PAKISTAN INSTITUTE OF TRADE AND

DEVELOPMENT, ISLAMABAD

EXPORT TRENDS IN PAKISTAN-SAUDI ARABIA

TRADE RELATIONS AND FUTURE PROSPECTS

PREPARED BY: PROBATIONARY OFFICERS OF 30TH

SPECIALISED TRAINING PROGRAMME

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 LIST OF MEMBERS

S# Probationer Name

1.
Amna Shabbir

2.
Aqsa Rauf

3.
Arsalan Zahid Khan

4.
Bilal Shahid

5.
Hussain Nawaz Ranjha

6.
Irtaza Ali

7.
Nida Rasheed

8.
Rao Naveed

TABLE OF CONTENTS

INTRODUCTION......................................................................................................................................iv
CURRENT STATUS OF TRADE.............................................................................................................iv
REASONS FOR FLUCTUATIONS IN EXPORTS.................................................................................v
POLICY GUIDELINES FOR EXPORT PROMOTION IN FOLLOWING SECTORS..................vii

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REFERENCES..........................................................................................................................................xiv

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 INTRODUCTION

The Islamic Republic of Pakistan and the Kingdom of Saudi Arabia, over the course of history’ have
forged a distinctive economic and strategic alliance. Their bond, rooted in a tapestry of historical, cultural,
and economic connections, epitomizes the enduring relationship between the two nations. Originating
from the 1951 Friendship Treaty, spanning over 70 years, this alliance transcends mere commercial
dealings. It is nurtured by a shared Islamic faith, cultural kinship, and a profound understanding of each
other's strategic imperatives. Pakistan, with its battle-tested military prowess, stands as a stalwart
guardian of Saudi Arabia's security interests, while the Kingdom serves as a vital economic lifeline for
Pakistan, particularly during times of fiscal strain.

The intricate interplay between these two nations is vividly illustrated in their trade interactions. Over the
decades, their partnership has blossomed into a multifaceted exchange spanning diverse sectors, including
energy, infrastructure, agriculture, and technology. Pakistani exports to Saudi Arabia encompass a wide
array of goods, such as textiles, rice, machinery, foodstuffs, minerals, surgical instruments, sporting
equipment, pharmaceuticals, carpets, and dairy products, fulfilling crucial demands within the Kingdom.
Conversely, Saudi exports to Pakistan primarily consist of crude petroleum and polymers, contributing to
the economic synergy between the two countries. In 2022, Pakistan's exports to Saudi Arabia totalled over
$507 million, led by rice, bovine meat, and spices, while Saudi exports amounted to $4.5 billion,
predominantly comprising crude petroleum and polymers, showcasing a mutually beneficial trade
relationship.

Beyond immediate economic gains, the historical trajectory of Pakistan-Saudi relations encompasses
significant milestones. The landmark visit of Saudi Crown Prince Mohammed bin Salman to Pakistan in
2019 exemplifies the enduring nature of this partnership. Collaborative endeavours such as the $10 billion
refinery and petrochemicals complex in Gwadar underscore the depth of economic cooperation and
shared aspirations for progress and prosperity. Furthermore, the recent visit of Saudi Foreign Minister
Faisal Bin Farhan signals a renewed commitment to enhancing economic ties and fostering mutual
prosperity.

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 CURRENT STATUS OF TRADE

Saudi Arabia stands as the 27th largest export economy globally, boasting exports of $163 billion and
imports of $131 billion in 2016, leading to a favorable trade balance of $31.8 billion. Its GDP in 2016
was $646 billion with a per capita GDP of $54.4k.
In the first half of the current financial year, bilateral trade between Pakistan and Saudi Arabia reached
$2.482 billion, with Pakistan exporting $262.58 million and Saudi Arabia exporting $2.219 billion.
Despite lacking preferential trade agreements, negotiations for a Free Trade Agreement are in their final
stages, following an agreement made in September of the previous year.
From 2015 to 2017, Pakistan’s exports to Saudi Arabia experienced a decline from $431 million to $334
million, marking a percentage change of -23%. Key exports from Pakistan to Saudi Arabia include
cereals, meat, fiber, cotton, and sugar.
Saudi Arabia has made significant investments in Pakistan, with Crown Prince Mohammed bin Salman
concluding deals worth $20 billion in February 2019. This included a $10 billion Aramco oil refinery and
petrochemical complex in Gwadar, Balochistan, alongside potential acquisitions in energy and mining
sectors.
Annual bilateral trade between Saudi Arabia and Pakistan currently stands at an estimated $3 billion, with
ongoing negotiations for a Free Trade Agreement since 2018. The Pakistani government should prioritize
this agreement, while also establishing a working group to identify sectors for Saudi investment, such as
textiles, sports, leather goods, and surgical equipment.
Factors contributing to trade fluctuations include adherence to Saudi Arabian standards for packaging,
health, and halal requirements, along with visa issues for Pakistani businessmen, which can take up to six
weeks for approval. Additionally, Saudi Arabia only allows exports of Pakistani fruits and vegetables
after their season ends, posing challenges due to perishability and Pakistan's limited storage facilities.

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1) Imports from Saudi Arabia – Five Year Trend Analysis

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2) Exports to Saudi Arabia – Five Year Trend Analysis

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viii
 REASONS FOR FLUCTUATIONS IN EXPORTS

1) Export competitiveness of Pakistan is shrinking, while competitors like Bangladesh, India, and
Vietnam are experiencing expansion in export competitiveness.

a) Market share decline: Pakistan's share of global exports has shrunk from 0.18% in 2005 to 0.12%
in 2021. This indicates a stagnant performance while the global market expands.

b) Competitor growth: Meanwhile, Bangladesh's share rose from 0.06% to 0.19%, India's from
0.61% to 1.65%, and Vietnam's from 0.14% to 1.17% during the same period [PIDE]. This
highlights the rapid growth of competitor economies.

c) Case study - textile industry:

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Pakistan's textile industry, traditionally a major export earner, faces challenges like high energy costs,
outdated technology, and a lack of focus on value-added products. In contrast, Bangladesh has invested
heavily in modernizing its textile sector and diversified its offerings, making it a more competitive player.
While, Bangladesh has made significant strides in improving its garment industry's efficiency and
competitiveness. They've invested in infrastructure, worker training, and compliance with international
labor standards, attracting major global brands.

2) Low investment in Research and Development (R&D) at the firm level is a significant factor
hindering Pakistan's export growth.

a) Limited R&D leads to a focus on producing existing products with minimal innovation. This
makes Pakistani exports less competitive in a global market constantly seeking new features and
advancements.
b) Example of Pakistan’s Agriculture Sector: Pakistan's agricultural exports primarily focus on raw
commodities like rice and wheat. Limited R&D hinders efforts to develop new crop varieties,
improve yield, or create processed food products with longer shelf life and higher export
potential.

3) The real exchange rate has also significantly impacted Pakistan's export performance.

a) Impact of overvalued currency:

Reduced Competitiveness: If the Pakistani Rupee is overvalued compared to other currencies,

Pakistani exports become relatively more expensive in the international market. This discourages

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 foreign buyers and makes it harder for Pakistani exporters to compete with producers from
countries with weaker currencies.

b) Example of textile exports: Pakistan's textile industry faces stiff competition from countries like
Bangladesh and Vietnam. If the Rupee is overvalued, Pakistani textile exports become
comparatively more expensive, potentially leading to lost market share to competitors with
weaker currencies.

4) COVID-19 pandemic significantly hindered Pakistan's exports in several ways.

a) Supply chain disruptions: Lockdowns and travel restrictions disrupted global supply chains,
hindering the movement of goods and raw materials. This made it difficult for Pakistani exporters
to source materials and deliver finished products on time, leading to order cancellations and lost
business.

b) Reduced Demand: Lockdowns and economic slowdowns in major importing countries like Saudi
Arabia and Europe caused a decline in global demand for goods. This directly impacted Pakistani
exports, particularly for non-essential items like textiles and garments.

c) Labor Shortages: Factory closures and worker illness due to COVID-19 led to labor shortages in
Pakistan's export-oriented industries. This reduced production capacity and slowed down the
fulfillment of export orders.

POLICY GUIDELINES FOR EXPORT PROMOTION FOR SPECIFIC

PRODUCTS

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Table 1. Pakistan's top ten exports to Saudi Arabia.

Product Product label Value in Value in Value in Value in Value

Code 2018 in 2019 in 2020 in 2021 in in 2022
Millions Million Million Million in
$ $ $ $ Million
$
1006 Rice 66.348 102.766 97.091 85.386 108.406
0201 Meat of bovine 26.036 32.093 29.464 28.723 45.046
animals, fresh or
chilled
0910 Ginger, saffron, 20.632 17.115 23.362 25.078 29.856
turmeric "curcuma",
thyme, bay leaves,
curry and other
spices (excl. pepper
...
6203 Men's or boys' suits, 10.020 10.980 11.631 17.525 23.343
ensembles, jackets,
blazers, trousers, bib
and brace overalls,
breeches
302 Bedlinen, table linen, 12.909 19.152 16.021 22.493 22.883
toilet linen and
kitchen linen of all
types of textile
materials (excl.
6405 Footwear with outer 7.114 11.162 8.534 12.115 17.917
soles of rubber or
plastics, with uppers
other than rubber,
plastics, leather
6306 Tarpaulins, awnings 13.915 18.461 24.421 20.297 17.446
and sunblinds; tents;
sails for boats,
sailboards or
landcraft; camping
5512 Woven fabrics 2.619 7.811 5.646 8.568 15.198
containing >= 85%
synthetic staple
fibres by weight
6101 Men's or boys' .374 2.136 2.561 3.961 11.717
overcoats, car coats,
capes, cloaks,
anoraks, incl. ski
jackets, windcheaters
0204 Meat of sheep or 7.054 16.876 13.505 8.127 10.391
goats, fresh, chilled
or frozen

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Rice

Quarterly:

1. Implement quarterly quality assurance programs to ensure that exported rice meets international
quality standards and certifications required by Saudi Arabia. Conduct regular inspections of rice
processing facilities to maintain hygiene standards and product integrity. The recent backlash
from Russia on recent Pakistan’s consignment of rice is a prime example of fragile quality
assurance programs in which coffin fly was present.
2. Launch quarterly export promotion campaigns targeting key importers in Saudi Arabia through
trade fairs, exhibitions, and digital marketing initiatives. Highlight the unique characteristics and
quality of Pakistani rice to enhance market penetration.

Bi-annually:

1. Conduct bi-annual training programs for rice farmers, processors, and exporters to enhance
technical skills, knowledge of modern farming practices, and post-harvest management
techniques. This improves the overall quality and yield of rice produced for export.
2. Engage in bi-annual trade negotiations with Saudi Arabia to address tariff barriers, non-tariff
measures, and sanitary and phytosanitary (SPS) issues affecting rice exports. Aim to secure
favorable trade agreements that facilitate market access and reduce export costs. In total, 88
regulatory measures are being taken by Saudi Arabia against Pakistan’s exports.

Annually:

1. Allocate annual funding for research and development initiatives aimed at developing high-
yielding rice varieties with superior taste, aroma, and cooking characteristics. Invest in
biotechnology and genetic improvement programs to enhance the competitiveness of Pakistani
rice varieties
2. REAP can collaborate with agricultural research institutions, universities, and private sector
stakeholders to fund R&D projects focused on varietal improvement, post-harvest management,
and sustainable farming practices.

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0201 Meat of Bovine Animals, Fresh or Chilled and 0204 Meat of sheep or goats, fresh, chilled or
frozen

Quarterly:

1. Conduct quarterly livestock health monitoring programs to prevent and control the spread of
diseases among bovine animals. Implement vaccination campaigns and quarantine measures to
maintain the health and quality of livestock destined for export.
2. Abolish undue taxes being extorted from the livestock farmers in animal markets and set up FMD
(Foot & Mouth Disease) free compartments in the province as most of the markets for Pakistan
were closed due to this disease. Pakistan had already reached stage 2 of the FMD control, unless
Pakistan reaches stage 3 and 4, most of the destinations would not open. Without achieving these
stages, Pakistani products could not reach the high-end markets with bigger potential.
3. Establish quarterly traceability systems to track the origin, health status, and movement of bovine
animals throughout the supply chain. Implement electronic identification and documentation
systems to ensure compliance with export regulations.

Biannually:

1. Conduct bi-annual audits of slaughterhouses, processing facilities, and meatpacking plants to

ensure compliance with international quality standards and hygiene regulations. Invest in
infrastructure upgrades and staff training to maintain product integrity.
2. Implement bi-annual feed quality control measures to ensure the safety and nutritional value of
feed provided to bovine animals. Monitor feed ingredients for contaminants, toxins, and
adulterants that could impact meat quality and safety.

Annually:

1. Implement annual genetic improvement programs to enhance the productivity, disease resistance,
and meat quality of bovine breeds raised for export. Invest in selective breeding, genomic
selection, and embryo transfer technologies to optimize breeding outcomes.
2. It is imperative to facilitate The All-Pakistan Meat Exporters and Processors Association
(APMEPA) by putting a ban on slaughtering of female animals and ensure its strict compliance as
it is threatening the future supplies of animals and such a ban should spread all over the country.
3. Setting up quarantine offices at all airports, dry ports and seaports working round the clock.
Increasing the manpower in the quarantine department which plays a pivotal role in meat exports.

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 4. Banning or putting some limitations on the export of animal feed as it is necessary to bring down
the rising cost of the animals. Subsidized energy tariffs for their sector as meat could not be
exported without freezing thus being a major input cost.

Ginger, saffron, turmeric "curcuma", thyme, bay leaves, curry and other spices

Quarterly

1. Implement quarterly quality assurance programs to ensure that exported spices meet international
quality standards and certifications required by Saudi Arabia.
2. Conduct regular inspections of spice processing facilities to maintain hygiene standards and
product integrity.
3. Organize quarterly participation in virtual trade fairs, webinars, and online platforms to showcase
Pakistani spices and facilitate business networking with Saudi Arabian buyers.

Biannually

1. Invest in bi-annual infrastructure development projects to upgrade transportation, storage, and

packaging facilities for efficient export of spices to Saudi Arabia.
2. Focus on improving cold storage facilities and transportation networks to ensure the freshness
and quality of spices during transit.

Anually:

1. Establish an annual Spice Export Promotion Council or Task Force to coordinate export
promotion efforts, resolve industry challenges, and advocate for the interests of spice exporters.
2. Promote value-added spice products such as spice blends, infused oils, and gourmet spice mixes
through targeted marketing campaigns and product differentiation.

Textiles: Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls,
breeches, Bedlinen, table linen, toilet linen and kitchen linen of all types of textile materials,
Footwear with outer soles of rubber or plastics, with uppers other than rubber, plastics, leather,
Tarpaulins, awnings and sunblinds; tents; sails for boats, sailboards or landcraft; camping, Woven
fabrics containing >= 85% synthetic staple fibers by weight, Men's or boys' overcoats, car coats,
capes, cloaks, anoraks, incl. ski jackets, windcheaters

Quarterly:

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 1. Review and rationalize electricity tariffs for industrial consumers, including textile
manufacturers, to ensure they are competitive compared to regional peers.
2. Introduce targeted subsidies or incentive schemes for energy-efficient technologies and renewable
energy adoption in the textile sector to reduce energy costs and enhance competitiveness.
3. Organize quarterly participation in virtual trade fairs, textile exhibitions, and buyer-seller
meetings to showcase Pakistani textile products and facilitate business networking with Saudi
Arabian buyers.

Bi annual:

1. Allocate bi-annual funding for R&D initiatives aimed at innovation and product development in
the textile sector, including the use of sustainable materials, eco-friendly processes, and advanced
manufacturing technologies.
2. Conduct bi-annual training programs and workshops for textile workers, designers, and
entrepreneurs to enhance technical skills, design capabilities, and compliance with export
standards.

Annual:

1. The government of Pakistan can promote sustainable practices and innovation in the textile sector
by offering incentives for eco-friendly production processes, waste management initiatives, and
renewable energy adoption. This includes supporting research and pilot projects focused on
sustainability and encouraging industry-wide adoption of best practices.
2. Foster partnerships between the government and private sector stakeholders to mobilize
investments in energy infrastructure, including power generation, transmission, and distribution
projects, to enhance supply reliability and address energy shortages.

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Table 2. Pakistan's top ten imports from Saudi Arabia.

Product Product label Value in Value in Value in Value in Value in

Code 2018 in 2019 in 2020 in 2021 in 2022 in
million $ million $ million million $ million $
$
2709 Petroleum oils and 1902.032 1402.005 780.201 2126.025 3208.583
oils obtained from
bituminous minerals,
crude
3901 Polymers of 260.824 254.400 262.937 403.355 393.372
ethylene, in primary
forms
3902 Polymers of 328.512 268.109 261.905 336.835 343.271
propylene or of other
olefins, in primary
forms
3105 Mineral or chemical 66 63 35.755 60.089 216.422
fertilisers containing
two or three of the
fertilising elements
nitrogen,
2905 Acyclic alcohols and 221.004 174.505 127.394 221.470 206.115
their halogenated,
sulphonated, nitrated
or nitrosated
derivatives
2902 Cyclic hydrocarbons 201.327 116.558 138.512 170.452 204.136

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2710 Petroleum oils and 119.326 63.739 105.242 57.653 188.376
oils obtained from
bituminous minerals
(excl. crude);
preparations
containing
3817 Mixed alkylbenzenes 19.532 20.322 21.187 84.047 99.616
and mixed
alkylnaphthalenes
produced by the
alkylation of
benzene and
naphthalene
7208 Flat-rolled products 1 2 12 64.543 52.173
of iron or non-alloy
steel. of a width >=
600 mm. hot-rolled.
not clad
2903 Halogenated 9.258 11.472 14.038 45.843 31.189
derivatives of
hydrocarbons

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REFERENCES

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