Gujranwala’s Business Centre & the Evolving Pakistan – Sri Lanka Landscape

1) Sri Lanka Trade Profile

1.1. Geographical and Historical Overview of Sri Lanka:

Sri Lanka is strategically located in South Asia, sharing its maritime boundaries with neighboring countries, India and the Maldives. Spanning an area of 65,610 square kilometres, this island nation boasts Colombo as both its capital and its most significantcity. Historically, Sri Lanka has undergone pivotal milestones; it gained its independence as the Dominion of Ceylon on February 4, 1948. This was further solidified when it transitioned into the Republic of Sri Lanka on May 22, 1972.

1.2. The Maritime Importance of Sri Lanka:
The maritime trade landscape of the Indian Ocean is deeply impacted by the rising prowess of nations like China and India. As a testament to this, the Indian Ocean facilitates a whopping 70.0 per cent of the world’s oil trade, half of its shipping containers, and 35.0 per cent of global bulk cargo. Within this context, Sri Lanka, with its bays and anchorages, emerges as a significant transit trade centre.

1.3. Trade Infrastructure: Ports and Their Development:
Historically, Sri Lanka’s prominence in trade can be traced back to its interactions with traders spanning the Indian Ocean, the Arab regions, and even Southeast Asia. Fast forward to the modern era, and we see Sri Lanka benefitting immensely from China’s One-Belt-One-Road (OBOR) Initiative. The Port of Colombo exemplifies this growth and strategic importance. Today, it not only caters to 87.0 per cent of global shipping but also proudly ranks 28th according to the World Shipping Council.

1.4. Sri Lanka on the Global Trade Stage:
Since 1948, Sri Lanka has been a proactive member of international trade forums. It began with its induction into the General Agreement on Tariffs and Trade (GATT). This journey evolved with its membership in the World Trade Organization (WTO) in 1995. Additionally, Sri Lanka embraced the Bangkok Agreement in 1975, which later morphed into the Asia Pacific Trade Agreement (APTA) by 2005. Furthermore, its trade engagements in the region are evident with its participation in the South Asian Preferential Trading Arrangement (SAPTA) in 1995 and the South Asian Free Trade Agreement (SAFTA) in 2006.

1.5. Post-Independence Economic Trends and Evolution:
In the aftermath of its independence, Sri Lanka’s economic backbone was its export sector, particularly tea, rubber, and coconuts. On the flip side, its imports were dominated by essentials like rice, sugar, and investment goods. While the plantation sector flourished, accounting for 90.0 per cent of global exports, the manufacturing sector grappled with challenges. These challenges stemmed from its limited domestic market and stiff competition from established suppliers in potential overseas markets.
Interestingly, the country maintained a trade surplus for the initial eight years after independence. However, by 1957, the economic strategy pivoted towards import substitution. From 1948 to 1960, Sri Lanka experienced an average GDP growth of 5.0 per cent, largely fuelled by its agricultural exports.

1.6. Decadal Economic Snapshot (2010-2020):
By 2010, Sri Lanka’s export dynamics had undergone a shift. Industrial exports constituted 71.0 per cent of total exports, with apparel exports being a significant chunk. In contrast, agricultural exports receded to 27.0 per cent, although tea exports remained prominent due to their superior quality. The import landscape also transformed with a diminishing share of consumer and investment goods and a rising import trend for intermediate goods, especially petroleum products. By 2019-2020, Globally, Sri Lanka secured the 84th position in merchandise exports and stood at the 76th spot for imports 1 . In 2020, among 190 economies, the nation was positioned 99th in the Doing Business (DB) ranking 2 . In terms of the Global Competitiveness Index 3, Sri Lanka was ranked 84th in 2019, and for the Logistics Performance Index 4, it achieved the 94th rank in 2018.

2) Sri Lankan’s Trade Ranking

2.1. Sri Lanka’s Top Import Countries:

Sri Lanka is a nation with a diverse economy, and understanding its top imports is crucial for analyzing its trade dynamics. The following table illustrates Sri Lanka’s top import partners and the corresponding import values in USD:
1 https://www.wto.org/english/res_e/statis_e/daily_update_e/trade_profiles/LK_e.pdf
2 https://www.doingbusiness.org/content/dam/doingBusiness/country/s/sri-lanka/LKA.pdf
3 https://countryeconomy.com/government/global-competitiveness-index/sri-lanka
4 https://lpi.worldbank.org/international/scorecard/radar/254/C/LKA/2018#chartarea

2.2. Sri Lanka’s Top Export Countries:

Based on the Trade Statistics of Sri Lanka, most of the exports are in the United States and the United Kingdom. With its diverse and dynamic product range, Sri Lanka’s large chunk of exports refers to the apparel and food industry. Following are the major countries (relative to volume of the exports) to which the Sri Lankan nation exports:

2.3. Sri Lanka Top Imports Product Category:

Sri Lanka’s import landscape in 2022 is marked by a diverse group of trading partners, each playing a significant role in the country’s import ecosystem. China and India lead the way as the top import sources, underlining the depth of Sri Lanka’s economic relationships with these neighbouring giants. The United Arab Emirates, Malaysia, Singapore, and the United States also feature prominently, reflecting Sri Lanka’s global trade reach and the diversity of goods it imports. Additionally, Indonesia, Japan, Vietnam, and Thailand contribute significantly, emphasizing the multifaceted nature of Sri Lanka’s import sources. The top imports based on goods are as follows:

The table highlights the top import categories and their respective import values, with oil and mineral fuels leading the pack at $3,400,857,675, emphasizing the nation’s significant dependence on global energy resources. Industrial and electrical machinery, knitted fabrics, iron and steel, plastics, pharmaceuticals, cotton, rubber, and cereals also played vital roles in Sri Lanka’s imports.

2.4. Sri Lanka Top Exports Product Category
Sri Lanka’s export portfolio spans a vibrant spectrum, with its both traditional agricultural strengths and its growing modern industries. The highest export prowess for Sri Lanka lies in its apparel sector with knitwear and non-knit apparel leading substantially. Following closely, the export landscape diversifies with Sri Lanka’s coffee and spices as a formidable player which ensures the nation’s rich agricultural heritage. Additionally, rubber remains a stalwart in exports, highlighting Sri Lanka’s enduring contributions to global markets. Further Sri Lanka also trades in electrical machinery, precious stones, seafood, oil, mineral fuels, preserved fruits, vegetables, and natural fibers. This comprehensive array of exports illustrates Sri Lanka’s dynamic economic landscape, blending traditional strengths with contemporary industries to assert its prominence in global
trade. The top exports based on goods are as follows:

3) Pakistan Trade Profile:

Pakistan, like Sri Lanka, is also a lower-middle income economy and located in South Asia. Pakistan shares a border with India in the East and a border with China in the North-East. Pakistan also shares a border with Iran on the southwest while it has a border with Afghanistan on the Northern and Western edges. Pakistan is the 33rd largest country in the world with an area of 881,913 square kilometres and Islamabad is the capital.

3.1. Demographics of Pakistan

Pakistan is situated in South Asia, shares borders with India to the east, China to the northeast, Afghanistan to the north and west, Iran to the southwest, and is flanked by the Arabian Sea and the Gulf of Oman to the south. The northern and western regions boast the impressive Karakoram and Pamir mountain ranges, home to some of the world’s highest peaks, including K2 (8,611 meters) and Nanga Parbat (8,126 meters). To the west lies the Baluchistan Plateau, while the east is characterized by the Thar Desert, alluvial plains of Punjab, and Sindh. Flowing through the country for over 1,000 miles (1,609 km), the Indus River and its tributaries journey from the Kashmir region to the Arabian Sea. Pakistan is administratively divided into 170 districts, including the capital Islamabad and Azad Kashmir. The official languages are Urdu and English, and the currency is the Pakistani rupee (PKR). With a population exceeding 250 million, Pakistan presents significant investment and business prospects across various sectors, given its substantial demographic size.

3.2. Economic Outlook of Pakistan

Pakistan holds the position of the second-largest economy in South Asia, following India. The composition of Pakistan’s economy includes the services sector (62%), industry/manufacturing (19%), and agriculture (19%)in 2021. China plays a pivotal role in Pakistan’s economic landscape, constituting 47% of foreign direct investment (FDI) inflows from March to July 2021. The China-Pakistan Economic Corridor (CPEC) encompasses approximately USD 62 billion in infrastructure investments, aiming to establish nine special economic zones by 2030.

3.3. Pakistan Export and Import Infrastructure

From the 1960s onwards, the structure of Pakistani exports changed from raw materials to manufactured goods. Major imports have conventionally been fuels and fuel products, capital goods consisting of manufacturing machinery and equipment, automobiles and auto parts, electrical goods, agricultural equipment and inputs such as fertilizers, including phosphate, potassium, sulphur, pesticides and insecticides along with medicines and medical equipment. Pakistan’s main spending on imports has been for fossil fuels from Saudi Arabia.

4) Pakistan’s Trade Ranking

4.1. Pakistan’s Top Export Countries

In 2019, Pakistan ranked 68th in merchandise exports globally while the country ranked 52nd in merchandise imports 5. Furthermore, the country ranked 108th in Doing Business (DB) in 2020 6. Pakistan ranked 110th in the Global Competitiveness Index (GCI) in 2019 7 and 122nd in the Logistics Performance Index (LPI) in 2018 8. Pakistan is also a signatory to trade blocs and international organizations such as SAARC and WTO. The table below presents data on Pakistan’s top export destinations in 2022, showcasing the countries that are significant recipients of Pakistani exports and the corresponding export values in USD. The table underscores the vital role played by the United States as the leading export destination, with an export value exceeding $6 billion. China, the United Kingdom, Germany, the Netherlands, the United Arab Emirates, and
other nations also feature prominently as key export partners for Pakistan. The top exports of the Pakistan in terms of countries are as follows:

5 https://www.wto.org/english/res_e/statis_e/daily_update_e/trade_profiles/PK_e.pdf
6 https://www.doingbusiness.org/content/dam/doingBusiness/country/p/pakistan/PAK.pdf
7 https://countryeconomy.com/government/global-competitiveness-index/pakistan
8 https://lpi.worldbank.org/international/scorecard/radar/254/C/PAK/2018#chartarea

4.2. Pakistan’s Top Import Countries

Pakistan’s import landscape is a tapestry woven with diverse global connections, showcasing a network of pivotal trade partnerships that fuel the country’s economic engine. Leading the pack is China, firmly entrenched as Pakistan’s foremost import ally, orchestrating a substantial influx of goods that underscores the strength of their trade ties. The United Arab Emirates follows suit, contributing significantly to Pakistan’s imports, and amplifying the importance of regional collaborations. Indonesia’s role as an import partner highlights Pakistan’s inclination toward varied sourcing beyond immediate geographical bounds. Meanwhile, the United States, with its global economic clout, remains a significant player in Pakistan’s import market, fostering transcontinental trade alliances. The collective contributions from Saudi Arabia, Qatar, Kuwait, Japan, South Africa, and Thailand further diversify Pakistan’s import spectrum, painting a vivid picture of interwoven regional affiliations and global trade partnerships that together underpin Pakistan’s economic resilience and trade versatility.

4.3. Pakistan Top Export Product Categories

The table provides an overview of Pakistan’s top export categories in 2022, highlighting the specific Harmonized System (HS) codes representing these export products and their corresponding export values in USD. Pakistan’s exports are diverse, encompassing textile articles, knit and non-knit apparel, cotton, cereals, copper, leather products, fruit and nuts, natural minerals and stone, and precision instruments.

4.4. Pakistan’s Top Import Product Categories

Pakistan’s imports encompass vital commodities crucial for its economic vitality. Dominated by oil and mineral fuels, these imports fulfil energy needs, and economic stability. Concurrently, imports of electrical and industrial machinery signify Pakistan’s focus on technological progress and industrial growth. Iron, steel, pharmaceuticals, and fats/oils fulfil infrastructure, healthcare, and dietary demands. The import of motor vehicles highlights reliance on foreign automotive technology, impacting the transportation sector. Plastics, organic chemicals, and oil seeds imports reflect Pakistan’s involvement in manufacturing and agriculture. Overall, these imports underline Pakistan’s reliance on global markets, influencing economic policies and developmental paths.

5) Trade Mapping:

5.1. Trade Mapping of Pakistan Exports with Sri Lankan Imports

By analysing the trade patterns of Pakistan and Sri Lanka, we can discern several key product categories in which Pakistan has the potential to emerge as a significant export player. These categories include plastics, pharmaceuticals, cotton, cereals, manmade staple fibres, vegetables, and natural minerals. This analysis suggests that Pakistan has the opportunity to strengthen its export presence in these sectors.

5.2. Trade Mapping of Sri Lankan Exports with Pakistan Imports

The following table shows the Top 20 exports of Sri Lanka and Imports of Pakistan by volume. The trade volume of the products that are highlighted in green shows the volume of Sri Lanka’s exports and Pakistan’s imports. Highlighted products show the high potential for Sri Lanka to emerge as an export player for the Pakistani market. The categories involved are Coffee and Spices, Electrical Machinery, Oil and mineral Fuels, Industrial Machinery, Chemical Rate, Fats and oils, and Motor Vehicles and parts. The following table of trade maps shows that Sri Lanka can strengthen its export presence in these sectors.

5.3. Promising Products for Pakistan

When examining the trade data between Pakistan and Sri Lanka, there are specific products where Pakistan’s exports are currently quite low, while Sri Lanka has substantial imports in these categories. This situation suggests that Pakistan has the potential to significantly boost its exports in these product categories, addressing the existing trade gap. Some of these promising products include cork, nickel, fertilizers, tin, other base metals, photographic materials, railway equipment, silk, wood pulp, apparel accessories, clocks & watches, wool, and base metal articles. Focusing on the export expansion of these products could lead to a more balanced trade relationship between the two countries and contribute to Pakistan’s export growth

5.4. Promising Products for Sri Lanka

The table shows the highest volume of imports from Pakistan with the lowest volume of exports for Sri Lanka. The purpose of this table is to suggest to the Sri Lankan customs department that these categories are hot avenues of exports for Sri Lanka. By working on these products’ Sri Lanka can attain an increase in their export chunk while also building ties with Pakistan

6) Mapping the Sri Lanka’s Top Imports with Gujranwala
Business Centre (GBC) Sectors:

The linkage between Sri Lanka’s top imports and Gujranwala Business Centre (GBC) sectors highlights significant synergies. GBC’s prowess in Rice and agro Processing, Textile and apparel, and Metal Processing directly aligns with Sri Lanka’s high demand for cereals, knitted fabrics, and iron & steel. Similarly, GBC’s strength in areas such as Ceramics, Plastic Products, and Home Appliances matches Sri Lanka’s import patterns for ceramic products, plastics, and electrical machinery. This compatibility emphasizes clear avenues for GBC to capitalize on, potentially leading to a stronger export footprint in the Sri Lankan market.

6.1. GBC Sectorial and Product Mapping with Free Trade Agreement (FTA) with
Sri Lanka

7) Recommendations:

Based on a detailed analysis of Sri Lanka’s top imports and Gujranwala’s business sectors, I’d like to provide strategic recommendations to enhance GBC’s export footprint in Sri Lanka:

Rice & Agro Processing:
Given the 100% concession rate for products like Basmati Rice, Fruits, Vegetables, Spices, and Meat Preparations, Pakistan should focus on increasing the production and export of these items. Additionally, exploring new varieties and improving the quality of these products could further boost exports.

Textile & Apparel:
While some products like Silk Yarn, Sacks and Bags, Yarn of Coir, and Wool enjoy a 100% concession rate, others like Shirts, T-Shirts, Carpets, Bed Sheets, and Garments do not. Pakistan could negotiate for more concessions in these areas or focus on value addition and product differentiation to make these products more appealing.

Ceramics:
Most ceramic products enjoy a 100% concession rate, except for Ceramic Sinks and Washbasins. Increasing the production and export of concessionary items and negotiating for concessions on Ceramic Sinks and Washbasins could be beneficial.

Metal Processing:
This sector enjoys a 100% concession rate for most products. Pakistan should leverage this opportunity to increase its exports in this sector.

Home Appliances:
Currently, there are no concessions for home appliances. Pakistan could negotiate for concessions in this sector or focus on producing high-quality, differentiated products to compete in the Sri Lankan market.
9 https://www.commerce.gov.pk/wp-content/uploads/pdf/anx-A-1.pdf
10 https://www.commerce.gov.pk/wp-content/uploads/pdf/anx-A-2.pdf
11 https://www.commerce.gov.pk/wp-content/uploads/pdf/anx-B-3_2.pdf

Steel Security Equipment:
Products in this sector enjoy a 100% concession rate. Increasing production and maintaining high quality could boost exports.

Food Processing:
While most products in this sector enjoy a 100% concession rate, some like Castor Oil, Tung Oil, Sesame Oils, Animal Fats and Oils, Vegetable Fats and Oils, and Sauces do not. Pakistan could negotiate for more concessions or focus on value addition for these products.

Rugs & Carpets:
Only woven carpets enjoy a 100% concession rate. Pakistan could negotiate for concessions on other types of carpets or focus on producing high-quality, differentiated products. Sanitary Fittings, Plastic Products, Pipes and fittings, Pumps and motors, Cutlery and hunting Knives: These sectors currently do not enjoy any concessions. Pakistan could negotiate for concessions or focus on producing high-quality, differentiated products to compete in the Sri Lankan market.