Observer Report Islamabad
Given Pakistan’s observable characteristics in terms of economic size, level of development, remoteness, and factor endowments, it is estimated that Pakistan’s potential annual exports are at US $ 88.1 billion, about four times the actual current level, World Bank said in its recent report “Pakistan Development Update”.
This large gap between actual and potential exports, or “missing exports,” places Pakistan among the top quartile of the distribution of countries with missing exports.
Were Pakistan’s exporters to tap into that potential, the resulting export-to-GDP ratio would place the country at around the middle of the distribution of countries according to export orientation.
To reach that point, Pakistan’s exports would need to grow at the same rate as Vietnam’s for 10 years, or Bangladesh’s for 13 years.
The report said the opportunity cost of Pakistan’s “missing exports” is estimated at 893,000 jobs and US $ 1.74 billion in foregone taxes.
Of these, 152,000 jobs could be created in the agriculture export sector, and 741,000 jobs could be created in the
manufacturing export sector.
While some of these jobs could be newly created, others may imply the reallocation of labor from relatively lower productivity, domestic-oriented firms, to higher productivity, export-oriented firms.
In terms of foregone tax revenue, a back-of-the-envelope calculation suggests that realizing the export potential would bring an additional US $ 1.74 billion in direct tax revenues annually, taking into account Pakistan’s value added share in gross exports, as well as the implicit direct tax rate across sectors.