akistan’s export sector is at a crucial crossroads. For years, its reliance on textiles has shaped the country’s external trade profile, but the global landscape is shifting and Pakistan must adapt or risk stagnation.

With textiles still accounting for a significant portion of total exports, any market fluctuation in demand, pricing, or trade restrictions disproportionately affects national economic stability. The latest trade data highlights the vulnerabilities of this structure.

In FY23, Pakistan’s exports were around $27.7 billion. This showed a notable decline compared to the previous year. While global economic headwinds played a role, a fundamental issue was the country’s failure to diversify its export portfolio both in terms of products and destinations.

The composition of exports has remained largely unchanged for over two decades. Textiles, rice, leather and a few other agricultural commodities dominate the mix. The Higher Education Commission-funded research project titled, A Stitch in Time: Diagnosis of the Declining Export Performance of Pakistan Textile, has extensively analysed this situation and identified structural bottlenecks in both policy and industry dynamics.

While its competitors, such as Bangladesh and Vietnam, have aggressively expanded into high-value textiles and other industrial exports, Pakistan has lagged behind. Research indicates that Bangladesh’s ready-made garment exports have crossed the $38 billion mark, a testament to robust trade policies and ease of doing business. Pakistan, in contrast, has struggled with inefficiencies in trade facilitation, logistics and export promotion strategies.

The destination problem is equally severe. A significant share of Pakistan’s exports goes to just a handful of markets: the United States, China, the European Union, the UAE, and Afghanistan. This over-concentration makes Pakistan highly susceptible to geopolitical shifts and economic downturns in these regions.

The recent slowdown in China’s economy and protectionist policies in Western economies have already signalled potential export decline. Pakistan has failed to tap into non-traditional markets such as Africa, Latin America and the emerging economies of Central Asia. Even within Asia, where regional trade frameworks such as RCEP have gained traction, Pakistan remains a non-participant, missing out on strategic integration opportunities.

Beyond the macro picture, industry-level challenges have also impeded diversification. Evidence suggests that high energy costs, lack of access to credit for SMEs and bureaucratic hurdles in trade regulations are among the frequent barriers.

Surveys indicate that a majority of exporters cite energy costs as a major obstacle. Many mention difficulties in meeting compliance and certification standards for high-value markets. Firms that have attempted to shift towards synthetic textiles, pharmaceuticals or processed food exports struggle with securing consistent regulatory support and investment incentives.

Pakistan needs a bold and structured approach to export diversification, balancing both product and destination strategies. At the product level, high-value manufacturing sectors must be prioritised. The textile sector itself must move beyond basic cotton-based products to synthetic fibres, technical textiles and fashion branding.

Investment in pharmaceutical exports must be scaled up, ensuring that local manufacturers can compete with regional players like India and Bangladesh. Engineering and auto parts industries have latent potential, given Pakistan’s large-scale manufacturing base, but require targeted policy interventions to establish global competitiveness.

Beyond the macro picture, several industry-level challenges have impeded diversification. Evidence suggests that high energy costs, lack of access to credit for SMEs and bureaucratic hurdles in trade regulation are frequent barriers. 

Market diversification must go hand-in-hand with these product shifts. Trade agreements with Africa and Latin America should be actively pursued, leveraging Pakistan’s competitive strengths in agricultural exports and mid-tier manufacturing.

The Central Asian region presents a strategic opportunity. Pakistan must improve its trade connectivity through well-negotiated transport agreements. The China-Pakistan Economic Corridor can play a critical role in this. Greater engagement with Kazakhstan, Uzbekistan and Azerbaijan is needed to fully unlock potential gains.

The implementation roadmap must be multi-tiered, considering short-, medium- and long-term actions. In the short term, export facilitation measures such as digitalising trade procedures, reducing energy costs for exporters and easing SME access to financing must be prioritised.

At the federal level, the Ministry of Commerce and the Trade Development Authority of Pakistan must streamline export documentation and introduce digital platforms that allow exporters to seamlessly access new markets. At the provincial level, industrial zones must be equipped with energy-efficient infrastructure to reduce costs for emerging exporters.

In the medium term, Pakistan must negotiate preferential trade agreements with non-traditional partners. A structured engagement with Africa, backed by export credit insurance schemes, can open up significant trade avenues. Latin American economies such as Brazil and Argentina are big importers of textiles and food products. Pakistan’s share of these markets is negligible. Establishing export promotion offices in these regions is essential. At the industry level, export clustres for pharmaceuticals and engineering goods should be developed in Karachi, Faisalabad and Lahore.

Long-term strategies must be rooted in industrial transformation. Pakistan must shift from being a raw material exporter to a producer of high-end, finished goods. The auto sector’s potential for exporting electric vehicle components should be explored, leveraging emerging global demand.

High-tech exports, including IT-enabled services, must receive sustained investment, ensuring Pakistan competes in the global digital economy. Trade reforms should focus on securing membership in regional economic blocs, ensuring that Pakistan does not remain isolated from major trade partnerships.

Key stakeholders for implementation include the Ministry of Commerce, the TDAP, the Federal Board of Revenue and the State Bank of Pakistan. Industry bodies, such as the All-Pakistan Textile Mills Association and the Pakistan Business Council must be actively engaged in policy formulation, ensuring that private sector perspectives are integrated.

International development partners, including the World Bank and Asian Development Bank, can provide technical assistance and funding for capacity-building programmes aimed at export competitiveness.

Pakistan’s trade policy must be re-oriented toward resilience and growth. Relying on traditional markets and low-value exports will not sustain long-term economic expansion. A structured, evidence-based approach, backed by data-driven policy interventions, is essential.

By embracing a diversified export strategy, Pakistan can enhance economic stability, create high-value jobs and establish itself as a formidable player in global trade.

Ahad Nazir is an associate research fellow at the Sustainable Development Ppolicy Institute.

Dr Amjad Masood is a senior assistant professor at Bahria University.

The authors can be reached at ahad@sdpi.org. The article doesn’t necessarily represent the views of their organisations.