Empirical analysis of export promotion in Pakistan, 1959-77

The present study provides an empirical analysis of export promotion in Pakistan over the period 1959-60 to 1976-77, developing and extending the methods used for other countries by the NBER. The Export Bonus Scheme and the Export Performance Licensing Scheme are discussed in respect of their institutional framework, rate structure, scope and coverage, premia and other important features. The rebates of import duties paid on inputs used in the production of exports and the exemption of exports from indirect taxes are also discussed. The Effective Exchange Rates (EERs) for exports taking into account the export subsidies involved in these Schemes and the export taxes where applicable, are calculated for a large number of commodity groups as well as for the manufacturing and primary sectors. Both nominal and real EERs are examined in detail. The extent of discrimination against the exports of the primary sector implied by the lower EERs afforded to them is determined, and its effects on the growth of the economy and on export performance are outlined. It is found that this discrimination has fallen, on average, by about 23 per cent during the period after the devaluation of 1972 compared with that during the pre-devaluation period. The pricelevel- deflated-EERs (PLD-EERs) in Pakistan are compared with the PLD-EERs in some other developing countries for the period 1960-61 to 1970-71. A statistical analysis of the exports of the manufacturing and primary sectors as well as of a wide range of commodity groups is undertaken to determine the relationship between export performance and the EERs. On the premise of the relative unimportance of Pakistan's exports in total world exports, a single-equation model is estimated. The partial adjustment model is also estimated to take account of the lag structure. It is found that the EERs have been a significant determinant of exports, particularly of manufactures, from Pakistan during the period studied. Moreover, during this period, the growth of the manufacturing sector has been export-biased, while the growth of the primary sector has been biased against exports