239.73345.41543.46443.66946.49748.58051.88940.66343.053 Hong Kong 37.65535.66034.71736.23639.39341.12242.30142.18240.16432.80235.356 USA 19.58117.50316.73016.45417.04817.37717.54116.74616.94514.11716.862 Korea 17.73715.24714.62813.72714.23012.97212.29312.28712.11210.55112.578 India 11.53010.85812.06512.96913.64117.67419.52219.74421.94220.55924.118 Turkey 10.20510.60412.30115.18117.62118.90919.47522.82622.98619.27821.724 Pakistan 6.6766.6617.0188.5219.15110.69111.37611.17711.0929.86711.414 Indonesia 8.2397.7336.8417.0287.2468.3129.3049.6999.9609.12310.970 Taiwan 14.90612.38811.71911.43411.98811.65711.32411.11310.4478.79510.716 Vietnam 2.1202.2173.0534.0255.5935.6985.8768.72110.28710.44413.499 Mexico 11.20210.1039.9639.4459.5619.4448.5177.3556.9045.7896.291 Bangladesh 5.4604.7304.4954.8316.8938.4478.9619.69912.01013.59116.923 Total 13 228.333225.062235.128264.228291.113321.185357.058391.670412.498362.664430.242 Total World 354.970341.360355.070395.360456.110483.106530.004588.394618.273526.676602.116 Rest World 126.637116.298119.942131.132164.997161.921172.946196.724205.775164.012171.874 Share % 64.365.966.266.863.866.567.466.666.768.971.5 Global Trade in Textile & Clothing 19

20. Major Investments in the World Textile Sector Pakistan’s capacity is not keeping pace

21. Shipped Short-staple Spindles 2002 - 2011 - World & Regions - ITMF‘s Textile Machinery Shipments Statistics million spindles + 7% 21

22. Investments in Short-staple Spindles 2011 - 5 Biggest Investors million spindles ITMF‘s Textile Machinery Shipments Statistics 22

23. Shipped Shuttle-less Looms 2002 - 2011 - World & Regions Looms ITMF‘s Textile Machinery Shipments Statistics + 43% 2010 & 2011: 19 instead of 14 Chinese producers 23

24. Looms Investments in Shuttle-less Looms 2011 - 5 Biggest Investors ITMF‘s Textile Machinery Shipments Statistics 24

25. Machines Investments in Circular Knitting Machines 2011 - 5 Biggest Investors ITMF‘s Textile Machinery Shipments Statistics 25

26. China dominates the textile sector But changing Chinese demographics will reduce China’s long term impact

27. China‘s Textiles Export in the World Market (Billion dollars and percentage)ValueShare in world exports/importsAnnual percentage change 2010 1980199020002010 2005-10200820092010 Exporters China a77 4.66.910.430.7 1317-829 European Union (27)67 --36.626.8 -237 extra-EU (27) exports21 --10.18.3 01-2210 India13 2.42.13.65.1 98-1241 United States 12 6.84.87.14.9 01-2123 Hong Kong, China 11 ---- -4-9-1913 domestic exports 0 1.72.10.80.1 -16-14-29-10 re-exports 11 ---- -4-8-1814 Korea, Republic of 11 4.05.88.24.4 10-1220 Taipei, Chinese 10 3.25.97.73.9 0-5-1524 Turkey 9 0.61.42.43.6 55-1816 Pakistan 8 1.62.62.93.1 2-3-921 Japan 7 9.35.64.52.8 13-1716 Indonesia4 0.11.22.31.7 4-4-1329 Thailand4 0.60.91.31.5 63-725 Viet Nam b3... 0.21.1 30182932 Mexico a 2 0.20.71.70.8 -2-10-1920 Canada 2 0.60.71.40.8 -5-14-1716 Above 15228 --91.091.1 ---- Leading exporters of textiles, 2010 Source: WTO Figures from WTO show that in 2010, China’s textile exports covered 30.7% of the world’s total textile trade, 20.3 percentage points higher than in 2000. In 2010, textile exports from India and Vietnam grew 41% and 32%, faster than China (29%). Textile exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in world’s total is still higher than China. 27

28. China‘s Garment Export in the World Market ValueShare in world exports/importsAnnual percentage change (Billion dollars and percentage) 2010 1980199020002010 2005-10200820092010 Exporters China a130 4.08.918.336.9 124-1121 European Union (27)99 --28.528.1 38-141 extra-EU (27) exports22 --6.66.3 310-212 Hong Kong, China 24 ---- -2-3-185 domestic exports 0 11.58.65.00.1 -43-42-80-28 re-exports 24 ---- 35-116 Bangladesh b16 0.00.62.64.5 18231525 Turkey 13 0.33.13.33.6 2-2-1510 India11 1.72.33.03.2 5109-6 Viet Nam b11... 0.93.1 18 -227 Indonesia 7 0.21.52.41.9 77-615 United States 5 3.12.44.41.3 3-612 Mexico a 4 0.00.54.41.2 -10-4-166 Thailand4 0.72.61.91.2 14-1215 Pakistan 4 0.30.91.1 23-1417 Malaysia a4 0.41.21.1 915-1424 Sri Lanka b 3 0.30.61.41.0 45-57 Tunisia b 3 0.81.01.10.9 5-17-2 Above 15314 --79.589.4 ---- Source: WTO Leading exporters of garment, 2010 WTO figures show, China’s garment export covered 36.9% of the world’s total in 2010. In 2010, China’s garment export grew slower than Bangladesh, Vietnam and Malaysia. Garment exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in world’s total is still close to China. 28

29. As China prepares to move out of the lower end – the EU moves the goalpost for Pakistan

30. New Rules for LDC exports to the EU From January 2011, garments from LDCs made of IMPORTED FABRICS will get the GSP under a new rule. That is, ONE STAGE PROCESSING (fabric to garment) is the only requirement to qualify for GSP benefit. Single stage rule is applicable ONLY TO THE LDC beneficiary countries including Bangladesh which already has a strong presence in the global textile market. 30

31. Pakistan’s case

32. The case for preferential market access for Pakistani exports into EU Out of around 60 countries classified as low income countries, only Pakistan, Vietnam & India do not get zero duty on their exports to EU. The rest get zero % duty on their exports to EU by way of: Everything But Arms preference to LDC (least developed countries) like Bangladesh, Nepal, Afghanistan etc. GSP+ preference to vulnerable countries like Sri Lanka (Sri Lanka’s status temporarily withdrawn in 2010) FTA (Free Trade Agreement) with select countries like Egypt, Mexico, Chile, Southern African Development Community, Tunisia etc. 32

33. The case for preferential market access for Pakistani exports into EU Amongst regional competitors, Pakistan and India face the highest tariffs (both are restricted to GSP preference). India’s economy though is much bigger and growing at a faster pace than Pakistan’s economy. India’s GSP eligible exports to the EU were 10 times those of Pakistan in 2010 33

34. The case for preferential market access for Pakistani exports into EU Pakistan is a ‘vulnerable’ country as defined by the EU. 200820092010 %age of 7 largest GSP sections of imports from Pakistan into the EU out of total imports from Pakistan into the EU of GSP eligible products 92.5%92.8%92.5% %age of imports from Pakistan into the EU of GSP eligible products out of total imports into the EU of GSP eligible products from GSP eligible countries 0.81%0.90%0.80% Source: UNCTSD and calculations 34

35. The case for preferential market access for Pakistani exports into EU Additionally: Pakistan is ranked at 142 in the HDI (Human Development Index) by UN, below Vietnam and India. EU has initiated FTA talks with India which will lead to zero duty status to many Indian exports shortly. FTA talks with Pakistan is put on the second stage Pakistan, we feel, is being penalized for having an open economy 35

36. The case for preferential market access for Pakistani exports into EU And finally: Among countries having exports of less than 2% of total EU imports, Pakistan is the only country besides Vietnam which does not have zero duty status. 36

37. So what can potentially happen if the EU provides Pakistan preferential access to its markets?

38. Potential impact of greater access to Pakistan to the EU markets In the near term, not much – maybe $300 - 500 million increase in exports per year. Mainly due to: a lack of investments in the value added sector. Because of the War on Terror buyers & their designers are not willing to come to Pakistan. Chronic power shortages which are likely to continue in the medium-term. Existing commitments of Pakistani exporters. 38

39. Not a major impact – but still important

40. A clear signal that Pakistan is viewed as an important partner by the EU. An economically vibrant Pakistan is in the interest of the world. Investments including FDI will flow into Pakistan, especially in the textile & agricultural sector. In the medium-term provide fiscal space to the GoP to allow spending on infrastructure and social welfare projects. 40

41. How can you help?

42. What support are we looking for from the Trade Counsellors? Pakistan’s is a unique case – we would like the EU to include it in the list of First Stage countries for an FTA with the EU. In the meanwhile, we suggest that the EU/GoP/PBC work together to ensure that the Pakistan government is able to submit in time the application for GSP+ status Trade counselors are requested to work to create goodwill to ensure final legislation for GSP+ preference does not restrict Pakistan (import share threshold of 2%) 42

43. What support are we looking for from the Trade Counsellors? PBC & European Union to ensure the relevant treaties / conventions are ratified PBC’s access to top government figures could be utilized to make sure the relevant treaties / conventions are ratified and commitments are made for monitoring and reporting the implementation of treaties. Counselors work with their governments to allow Pakistan a longer timeframe for implementation of certain controversial treaties for which additional ground work is required. Any other suggestions are welcome. 43

44. THANK YOU 44