Are you interested in exporting to Pakistan or importing from there? Or you are a local Pakistani citizen, intending to start an export-import business in Pakistan and curious how to start exporting from Pakistan? Anyway, you must learn about the business environment and export-import opportunities in Pakistan first. Following article will give you an overview and instructions and many export-import business ideas.
1.Overview of Pakistan as Country
Pakistan is a large country in South Asia, with a population of over 205 million people. Pakistan’s population now accounts for 2.62% of the world population. The economy of Pakistan is in the 23rd in the term of PPP ( purchasing power parity)
Pakistan is ranked 6th in the world in the population rankings of countries and territories. The population density of Pakistan is 267 people / km2 amongst a total land area of 770,998 km2.
If you want to export to Pakistan, then you can consider, that Pakistan’s market presents a great demand for all imports related to agricultural products, consumer goods and also machinery and raw materials.
Pakistan consumers are not very choosy regarding the quality of the goods. A lot of goods has a great opportunity to enter to Pakistan’s market. Most Pakistani consumers have relatively low incomes, so when shopping, they often care about prices when making purchasing decisions.
1.1.Pakistans potential as a target export market
Currently, Pakistan is in great demand for various commodities, in fields such as electricity, electrical appliances, machinery, household appliances, agro, forestry, seafood.
When starting exporting to Pakistan, then one idea is to target the retail market companies. Pakistan’s retail industry is underdeveloped, based mainly on private ownership.
In Pakistan, there are many shops selling a variety of goods, such as garments, tires, mechanical goods. These stores are often located close to each other and concentrated in markets in big cities.
Foreign businesses that want to promote their products and sell to these Pakistani retailers, often choose to use the services of domestic agents, distributors or develop their own distribution network.
These agents work on a fixed commission, which can range from 10% for equipment and factory purchases, 15-20% for spare parts. Agency commission may be charged at FOB, Ex-factory, or CIF rates depending on the agreement.
Some dealers want the seller to give them the original price and they will add commission to the final sale price. Some other agents act as consultants and receive consulting fees.
Local distributors usually sign exclusive contracts with foreign manufacturers or suppliers. Regarding the payment mechanism, advance payments for the foreign suppliers is highly recommended.
Due to the limited information of the market and because the political situation in Pakistan is still unstable, if you export to Pakistan, firstly you need to check carefully the basic information about the Pakistani partner company. Check their financial situation, business owners, all should be investigated by the local reliable Investigation Office.
Warning when exporting to Pakistan!!!
You should note that when the transaction has been made, sometimes it does not ensure the shipping through intermediaries arrive to your Pakistani importer.
For example: In the past, there was an enterprise A. They signed a contract to export rosin to Pakistan, paid in US dollars. This business hired Iranian cargo to move goods to Pakistan. However, when the Pakistani business made payment procedures via bank, the delivery documents were blocked by the US government on the grounds that Iran was embargoed.
Learn more about risks in Exim business: Risks in export-import business and how to overcome these.
1.2.What are Pakistan’s main import products
So, you are curious, how to export to Pakistan? All start from knowing, what kinds of items are in demand in Pakistani market.
The top import sources of Pakistan are China, the United Arab Emirates, Saudi Arabia, Indonesia, and Japan.
Pakistan’s largest imports from China: Cotton, cotton yarn, dyes, chemicals, plastic materials, water means, automobile tires, alloy steel, textile machinery, seeds, plasma, fibers synthetic, flavoring, peanuts, pesticides, molds, washing powder, tea, pharmaceuticals, synthetic rubbers, animal fats, petroleum, dried vegetables.
Pakistan is a major importer of cotton raw material in the world, this demand stems from the selection of high-quality raw material products for export production.
Pakistan banned the import of the following items
- Goods contrary to Islam
- Dyes made from benzidine or containing benzidine
- Hazardous waste
- Alcohol and alcoholic beverages, including sediments and waste from distillation and winemaking
- Factory waste and liquidation or junk goods do not qualify
- Firecrackers, fur, skins, waste, and scrap of polyethylene and polypropylene, retread tires, used pneumatic tires
- Items imported from India are restricted and are only allowed to be specified under Pakistan’s Rules of Procedure and Import.
Pakistan regulates restrictions on imports of some goods, meaning that they can only be imported if they meet certain conditions set by Pakistan. Most import-restricted items require a certificate or an approval in advance from the relevant Pakistani regulatory authority.
Below is a list of main restricted import goods
- Tobacco products
- Instruments and radioactive materials
- Breed term
- Calcium carbide
- Asbestos (asbestos)
- Food colorings
*Wheat is only imported through public sector entities.
*The materials used to produce pesticides are only imported by industry users.
Importing calcium carbide requires prior approval from the Pakistan Department of Explosives.
Importing refurbished cylinders (cylinders used to extract or liquefy gas) used in motor vehicles requires certification of the Pakistan Explosives Division. Weapons and ammunition, if not on the prohibited list, belong to the Ministry of Commerce of Pakistan.
If you start importing into Pakistan, pay very close attention to the export-import documentations and procedures, all must be correct.
Because Pakistan is Next to India.
2.What are main export products of Pakistan
Before you learn how to export from Pakistan, first you need to know, what are the products and product categories which can be exported from Pakistan.
Pakistan main exports are: Rice, mangoes, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, veterinary surgical supplies, sports goods, cutlery, surgical instruments, electrical appliances, software, carpets, rugs, ice cream, livestock meat, chicken, powdered milk, wheat, seafood , vegetables, processed food items, defense equipment (submarines, tanks, radars), salt, onyx, engineering goods, and many other items.
Some Pakistan export statistics: In February 2018, textile production increased by 0.13%, coal and petroleum increased by 16.28%, pharmaceuticals by 49.27%, non-metallic minerals by 11.13%, cars by 7.99%. , iron and steel increased by 12.60%, electronics decreased by 1.17%, paper products rose by 1.69%, Products related to mechanical engineering rose by 1.71%, rubber by 8.34%, food and beverage and tobacco by 1, 51%, chemicals down 5.00%, fertilizers down 7.36%, leather products down 21.62%, wood down 56.39%.
Pakistan’s top 5 export products
Below are Pakistani top 5 export products, which are globally associated with Pakistan.
Pakistan is the fourth largest cotton producer in the world, ranking third in raw material consumption and the largest cotton yarn exporter.
Cotton is Pakistan’s main industrial crop, accounting for 15% of the country’s arable land. Cotton production is concentrated in two provinces: Punjab and Sindh.
The main export items include raw cotton, cotton yarn, fabrics, clothing, and some other cotton products.
Pakistan produces over 11 million bales of cotton every year. Cotton is rolled domestically and spun by a stable spinning industry.
The main countries importing cotton and cotton products from Pakistan are the US, EU, China, Bangladesh, Vietnam etc
2.Knit or crochet clothing and accessories
The annual global export turnover from Pakistan is only about 20 billion USD but the export of knitwear only reached 2.719 billion USD in the fiscal year 2017-2018, including knitted products such as tops with caps, shirts, t-shirt, jersey, pullovers, jackets etc.
This is due to export support policies and efforts towards better market access. Positive trends in international demand and exchange rate adjustments are also expected to help sustain this emerging trend in the coming months.
Pakistan is forecast to export 4 million tons in 2020, amid increased production to make up for early fall inventories. Pakistan usually exports white rice and some fragrant basmati rice, competing mainly with India.
The main consumption markets are Africa, the Middle East, Singapore, Kenya. China is one of Pakistan’s largest non-basmati rice importers.
Pakistan is one of the largest sugar producers in the world. However, the sugar industry in Pakistan is completely dependent on cane production, although sugar in the northern region is made from sugar beets.
Sugarcane plantations in Pakistan provide jobs for 4 million people each season, accounting for 12.14% of the total agricultural labor force in the country.
Pakistan is the country with the largest salt mines in the world with an estimated reserve of about 10 billion tons at three mines, where the rock hard rock mine in Khewra in Jhelum district has reserves of more than 6,687 billion tons. The other two mines are Warcha and Kalabagh.
Not only meeting the domestic demand for salt from the Khewra field, Pakistan also exports salt to India from 10,000 to 18,000 tons per year. This generates a foreign currency revenue for this country.
In addition, Pakistan is a country rich in natural resources, including precious metals such as gold, iron, silver, copper, and oil.
Pakistan’s largest export markets are: the United States, Germany, China, the United Kingdom and Afghanistan.
Pakistan’s largest exports to India: dried dates, cement, leather, petroleum, kaolin, medical instruments, scrap iron and steel.
3.How to start exporting business in Pakistan
1.Establish an exporting company
Export from Pakistan can be done only if you have an Exim company. Export companies may be established in Pakistan in the form of sole monopolies, associates, or limited liability or public companies.
Foreign investors usually set up a limited liability company in Pakistan under the Corporate Law of 1984, and need to register with the Securities and Exchange Commission.
There are also some other forms such as franchising, joint ventures, etc.
We also suggest, before starting a venture, to conclude an export business plan.
2.Become a priority exporter
As a rule, an exporter is recognized as a priority exporter when it operates in Pakistan and regularly has export or import activities.
You can only apply for a priority exporter when you have a company established.
To facilitate priority exporter, according to the guidance of the World Customs, Pakistan Customs is preparing a comprehensive plan to facilitate the clearance of goods.
Priority exporter must provide all details related to their business to receive this incentive. Customs will look up details such as: Profile of the company, bank account, number of employees and information of foreign partners.
Benefits for priority exporter
Priority exporter will receive a lot of preferential clearances in customs without any inspection.
Priority exporter can receive goods directly from the port to the manufacturing shop without having to go through the hassle of customs procedures, after completing the essential procedures.
Customs will issue access cards to priority businesses upon entry without any hassle through Customs, railway stations, offshore terminals and dry ports. It will also ensure quick completion of cases / investigations within 6 to 9 months and a 50% reduction in the required bank guarantee.
One of the biggest advantages for the priority exporter is that there will be a separate support point by the designated officials who will be responsible for solving the legitimate issues of the business.
3.Building relationship and communication
Exporting from Pakistan start from marketing and relations creation, globally.
3rd party referrals are necessary in establishing export business relationships. Pakistanis themselves like to work with people they know and trust and they will spend time building more relationships to get to know you better. Pakistanis like to work directly, face to face. They do not like to work over the phone.
4.Use export intermediaries services
Sometimes setting up a formal business can be a hassle. In this case, we recommend using third party services.
The advantage of an intermediary service is to help you package your import and export business licenses.
There are many services which offer it. You can choose the one which is cost-effective and efficient.
They must be responsible for compensation if they have done something wrong or something not required.
They provide free consultation on the initial procedures that businesses need to do, the rules of accounting, invoices of legal documents, laws related to tax laws in business. Supporting accounting services for businesses.
5. Marketing and sales
In your business, there is only one thing that brings in revenue. This is marketing and sales! Prepare professional websites, brochures. Attend or visit international expos and of course business visits and direct callings, mailings.
You should put a constant focus on marketing and sales, as the results from this won’t usually come immediately, but it can take even 6 months when you see the first results as an orders. Marketing and sales for export-import company is crucial for survival.
4.How to import into Pakistan
The one who wants to import into Pakistan must pay attention to the import-export documentation. Also one must follow Pakistan’s traditional customs clearance system (which is considered cumbersome, time-consuming and costly) with the following steps:
A). Follow traditional Pakistani custom rules & procedures
1. Receiving a set of documents from customers
2. Customers filling information about goods at the time point of arrival at the port of destination or if in urgent need, information on the goods shall be filled in the customs declaration prior to the arrival of the goods in accordance with Article 79 of the Pakistani Customs Code.
3. Complete the customs declaration according to inspection procedures, either common or automatic customs clearance. Both procedures are equally applicable.
4. Request to check the Bank draft upon receipt of the import declaration for the goods
5. Collection of bank draft and the original set of shipping documents from the customer
6. Upon receipt of all the above documents, the goods will be subject to import duties and will be withdrawn from the relevant delivery agent.
7. The goods will be released after a few days
Import export documentation in Pakistan
The set of export and import documents prescribed by Pakistan includes bill of lading, invoice, packing list, certificate of origin, copy of the letter of credit, certificate of insurance.
Bill of landing
You will need 3 copies of the bill. The invoice must be signed by the manufacturer or owner of the ship and must include the name of the consignee and the ship transporting the goods, the packaging description and number, the serial number or other identifying information, the value of the goods at C&F prices (shipping cost is stated separately) and the origin of goods. In the case of bulk cargoes or goods traded under generic names, the invoice will give the name for the imported product.
Not required, but for convenience of goods clearance.
Certificate of origin
Although it is not legally required, the importer or the importer’s bank usually requires a certificate of origin. If this document is not available, the origin of the goods must be stated on the invoice.
The importer must pay insurance through an insurance company registered in Pakistan.
Recently, Pakistan has changed its customs clearance system from traditional to online (PACCS), with specific steps:
B). Follow online custom procedures
1. Receive a set of documents from customers
2. Fill in the cargo manifest online based on the set of undeclared vouchers or required documents, even if the ship has already arrived at the port or the ship will arrive shortly.
3. Import Declaration (IGM)
4. Shipping lines will need to submit a detailed report of all cargo types on board within 24 hours of arrival
5. Request a bank draft check immediately after submitting an online cargo manifest
6. Collection of draft and original set of documents from customers
7. Upon the receipt of all of the above documents, the customer will be required to pay import taxes and collect orders from the relevant delivery agent
8. Wait until the online declaration information is delivered to the Pakistan Customs Administration
9. Deliveries can be made on the same day
If you want to start an export-import business, then Pakistan presents great business opportunities for both. For the ones who want to start export import business in Pakistan and also for ones who want to export to Pakistan. What is important to know and bear in mind is the fact that Pakistan’s business environment and legislative system is not so transparent yet.
Personal relations and connections are very important in Pakistan and finding a trustworthy partners and customers is key.
Therefore, when starting an import-export business, you need to clearly understand your partner to avoid unfortunate risks. Laws in Pakistan still have many gaps, and it is difficult to refund the lost money.