European Commission (EC) Trade Related Technical Assistance (TRTA)

Programme for Pakistan

Project PAK 75/17C
Distribution: UNRESTRICTED
Report No. ITC/DTSS/BAS/06/419

Trade Policy Consultative

Mechanisms in Pakistan
A national study

Prepared for ITC by

Mehnaz Shiraz
Muhammad Anum Saleem

This study was undertaken on behalf of the International Trade Centre UNCTAD/WTO (ITC). It was co-financed
by the European Union (EU) and ITC as part of a Trade Related Technical Assistance (TRTA) programme with
the Government of Pakistan, executed by ITC. The views expressed in this study can no way be taken to reflect
the official opinion of the EU.

International Trade Centre (UNCTAD/WTO), 2006

Palais des Nations, 1211 Geneva 10, Switzerland
Email: [email protected]
http://www.intracen.org

The designations employed and the presentation of material in this report do not imply the expression of any
opinion whatsoever on the part of the International Trade Centre UNCTAD/WTO (ITC) concerning the legal
status of any country, territory, city or area or of its authorities; the delimitation of the frontiers or boundaries of
any country or territory; or the endorsement of any commercial firm or product.
The International Trade Centre UNCTAD/WTO (ITC) has not formally edited this report.

Contents
Abbreviations .................................................. .............................. v
Executive summary .............................................. .......................... 1
Background to Trade Policy formulation in Pakistan ............. .............. 3
Summary of findings ............................................ .......................... 5
Overview of the Trade Policy consultation mechanism ...........................................5
Stakeholders ...........................................................................................................6
Chambers of Commerce and Industry .............................................................................. 6
Business/manufacturers' associations ............................................................................... 6
Specialized government agencies ..................................................................................... 7
Missions abroad, provinces and international donors ....................................................... 8
Academics ......................................................................................................................... 9
NGOs/NPOs...................................................................................................................... 9
Phases of consultation ............................................................................................9
Inter-ministerial consultation mechanism with relevant Ministries.................................. 9
Large stakeholders meeting in April ............................................................................... 10
Internal consultative meetings at MOC .......................................................................... 10
Decision-making after consultation ....................................................................... 10
Trade Policy flow chart.......................................................................................... 11
Perceptions and themes on the Trade Policy Consultative Mechanism 13
Meaningfulness of the consultative mechanism .................................................... 13
Wider distribution of the invitation to submit comments ............................................... 13
Is there a need for an annual process?............................................................................. 13
Is there a need for a secret document? ............................................................................ 13
Greater dialogue between decision makers and stakeholders ......................................... 13
Justification of policy decisions...................................................................................... 14
A better process for reconciling different views ............................................................. 14
Need for information dissemination and implementation mechanisms.......................... 14
Capacity to understand issues on both sides ........................................................ 14
Technical and systemic issues......................................................................................... 14
Research & development ................................................................................................ 15
Annex A List of people interviewed ........................... ................... 17
Annex B Trade policy making in Pakistan ...................... ............... 19
Annex C Trade policy flow charts ............................. ................... 21

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Abbreviations
APTMA

All Pakistan Textiles Manufacturers Association

CBR

Central Board of Revenue

CSP

Civil Service of Pakistan

EPB

Export Promotion Bureau

EU

European Union

FAP

Farmers Association of Pakistan

FPCCI

Federation of Pakistan Chambers of Commerce and Industry

ITC

International Trade Centre UNCTAD/WTO

LCCI

Lahore Chamber of Commerce and Industry

LUMS

Lahore University of Management Sciences

NUST

National University of Science and Technology

MINFAL

Ministry of Food, Agriculture and Livestock

MOC

Ministry of Commerce

MOIP&SI

Ministry of Industry, Production and Special Initiatives

NGOs

Non governmental organisations

NPOs

Non profit organisations

NTC

National Tariff Commission

NUST

National University of Science and Technology

PPMA

Pakistan Pharmaceutical Manufacturers Association

PTA

Pakistan Tanners Association

SIMAP

Surgical Instrument Manufacturers Association of Pakistan

SMEDA

Small and Medium Enterprise Development Authority

SBP

State Bank of Pakistan

TRTA

Trade Related Technical Assistance

UNCTAD

United Nations Committee on Trade and Development

WTO

World Trade Organisation

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vi

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Executive summary
This national study was commissioned by the International Trade Centre UNCTAD/WTO
(ITC) as part of the European Union (EU) Trade Related Technical Assistance (TRTA)
programme in Pakistan, which is being implemented by ITC. The focus of the study was to
analyze the current Trade Policy consultation mechanisms employed in Pakistan and to gather
views and perceptions from the public and private sectors regarding the effectiveness of this
consultation process.
During the compilation of the study, over 50 interviews were conducted in Islamabad, Lahore,
Faisalabad, Karachi, Sialkot, Quetta and Peshawar. Public sector interviewees included:

Officials at all levels in the Ministry of Commerce (MOC), Ministry of Food,

Agriculture and Livestock (MINFAL), and Ministry of Industries, Production and
Special Initiatives (MOIP&SI), and

Representatives of the National Tariff Commission (NTC), Pakistan's WTO Mission to

Geneva, Export Promotion Bureau (EPB), State Bank of Pakistan (SBP) and Small and
Medium Enterprises Development Authority (SMEDA).

Private sector interviewees included:

Business persons/exporters and industrialists,

Business associations, such as the All Pakistan Textiles Manufacturers Association

(APTMA), Pakistan Pharmaceutical Manufacturers Association (PPMA), and Surgical
Instrument Manufacturers Association of Pakistan (SIMAP),

Farmers associations, such as Farmers Association of Pakistan (FAP),

Chambers of Commerce at Karachi, Lahore, Peshawar, Quetta and Sialkot,

Representatives of academia at the Lahore University of Management Sciences

(LUMS), National University of Science and Technology (NUST), and University
Agriculture, Faisalabad, and

Non-Governmental Organizations (NGOs)/Non Profit Organizations (NPOs), such as

The Network.

During the course of the study, a picture of an extensive and two-tiered process of consultation
emerged. The first tier involves consultation at and within MOC, and between MOC and a
wide range of stakeholders. The second tier involves consultations conducted by the Chambers
of Commerce and Industry, business associations, other ministries and different arms of the
Government such as SMEDA, EPB and Central Board of Revenue (CBR) with their
members or client industry groups. The outputs from the second tier consultations supply
inputs to the first tier. Private sector stakeholders considered the first tier of consultations to be
a one-way flow of information from themselves to the MOC, whereas the second tier was more
of a dialogue, albeit a limited one.
Academia and NGOs/NPOs expressed strong dissatisfaction at not being included in either tier
of the consultation process.

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Perceptions and themes emerging from the interviews in the public and private sector are as
follows:

An overwhelming majority (90%) of public sector interviewees indicated satisfaction

with the meaningfulness and transparency of the Trade Policy consultation process.

In contrast, an overwhelming majority (90%) of private sector interviewees indicated

severe dissatisfaction with the current Trade Policy consultation mechanism. While
some respondents acknowledged some improvement in recent years, private sector
interviewees expressed repeatedly that the current consultation mechanism was
ineffective and the Government, even if it heard their views, always ended up doing
exactly as it pleased. Nearly all private sector interviewees expressed the view that the
current consultation mechanism was not a proper dialogue but a mere rubber stamping
exercise conducted by the Government to give legitimacy to its pre-cooked plans and
policies.

An overwhelming majority of private sector interviewees expressed the view that

powerful vested interests and lobbies influenced the consultation process and the Trade
Policy consultations leaned heavily in favour of these.

A majority of public sector interviewees thought the Government required more

technical expertise in MOC. The private sector unanimously expressed the view that the
Government, and in particular MOC, did not have the in-house technical expertise to
handle Trade Policy formulation in this day and age and this impacted strongly on
quality consultation.

Chambers and business associations continually expressed that the consultations were
meaningless because the secret Trade Policy draft document was never shared with
them before the Trade Policy was finalized. They felt they could not be expected to
comment blind on a document they had not seen and which would be presented to
them as a fait accompli.

A majority of public sector interviewees expressed strong dissatisfaction with the

capacity and commitment of the trade and business associations to perform their
function. A small number of the private sector interviewees agreed with this view.

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Background to Trade Policy formulation in Pakistan

In Pakistan, trade policy is not only, as in most economies, a collection of statements made
from time-to-time by the Government or the sum of the Governments trade-related actions. It
is also a formal document, issued once each year, which authorizes changes in trade
instruments (tariffs, subsidies and the like) that have fiscal impacts and, obviously, impacts on
private interests, including through the revenues arising due to trade protection. The Trade
Policy usually contains a rationale for the proposed changes as well as, possibly, statements on
broader trade matters.
Since Pakistans independence in 1947, a long-established practice has emerged in the
formation of the Trade Policy. The responsibility for formation of the Trade Policy and Import
and Export restrictions lies with the Federal Government, specifically with the Ministry of
Commerce (MOC).
Pakistans Trade Policy has always been guided by the economic and political backdrop of the
time. The current climate of globalization and the WTO has influenced the Trade Policy in the
direction and vision of an export-focused, liberal economy. An overview of the historical
economic perspectives influencing Pakistans Trade Policy is presented at Annex A.

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Summary of findings
Overview of the Trade Policy consultation mechanism
From the interviews conducted in various ministries, in particular MOC as well as other arms
of government and the private sector, a jigsaw emerged of the various pieces of the Trade
Policy consultative mechanism. The picture is one that is viewed differently from the public
vis--vis the private sector points of view.
MOC is responsible for formation of the annual Trade Policy, which is announced in
July/August every year, closely following the announcement of the Federal Budget in June.
MOC does not have a specific cell or commission exclusively in charge of formulation of the
Trade Policy. Through long-established practice, various wings of MOC work together, from
the embryonic stages of formulation through to the final draft of the Trade Policy. The Federal
Secretary and the Minister of Commerce oversee the procedure at various stages. Within
MOC, Section Officers in the Trade Policy Wing, the Joint Secretary (JS) Imports, the JS
Exports, the JS WTO Wing, the Secretary and the Minister of Commerce all play a role in the
Trade Policy formulation and consultative mechanisms.
The informal review of the previous years Trade Policy commences some three months after
the announcement of the policy, in around November/December of the same year. The
Secretary of Commerce holds monthly reviews of the current Trade Policy and the Minister of
Commerce holds quarterly reviews of it. Any gaps, successes and failures in the Trade Policy
are identified for consideration in the next years Trade Policy.
From December/January, MOC issues a letter inviting proposals and comments for the
formulation of the next Trade Policy. This standard letter, issued by a Section Officer in the
Trade Policy Wing of MOC, is widely circulated to selected government agencies and to most
business and industry associations, who may make direct written or face-to-face submissions to
MOC officials in response to the invitation. Some stakeholders also make representations to
officials or the Minister during the year, in addition to their response to the letter of invitation.
The letter is not published in newspapers or advertised on the Internet. Furthermore, it is not
sent to all relevant stakeholders: indeed academia and NGOs/NPOs report they have never
received an invitation from MOC inviting their input into the Trade Policy.
From our interviews we identified six groups of stakeholders, not all of whom were formally
part of MOCs consultative process:
1.

The Chambers of Commerce and Industry,

2.

Business/manufacturers' associations,

3.

Specialized government agencies,

4.

Pakistans Missions abroad, provinces and international donors,

5.

Academics (not consulted during the Trade Policy cycle), and

6.

NGOs/NPOs (not consulted during the Trade Policy cycle).

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We also identified three phases of the consultation process:

1.

Inter-Ministerial consultation with relevant Ministries,

2.

Stakeholders' meeting in April, and

3.

Internal consultations at the MOC.

Stakeholders
Chambers of Commerce and Industry
There are currently 32 such Chambers in Pakistan, affiliated with the Federation of Pakistan
Chambers of Commerce and Industry (FPCCI). The Chambers exist to promote business and
industry, to provide a platform for and to safeguard the interests of the private sector, and to act
as a bridge between the private sector and the government. 1
The Chambers interviewed reported they receive the letter from MOC inviting proposals in
March/April (i.e. three to four months after MOCs consultation process begins) and are given
2-3 weeks to send in their proposals. They report this is too late and too short a time frame.
Nevertheless, a flurry of meetings is triggered on receipt of the letter. Generally, the Lahore
and Karachi Chambers are more active compared to, for example, the Quetta Chamber of
Commerce and Industry.
On receipt of the invitation for proposals, the Chambers issue a circular to their members, via
post and/or e-mail, requesting their input. Following this circular, meetings are held in the subcommittees on relevant issues, as well as individually with different sectors/businesses wishing
to convey their views to MOC. Sometimes contradictory interests appear in the same sector;
for example in the paper sector, there may be a duty- or tariff-related issue directly in
competition between the paper manufacturers and the paper wholesalers. The Chambers collect
and collate all the proposals and forward these to MOC, as well as MOIP&SI and any other
relevant government arm, such as EPB or CBR.
The Chambers make recommendations on those subjects their members agree on more or less
unanimously. For example, the Lahore Chamber of Commerce and Industry (LCCI)
recommended that MOC should consult with the Chambers before entering into any Free
Trade Agreements, a view wholly supported by its members. However, LCCI also reported
that, where there are conflicting interests between different members, it does not filter these
conflicting demands but simply forwards them to MOC for final decision.

Business/manufacturers' associations
There are currently several hundred business/manufacturers' associations in Pakistan. Some 65
of these are deemed2 A class associations, mainly because they represent important exportfocused industries or those more likely to be affected by WTO-oriented policies. Certainly, the
powerful industrial sectors, such as the textiles, leather and sugar associations, are brought into

Currently, the Lahore Chamber of Commerce and Industry (LCCI) has some 12,000 members, composed
of business and manufacturers associations as well as other business entities. The LCCI has 80 subcommittees on areas such as Sales Tax, Imports Policy, WTO, SMES, Cottage Industry, and Textiles etc.
Similarly, the Sialkot Chamber has 6,000 members and 43 sub-committees.

By the Federation of Pakistan Chambers of Commerce & Industry (FPCCI).

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the consultative loop. Other prominent businesspersons and groups who carry huge economic
influence were asked by MOC for their opinion on various trade policy related issues,
including the formulation of the Trade Policy.3
The associations interviewed reported receiving a letter from MOC inviting proposals for the
Trade Policy in April, May or even June. Following receipt of the letter, the associations
consult with their members and hold meetings. As a result of these meetings, the associations
formulate their proposals internally and forward these to MOC or MOIP&SI.
Some business associations receive the invitation for proposals, but at a redundant point in
time. For example, SIMAP receives the letter from MOC in June, some 15-20 days before the
announcement of the Trade Policy4. Some associations say they are never approached for
consultations or invited to make proposals by anyone, including MOC. Furthermore, small and
medium-sized farming enterprises complained of never being consulted at all.5
Some large business associations also initiate consultation with MOC directly, such as the All
Pakistan Textile Mills Association (APTMA) and Pakistan Tanners Association (PTA).
Representing the largest export sectors in Pakistan, APTMA and PTA frequently initiated
dialogue with MOC and were also invited by MOC to discuss different issues throughout the
year, not just during the Trade Policy cycle. APTMA and PTA expressed satisfaction with the
consultation mechanism. However, this satisfaction is in contrast to the dissatisfaction
expressed by other, perhaps less organized or important, business/manufacturers'
associations.
Public sector interviewees were frequently of the opinion that the business/manufacturers'
associations in Pakistan were severely lacking in awareness, capacity and capability to advance
their interests. They pointed out that many proposals from the business sector tended to focus
on narrow and immediate issues, such as sales taxes and utility connection charges, without
taking account of broader or longer-term trade issues or strategy. Government officials felt
strongly that, with such poor awareness and vision coming from the private sector, they had no
choice but to rely on their own knowledge and perception to formulate the best policies in
Pakistan's interests. Some private sector interviewees acquiesced to this view, holding that the
private sector and the business associations needed to have much better awareness and
planning in the current globalized environment in order to meet the challenges of the future
and to strategize accordingly.

Specialized government agencies

Specialized government agencies, including EPB, CBR, SMEDA and SBP, are consulted
during the Trade Policy cycle. It was noted that MOC is moving towards a year-round
consultation with these arms of government, rather than an annual consultation, i.e. their
3

Several private sector stakeholders thought the government placed too much store on the opinions of
these influential businesspeople, who sometimes offered views that benefited their own operations while
causing harm to others.

As is apparent from the Trade Policy flow chart, the Trade Policy proposals are more or less finalized by
May of the year it is announced.

This was despite MINFAL claiming to have broad and comprehensive consultation mechanisms.
Moreover, the farmers interviewed felt strongly that the interests of large landholders and industrialists
(e.g. in the sugar, wheat or cotton industries) would always overshadow those of small landholders or
producers.

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inclusion in the Trade Policy formulation process is in addition to ongoing consultations on

various issues throughout the year, some of which are also relevant to the Trade Policy.
EPB plays a major role assisting MOC in coordinating consultations with
business/manufacturers' associations, as does SMEDA. EPB, in particular, is asked to meet
with business associations referred to it by MOC; EPB offices in all four provinces are looped
in to this task. The EPB is approached by the private sector and also claims to reach out to the
private sector during the Trade Policy cycle. Proposals collected by the EPB are forwarded to
MOC.
CBR is also consulted by MOC throughout the Trade Policy formulation cycle on various
tariff-related issues. SPB may be consulted on or issued directions concerning certain Trade
Policy issues, as is the CBR. It appears that SBP and CBR do not have a significant
consultation role with the private sector, merely referring any queries received to MOC. NTC,
the National Planning Commission and other government departments or authorities are also
consulted.
SMEDA reported it receives a letter from MOIP&SI (its parent department) inviting proposals
around January/February. It is given 2-3 weeks to provide its input, which it considers too
short a time frame. Nevertheless, following receipt of the letter, SMEDA initiates its own
consultative mechanism with the Chambers and business/manufacturers' associations,
respectively.
SMEDA is represented on 27 Chambers across Pakistan. These representatives, as well as
other SMEDA officers, sit with the Chambers sub-committees in special meetings arranged by
SMEDA to collect views on the Trade Policy formulation. Given its mandate, SMEDA pays
special attention to the SME-related committees in the Chambers in order to gather their
specific proposals.
Furthermore, SMEDA sends letters to 134 or so business/manufacturers' associations inviting
their views and proposals for the years Trade Policy formulation. Some associations are
inactive, whereas others, such as those for poultry, cutlery, footwear and fans, are more
aggressive and send in proposals as well as hold meetings with SMEDA. SMEDA collects the
proposals from the Chambers and business associations, sorts out the doable or worthy
from the ridiculous proposals, and forwards them to MOC and MOIP&SI.

Missions abroad, provinces and international donors

Pakistan's Diplomatic Missions in important markets are also formally invited to send
proposals for the Trade Policy. MOC considered that the comments from the Missions
provided important input from Pakistans key export markets into the Trade Policy process.
Pakistan's Mission to the WTO in Geneva also appears to play an important role in providing
its input during the Trade Policy cycle.
Inter-provincial consultative meetings also take place at MOC, commencing some 6 months
prior to the formulation of the Trade Policy. A bottoms-up approach is adopted, with the
meetings progressing to senior level as time progresses. The Secretary and Minister of
Commerce, representatives of other ministries, CBR, SBP, EPB, and Governors and Chief
Secretaries of Provinces are all looped into consultative meetings at various stages.

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Donors and international agencies may also be consulted in the formulation of the Trade
Policy, especially if there are any conditions attached to Pakistan's structural agreements with
the World Bank or the International Monetary Fund.
All proposals gathered end up in MOC for consideration.

Academics
The academics interviewed during the course of this study expressed strong dissatisfaction
with at exclusion from the process of consultation. They pointed out that, throughout the
world, academics and think tanks are looped into consultations and can provide the
Government with excellent research and strategic planning advice. The intellectual capital
existed in academic institutions, such as LUMS, and the Government should tap into this
capital. It was suggested that an endowment or a Chair could be set up specifically for the
Trade Policy or any other agenda set by MOC and the academic institutions could produce
ongoing research and working papers as well as identify the relevant stakeholders and areas of
focus in the rapidly changing global trade environment.
The concept of a partnership between academia and the MOC was stressed, rather than an ad
hoc hiring of academic consultants on a temporary basis.
The importance of government-academic partnerships in the agricultural sector was also
stressed.

NGOs/NPOs
NGOs and NPOs are not consulted during the Trade Policy cycle. A consumers' organization
representative reported that the ultimate effect of trade policies was borne by the consumer, be
these an increase in the prices of agricultural commodities or copyright issues in the computer
industry. It was strongly felt that NGOs should be included in the policy formulation process to
act as a check and balance in, for example, citizens' rights regarding fair trading practices.

Phases of consultation
The following phases were identified in the Trade Policy consultation process. However, it
should be noted that, although distinct, the phases do not take place on a precisely run time
schedule. Many consultations during these phases may take place simultaneously and in
tandem.

Inter-ministerial consultation mechanism with relevant Ministries

Several government Ministries are formally asked by MOC to provide proposals for the Trade
Policy, including, particularly, MOC, MOIP&SI, MINFAL, Ministry of Finance, Ministry of
Communications, Ministry of Science & Technology, Ministry of Narcotics Control, and other
relevant trade related ministries. Deciding which Ministry is relevant to the Trade Policy
inter-ministerial consultation appears to be at the discretion of MOC. None of our interviewees
suggested changes in the breadth of these consultations.
When the request for proposals reaches the concerned Ministries, certain mechanisms are
triggered. MOIP&SI reported that it consults regularly with relevant stakeholders within its
scope, such as the engineering sector, services sector, and Intellectual Property (IP) and
pharmaceutical-related sectors. MOIP&SI sends letters to its stakeholders, including the

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Chambers of Commerce and SMEDA, asking for their proposals on the Trade Policy being
formed. Any proposals received by it are forwarded to MOC. Separate interviews with
SMEDA and the Chambers confirmed the receipt of this letter from MOIP&SI.
MINFAL reported that it consults with farmers organizations on a nation-wide basis. The
National Standing Committee on Agriculture (where Parliamentary representatives are present)
takes views from farmers, ginners, livestock breeders and sellers. It holds discussions and
seminars on seeds-related issues vis--vis the Agreement on Trade Related Intellectual
Property Rights (TRIPs). MINFAL officials reported these consultations take place throughout
the year, but extra meetings are held during the Trade Policy formulation cycle and proposals
formed are reported back to MOC.

Large stakeholders meeting in April

Central to MOCs efforts at Trade Policy consultation is a large stakeholders' meeting held
annually in April in Islamabad. The purpose of the meeting is to discuss proposals received or
put forward by private sector stakeholders either before or during the course of this meeting.
Interviewees from both the public and private sectors reported varying numbers (between 200490 people) attending this meeting. Senior officials from all relevant ministries, such as
MINFAL and MOIP&SI, the Minister and Federal Secretary of Commerce, representatives of
the Provinces, as well as various business associations and other stakeholders, are all invited
and attend. Stakeholders attending give PowerPoint presentations and/or put forward verbal
and written proposals. MOC officials collect these proposals for review.
Interviewees from both the public and private sectors confirmed that this meeting has recently
become a feature in the consultation mechanism for the Trade Policy. Some private sector
interviewees had reservations about the efficacy of such a meeting, pointing out that the
problems and proposals of hundreds of people could not be effectively discussed in one day.
They thought it better to have focused, sector-wide discussions in a series of meetings with
MOC, rather than one big meeting. Private sector interviewees reported strong dissatisfaction
with the effectiveness of this meeting as a consultation tool.

Internal consultative meetings at MOC

Various private sector stakeholders also approach MOC throughout the year. MOC also
reportedly invites private stakeholders, such as APTMA, for consultation on various issues.
Therefore, a set of consultations also takes place internally at MOC with some private sector
stakeholders in tandem with the Trade Policy formulation process. The scope of these
consultations is unclear. However, it does appear that the bigger players are better able to have
dialogue with MOC due to these meetings.

Decision-making after consultation

From the interviews, it is clear that an extensive set of consultative meetings take place prior to
the announcement of the Trade Policy. The proposals collected in various ways all end up, in
one way or another, at MOC.
Around April, the Trade Policy is still in a matrix form at the MOC. There is no written text
at this stage. However, final brainstorming sessions start to take place at meetings held by
MOC between senior officials, the Joint Secretaries and the Secretary of Commerce, as well as
officials from other relevant ministries, the CBR, EPB, SBP, and the Provinces.

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There may be contradictory interests emanating from the same sector, e.g. the gemstone and
gold manufacturers may disagree over a subsidy in the jewellery sector, the prawn farmers and
prawn net producers may have a contradictory duty issue in the fisheries sector, and so on.
These, too, are debated in various cross-sector meetings convened by MOC.
The ultimate decision as to which proposal to accept or decline for inclusion in the Trade
Policy rests with MOC. Final decisions are taken after a flurry of long, high level meetings,
involving the Minister and Secretary of Commerce, Joint Secretary (JS) Trade Policy, JS
Imports, JS WTO Wing and other MOC officials, as well as inter-ministerial representatives,
inter-provincial representatives, EPB, CBR, and certain private sector representatives, such as
textile or sugar, or those able to plead a strong case to the Government.
In May, the matrix is replaced by the first text draft of the Trade Policy. This is a secret
document not available for comment by the public. The private sector expressed strong
reservations about this secrecy. The Chambers and business associations felt they could not be
expected to comment blind on a document that they had not seen and that would be presented
to them as a fait accompli.
Nevertheless, around May/June, the Prime Minister views the draft Trade Policy and calls
various meetings with stakeholders, including inter-ministerial representatives, provincial
representatives, private sector representatives, CBR and EPB.
Finally, the Trade Policy is presented to the Cabinet in July at a cooked stage. Any
amendments proposed by the Cabinet are added, around 10,000 copies of the Trade Policy are
printed, and the Minister of Commerce announces it on the same day. The Trade Policy is
translated into the Import Policy Order and the Export Policy Order of the year and becomes
legally effective and binding.

Trade Policy flow chart

Detailed flow charts of the Trade Policy consultation mechanism are set out at Annex B.

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Perceptions and themes on the Trade Policy

Consultative Mechanism
Meaningfulness of the consultative mechanism
All public sector interviewees expressed satisfaction with the meaningfulness of the Trade
Policy consultative mechanism, whereas an overwhelming majority (90%) of private sector
interviewees expressed dissatisfaction with it. The private sector felt they were not adequately
looped into the consultation process. Moreover, they felt that, even if their voices were heard,
their views were not generally included in the final Trade Policy document and the
Government gave no reasons for this.

Wider distribution of the invitation to submit comments

The interviews suggested that MOCs letter inviting comments and proposals for the formation
of the Trade Policy should be more widely distributed. Some stakeholders, such as academia
and NGOs/NPOs, never receive this letter and are left out of the process entirely. Equally,
some business associations and other stakeholders reported receiving the letter in March/April
or even June clearly not in time to make a meaningful input to the process.

Is there a need for an annual process?

Comments from the private sector suggested that an annual Trade Policy was not needed;
indeed, very few countries in the world followed this route. Some interviewees thought that
such an annual process resulted in uncertainty and a lack of cohesiveness in the Government's
policy-making. They stressed that what was really required was a clear, precise and consistent
trade policy direction rather than a formal document published every year. Rather than having
an annual Trade Policy document, the Government ought to create a trade-facilitating
environment whereby consistency of policy was ensured.

Is there a need for a secret document?

Several private sector stakeholders objected to the secrecy of the Trade Policy document.
One recurring view was that the Government expected stakeholders to comment blind.
Instead, they felt the Government should submit a draft of the Trade Policy to stakeholders and
provide a reasonable time frame for them to comment on the proposals set out in the draft.
Private sector stakeholders also commented in this context that the Government did not
provide stakeholders with sufficient information on trade policy issues, e.g. on issues such as
the Government's negotiating position in various Free Trade Agreements, for them to respond
with wholesome, well-informed comment. They stressed that such secrecy was unnecessary
and even damaging in the present global trading environment.

Greater dialogue between decision makers and stakeholders

The interviews indicated a need for more two-way dialogue between the decision makers (i.e.
the Government) and stakeholders. Many private sector interviewees expressed great
frustration at sending their views through their Chamber or business association, then seeing
no steps taken on their suggestion by the eventual decision makers, i.e. MOC. Although MOC
itself claims to be an open-door ministry, many stakeholders felt a lack of direct

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communication with it. They would like representatives from MOC to share information with
them, hear their views and be able to justify the policy decisions it takes.

Justification of policy decisions

A vast majority of private sector interviewees were frustrated that, even when they had
expressed their views to MOC, whether directly or through their association/Chamber, none of
their suggestions were actually taken into account when the Trade Policy document was made
public. Many interviewees were very dissatisfied with the lack of transparency with which the
final decisions were made. Almost all private sector interviewees considered that vested
interests lay at the root of some trade policy decisions made by the Government and expressed
strong dissatisfaction with this situation.

A better process for reconciling different views

During the consultative process, the Government was at times faced with contradictory views
and interests emanating from the same sector or even cross-sector. Some interviewees wished
to see more focused, consultative meetings conducted on a sector-wide basis, in an open,
transparent and well-publicized way. Some interviewees thought the one-day consultative
meeting held by MOC in April was simply not enough to constructively and fruitfully
understand the proposals and resolve the differing opinions of the entire business community
of Pakistan. They felt MOC should instead hold smaller, more focused, sector-based,
stakeholders-government meetings, so that professional and constructive discussions could
take place in an open and transparent manner.

Need for information dissemination and implementation mechanisms

Some interviewees pointed out that the proposals contained in the Trade Policy were not
adequately disseminated to the intended beneficiaries. They felt the proposals ought to be
widely published and advertised, including the details or incentives, funding and operating
mechanisms, etc, so that the intended benefits can be properly realised.
Moreover, they pointed out that many of the proposals were not accompanied by appropriate
implementation mechanisms. Even if a beneficiary is aware of a proposal, if the
implementation mechanisms are not in place by the time the Trade Policy is announced, there
can be insufficient time for the benefit to be effectively realised. By the time the bureaucracy
put the implementation mechanisms in place, it was already time for the next year's Trade
Policy and that proposal was already seen as a failure.

Capacity to understand issues on both sides

Technical and systemic issues
Interviewees were asked whether the Government, and in particular MOC, had available to it
the technical expertise required to formulate trade policy in this day and age. Did MOC and
other relevant arms of government have access to the highly qualified international and local
lawyers, economists and trade experts it needed? A large majority (80%) of public sector
respondents thought the technical expertise was not sufficient and needed improvement.
Private sector respondents unanimously agreed that MOC did not have the required technical
expertise and that the bureaucracy was not equipped for the extremely technical trade-related
demands of the day and age.

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Interviewees were also asked if systemic practices in the Civil Service of Pakistan (CSP), such
as the frequent transfer of bureaucrats from one department to another, were a problem as far
as the capacity of relevant ministries and departments to conduct quality consultations.
The 70% of public sector interviewees who responded to this question thought transfers were a
problem, in that they affected the continuity of consultations. If an on-the-job trained
bureaucrat is replaced by a someone fresh who needs to spend 36 months learning the ground
reality and technical issues involved in the particular sector, this must impact on consultations.
Moreover, 100% of private sector respondents thought that frequent transfers in the CSP were
a major source of ineffective and low quality consultative mechanisms. Several cited
international examples, where continuity and a technocratic culture were in force.

Research & development

Interviewees were asked if the government sector, particularly MOC and other relevant
ministries, had adequate research and development (R&D) mechanisms, and whether high
quality, sector-wide studies comparing Pakistans competitiveness, potential and problems
were conducted.
100% of private sector respondents expressed the view that the Governments R&D facilities
and procedures were extremely inadequate and that this added a cost to industry.
None of the academics, think tanks, NPOs and NGOs interviewed were ever invited by MOC
to express their views. All of these respondents thought that a government-academic nexus was
crucial to the formation of strategic trade policy. A recurring opinion expressed by these
respondents was that the Government had not commissioned any institutionalized, permanent,
independent think tanks to assist it as partners in the research and policy planning process.
While ad hoc consultants from IMF or World Bank were looped in sporadically, an
institutionalized set-up of academics and think tanks was an essential missing link in the Trade
Policy formulation and consultative mechanism in Pakistan. Several international examples,
particularly India, EU and US, were quoted.
Asked about similar capability in the private sector, 100% of public sector respondents
expressed the view that business associations were inadequately prepared to undertake R&D in
this area.
50% of private sector respondents agreed that they, too, must build their capacity in this area.
In addition, they felt strongly that their business associations must also build their capacity to
meet the challenges of globalization and be better prepared with adequate supporting
documents and statistics to plead a strong case to the Government when required. A recurring
view expressed was that institutional support from the Government was essential, such as in
China and India, as the private sector could not be expected to take over government-related
responsibilities.

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Annex A List of people interviewed

Public sector
Ministry of Commerce, Islamabad

Syed Asif Shah, Federal Secretary

Ms. Saira Abbas, Director to Minister of Commerce
Mr. Irfan, Assistant Head
Mr. Adnan, Section Officer, Trade Policy Implementation Section
Mr. Ahmed Mukhtar, Section Officer, WTO Wing
Mr. Syed Qasim Ali Shah, National Project Manager, Trade Initiatives from Human
Development Perspective, UNDP (Based at Ministry of Commerce, Islamabad)
Dr. Nadeem ul Haque, Trade Policy Adviser to Government of Pakistan
Ministry of Industries and Production & Special Initiatives (MOIP&SI),
Islamabad

Suleman Ghani, Federal Secretary

Ministry of Food, Agriculture & Livestock (MINFAL), Islamabad

Dr. Waqar Masood Khan, Special Secretary to the Prime Minister, Federal Secretary
Dr. Wajid Peerzada, Chief WTO Wing
National Tariff Commission (NTC), Islamabad

Dr. Faizullah Khilji, Chairman

Pakistans Mission to the WTO, Geneva

Dr. Manzoor Khan, Ambassador

Small & Medium Enterprises Development Board (SMEDA), Lahore

Ms. Aisha Amjad, Assistant Manager Policy Planning

Export Promotion Bureau (EPB), Karachi

Mr. Rafiq Qureshi, Deputy Director

State Bank of Pakistan (SBP), Karachi

Mr. Zaheer Abbas, Assistant Director & Trade Policy Resource Person

Private Sector
Chambers of Commerce

President & Secretary, Chamber of Commerce & Industry, Sialkot

Mr. Misbah-ur-Rehman, President, Lahore Chamber of Commerce & Industry

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Mr. Aftab Vohra, Senior Vice President, Lahore Chamber of Commerce & Industry
Mr. Ghazanfar Bilour, President, and Mr. Muhammad Ayub, Secretary, Sarhad (NWFP)
Chamber of Commerce, Peshawar
Mr. Ishaq Subhani, Director Research, and Seema Khanum, Deputy Secretary, Karachi
Chamber of Commerce & Industry
Mr. Khalid Feroze, former President, Karachi Chamber of Commerce & Industry
Representatives from Quetta Chamber of Commerce
Business / Industry Associations

Mr. Aamer Riaz Bhinder, Chairman, Surgical Instruments Manufacturers Association of

Pakistan (SIMAP), Sialkot
Mr. Anis-ul-Haq, Secretary, All Pakistan Textiles Mills Association (APTMA), Lahore
M. Ibad Khan, Farmer & Member of the Farmers Association of Pakistan (FAP), Lahore
Mr. Mansoor, Chairman, Pakistan Tanners Association (PAT), Lahore
Business people

Akbar Sheikh, CEO, North Star Group (Textiles), Lahore

Mr. Muhammad Zaka-ur-Rehman, CEO, Schazoo Laboratories Private Ltd, Lahore
Mr. Masroor Ahmed Khan, Director, Syed Bhais Private Limited, Lahore
Mr. Tariq Mehmood Sheikh, CEO, Interhom Private Limited, Lahore
Mr. Muhammad Yar Rahi, General Manager, Shakarganj Sugar Mills Private Limited,
Faisalabad
Mr. Khawar Khawaja, CEO, Greys of Sialkot, Sialkot
Mr. Sheikh Imran Kapoor, Managing Partner, IWHA Sports Industries, Sialkot
Mr. Zahid Malik, Director, Malik Sports, Sialkot
Mr. Asim Buksh, Director, J. Karim Buksh Private Limited / Mens Store, Lahore, Karachi,
Islamabad
Academia

Mr. Mansoor Malik, Director General, Intellectual Property Wing, National University of
Science & Technology (NUST), Islamabad
Dr. Ali Cheema, Associate Professor, Lahore University of Management Sciences (LUMS)
Abid Aman Burki, Associate Professor & Director, Centre for Management & Economic
Research, Department of Economics, School of Arts & Sciences, Lahore University of
Management Sciences (LUMS)
Representatives of University of Agriculture, Faisalabad
NGOs / Consultants

Mr. Aziz-ur-Rehman, Director, The Network, Islamabad

Mr. Akhtar Mehmood, Consultant

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Annex B Trade policy making in Pakistan

Historically, Trade Policy in Pakistan has been influenced broadly by the political backdrop
and economic philosophy of the day.6
1947

When Pakistan came into existence in 1947, it was considered the economic
backwater of the Indian sub-continent and its industrial base was nonexistent. All industry-based entities, by stroke of fortune, fell within the new
Indian boundary. Indeed, TIME magazine in 1947 described Pakistan as an
economic wreck.

1947-1958:

While finding its feet, the Governments direction on the Trade Policy
formulation was underpinned by Import Substitution industrialization. High
tariff protection, strict Import Licensing and Foreign Exchange controls
defined the Trade Policy at the time.

1958-1968:

Often referred to as the golden era of Pakistans development. Pakistans

economy grew at phenomenal rates, earning accolades internationally. There
was a re-ordering of the Trade Policy and more liberal policies were
pursued, away from direct control to indirect control and massive support
was given to encourage industrialization.

1968-1977:

An era of nationalization of all basic industry and financial institutions. It is

considered one of the worst phases of Pakistans economic history. The
Trade Policy was underpinned by nationalization and government controls.

1977-1988:

This phase again witnessed economic growth. The Trade Policy focused on
encouragement of industrial enterprise, some industry was denationalized,
economic regulations were eased, and export rebates were introduced.

1988-onward:

The Trade Policy took a definite shift towards liberalizing the economy,
reducing regulatory restrictions, creating an environment for Foreign Direct
Investment, easing restrictions on imports and liberalizing Foreign Exchange
regulations. The World Bank and IMF took a major role in Pakistans
economic affairs and the Trade Policy. With its entry into the WTO in 1995,
Pakistans Trade Policy entered a period of establishing a liberal, exportfocused economy.

Akbar Zaidi, S. Issues in Pakistan's Economy. Second Edition. Oxford University Press, 2005.

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Annex C Trade policy flow charts

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