1. ECO-PIDE Study on Regional Trading Patterns Pakistan Institute of Development Economics

2. Outline of the Presentation  Importance of regional economic integration in the ECO Region  Factors which have so far hampered economic cooperation in the region  Preliminary Findings of the Study  Future course of action

3. Regional Economic Integration  Regional and bilateral trade agreements (make up almost 40 percent of total world trade) − Trade Creation more competition, efficient allocation of resources, better productivity, enhanced economic growth − Institutionalization of policy reforms improved policy credibility − Stepping stone to multilateral trade liberalization − Enhanced regional security

4. Impediments in ECO Region − Protective import duties and taxes − Non-tariff barriers − Complicated custom procedures − Lack of regional transport network and transit system − Lack of regional trade facilitation measures − Similar comparative advantage and lack of trade complementarity

5. Measures to Enhance Economic Cooperation Large countries must lead the way Easing of travel and visa restrictions Strengthening of bilateral trade Create awareness about the potential benefits

6. Measures to Enhance Economic Cooperation (cont.)  Reform and harmonize trade policies to create a level playing field for stakeholders — Collective actions to lower trade barriers and advance domestic reforms — Reduce complexity of the tariff structure — Improvement in custom procedures  Facilitate trade through improvement in regional transport and transit system

7. Measures to Enhance Economic Cooperation (cont.)  Promoting Collectivism To safeguard regional interests in multilateral fora  Minimizing Trade Diversion Reduction in level of external protection

8. Measures to Enhance Economic Cooperation (cont.) − Effective implementation of policies and program − Conducive political and economic environment & strong willingness for integration − Acceptance for subsequent economic adjustments − Continuous dialogues and interaction

9. Measures to Enhance Economic Cooperation (cont.)  Exploring Potential in new areas Regional production sharing arrangements Intra-industry trade Cooperation in technology development and diffusion

10. Analysis of Bilateral Trade Flows: Some Preliminary Findings Revealed Comparative Advantage Indices Indicate export potential of a country Trade complementarity Index Indicates the level of complementarity in the bilateral trade structures

11. Revealed Comparative Advantage Index Revealed Comparative Advantage The numerator is the share of a country’s total exports of the commodity of interest in its total exports. The denominator is share of world exports of the same commodity in total world exports

12. Pakistan 20072003 Products ShareRCASharesRCA made up textile17.82 60.9 19.857.2 Cotton19.28 58.9 21.241.5 Leather Products3.88 13.9 1.914.3 Agro Food Processing6.97 13.0 5.211.9 Carpets1.25 12.8 3.811.7 Leather Raw Materials2.20 10.5 5.610.4 Man-made fibers2.16 9.6 10.98.4 Embroidery clothing10.38 9.1 0.27.1 Vegetable0.19 7.1 2.06.6 Wheat Milling Processing0.62 7.0 0.26.1

13. Azerbaijan 20072003 Products SharesRCASharesRCA Sugars & confectionery2.511.486.08.9 Mineral fuels,81.46.41.63.7 Fruit and nuts2.14.71.73.3 Fats & oils1.42.91.42.6 Vegetables0.62.01.32.0 Cotton0.71.90.31.2 Ships & boats1.51.91.00.9 Agro food Processing0.31.60.30.9 Inorganic chemical1.11.60.20.8 Fruit & Vegetable0.51.40.20.6

14. Iran 20062003 Products ShareRCASharesRCA Carpets 0.98.72.014.9 Oils & fuels 83.36.085.68.9 fruit & nuts 2.45.32.65.2 Animal Products 0.12.50.12.4 Zinc & articles 0.31.80.01.8 Vegetable plaiting materials 0.01.40.31.6 Vegetables 0.41.30.41.3 Lead & articles 0.01.20.11.0 Coffee, tea & spices 0.21.20.01.0 Cereals 0.01.10.30.9

15. Kazakhstan 20072003 Products ShareRCAShareRCA Zinc & articles2.114.20.415.3 Lead & articles0.59.71.114.6 Malt & starches0.78.05.710.5 Copper & articles5.95.34.48.1 Mineral fuels66.05.20.66.6 Inorganic chemical3.55.02.76.6 Cereals2.74.961.26.4 Ores3.33.711.95.3 Raw hides and skins0.73.43.14.9 Other base metals0.42.90.54.7

16. Turkey 20072003 Products ShareRCAShareRCA Carpets & Flooring0.99.23.59.9 Made up textile2.06.512.19.3 Fabric Designing7.56.40.86.2 Special woven fabric0.66.20.86.1 Knitted Fabrics0.95.82.95.8 Fruit and nuts2.55.71.65.7 Malt & starches0.55.10.35.7 Salt, sulphur etc.1.25.00.05.4 Cotton1.54.48.15.1 Apparel & clothing5.14.31.65.1

17. Kyrgyzstan 2007 2003 Products ShareRCASharesRCA Precious stones 20.144.745.125.1 Stone processing 0.942.27.614.7 Cotton 2.825.50.312.2 Wool 0.521.82.27.6 Salt; sulphur etc. 3.915.81.96.4 Rail Equipment 3.413.82.95.6 Vegetables 4.212.81.35.3 Glass & glassware. 3.612.21.45.0 Furniture & beddings 0.49.41.24.5 Reactors & boilers 3.38.71.33.5

18. Trade Complementarity Index TCI: measures the degree of matching products between one country’s exports composition and another country’s import composition

19. Trade Complementarity Index Importing Countries Exporting Countries IranAzerKyrgKazhaTurk Pakistan20031.10.91.20.71.6 20040.61.11.00.51.5 20050.71.1 0.51.4 20060.40.91.20.61.4 2007-11.20.61.6

20. Concluding Remarks  Strengthening trade and economic relations would be beneficial for all countries  To move the process of regional economic integration forward we need: − Reduction in trade barriers − Harmonization of custom procedures and tariff structure − Improving transparency in policies − Trade facilitation