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All the goods and services that are produced domestically but sold abroad are known as

exports. E.g. Pakistan exports cotton, wheat, rice, fruits etc. The exports of Pakistan have mostly

been less than imports, which means that our trade balance has mostly been in deficit. There are

many factors which determine the exports like GDP, inflation rate etc.

There are two types of exports:

i)? àanufactured Goods

ii)? Raw material

There may be certain reasons for a country to export:

i)? The country introduces a new product that is demanded worldwide but produced only

in that specific country.

ii)? Goods produced in a country are of a good quality and are recognized abroad for their

quality.

iii)? Goods produced in that country are horizontally different than those produced in

other countries.

iv)? There may be less competition in international market for that good.

v)? Cost of production is lower than other countries.

vi)? Price paid by foreigners is larger than the domestic buyers.

vii)? Contraction of domestic demand of that good may force the producer to find another

market to sell their product.


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Exports of Pakistan are mainly composed of agricultural products. About 60% of the

exports of Pakistan depend on agriculture which includes cotton, rice, wheat, fruits and

vegetables, guar and guar products etc. Cotton exports include raw cotton, cotton yarn and

finished garments. Pakistan is one of the largest cotton producers in the world.

àost of the trade of Pakistan is with United States (US). In 2006, US imports from

Pakistan had a value of US$ 3.7 million. These imports include the following products:

1.? Cotton apparel & household furnishings «US$2.6 billion (70.6% of Pakistani to U.S.
exports, up 18.6% from 2005)
2.? Cotton cloth & fabrics (threads, cordage) « $351 million (9.6%, down 5.6%)
3.? Other textiles apparel & household furnishings « $138.3 million (3.8%, down 11.6%)
4.? Textile floor coverings including rugs « $122.1 million (3.3%, down 2.1%)
5.? Non-textile apparel & household furnishings « $81.4 million (2.2%, up 7.2%)
6.? Sporting & camping apparel, footwear & gear « $61.2 million (1.7%, up 4.7%)
7.? Other scientific, medical & hospital equipment « $37.9 million (1%, up 10.4%)
8.? Toys, bicycles and other sporting goods « $34.4 million (0.9%, up 16.5%)
9.? Synthetic cloth & fabrics (threads, cordage) « $23.7 million (0.6%, down 39.1%)
10.?Cookware, cutlery, house & garden wares including tools « $21.4 million (0.6%, up
10.2%).1

 2+(0(.

Exports of a country depend on its exchange rate, inflation, foreign direct investment,

terms of trade and G.D.P. however, there are certain other things also which influence the export

1: http://internationaltrade.suite101.com/article.cfm/top_pakistani_exports_imports
activity of a country. E.g. increase in income of other countries, domestic production is cost

effective or domestic goods are cheaper as compared to international market, goods produced are

of a better quality.

3+4
The main objective of conducting this research is to find out the factors on which the

exports really depend and to suggest a policy to improve the balance of payments of Pakistan

which has been in deficit for a decade.

4+5
/+ 0* 

Nimrod Agasha tries to find out the factors which influence the exports of Uganda. He

takes G.D.P, Terms of trade, real exchange rate, foreign direct investment and foreign price level

as independent variables. As a whole, he found that 60% of the variation in exports is due to

G.D.P, FDI and Real exchange rate. Foreign price level, G.D.P of lag year and terms of trade

have a significant and positive effect on export growth rate. The real exchange rate and foreign

direct investment were statistically insignificant on export growth rate.

Helga Kristjansdoltir checks the dependency of exports on G.D.P of two countries i.e.

exporter and importer, the distance between them and factors that restrict trade between both

countries. He found a negative relationship of exports with the distance. G.D.P of both countries

had a positive effect on exports. Helga found that G.D.P and market size of recipient country is

more important.
 According to Nilanjan Banik, there are many factors which influence the exports. They

can be classified as demand side factors and supply side factors. If we look at demand side

factors, we find that most of the exports of LDC¶s are low technology products comprising of

agriculture, leather products etc. these products are price sensitive so firms offering cheaper will

be able to sell more. In this case, exchange rate has a positive effect on exports i.e. depreciation

of local currency leads to an increase in exports. If we see the supply side factors, increase in

exports is an outcome of improved factor productivity. Increase in productivity was mainly

observed in services sector. E.g. labour productivity of India has increased from 3.1% to 4.5% in

the period 1993-99.

Tanzania has implemented a number of trade policies since 1980¶s to increase the export

activity by manufacturing firms but the results were not much impressive. The data shows a little

response. The surveying 83 firms, Louis, Andrew and Oliver found that firms larger in size

export more than the others and larger firms sustain investment than smaller firms. The firms

which sustain investment export more than those firms which are smaller in size and do not

sustain investment. So, we can say that export activities are directly related to sustained

investment.

àacro Figazza says that the factors affecting the export performance can be split into two

components i.e. external and internal factors. External factors are related to market access

conditions and factors affecting import demand. Internal factors refer to supply side conditions.

Supply activity may be affected by location related elements such as access to raw material,

factor costs such as labour and capital etc. access to technology may also be an important

determinant of export performance as it affects the productivity of external sector. It was found

by Fugazza that limitation on access to foreign market is a major contributor to poor export
performance. It was also found that exports may respond to less than proportionally to an

increase in import demand but this is not always true.

Piyaporn Chaichanaran found that internal factors have no positive effect on the export

performance. It was also found that quality of technology, relation with suppliers and customers,

and availability of natural resources and raw material have a positive effect on export

performance. Regarding the external sector, findings show that the economic policy of importing

and exporting country have insignificant effect on export performance. However, economic

factors such as rate of economic growth, inflation and exchange rate of importing and exporting

country have a positive effect on export performance.

&0 +036. +-+
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The variables I have used in my research are as follows:

Exps = f (GDP, INF, EXR, FDI, TOT)

Where:

Exps = exports

GDP = Gross domestic product

INF = Inflation

EXR = Exchange Rate (in terms of US$)

FDI = Foreign Direct Investment

BOP = Balance of payments



7-
8.+.

 There is no Relationship between exports activity and GDP, inflation, exchange rate,

foreign direct investment and terms of trade.

 There is a Relationship between exports activity and GDP, inflation, exchange rate, foreign

direct investment and terms of trade.

.0 88
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6
97

I have used the simple OLS model to test the relationship between exports activity and

GDP, inflation, exchange rate, foreign direct investment and terms of trade. I have taken the

annual data from 1975 to 2006, a data of 32 years, to study the relationship.


 2-+ +06+()+(9.0().*6.

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The results show that there is a significant effect of GDP, inflation and EXR (exchange

rate) on the exports activity in Pakistan. GDP is significant at 1% and inflation and EXR are

significant at 5% level of significance. As it is a double log model hence the coefficients

represent the elasticity of particular variables. GDP is unit elastic to exports and inflation and

EXR are less than unit elastic i.e. 1% change in inflation and EXR will bring 0.15% and 0.21%

change in exports respectively.




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As the results show that GDP has a 100% significant effect on the exports activity, we

should try to increase our GDP and vanish the budget deficit as it is also a hot issue nowadays.

Exchange rate also has a significant effect. We should manage the exchange rate carefully at a

reasonable level so that our goods should be referred in international market as ³more for less´.


 / (.

'? http://www.teachmefinance.com/Financial_Terms/export.html

'? http://www.lse.co.uk/financeglossary.asp?searchTerm=&iArticleID=2213&definition=ex

ports

'? http://en.wikipedia.org/wiki/Export-led_growth

'? http://internationaltrade.suite101.com/article.cfm/top_pakistani_exports_imports

'? Determinants of export growth rate in Uganda By Nimrod Agasha

'? Determinants of exports and foreign direct investment By Helga Kristjansdoltir.

'? India¶s exports: Is the bull runover? By Nilanjan Banik

'? Determinants of Exports and Investment of manufacturing firms in Tanzania By Louis

Granier, Andrew àckay, Oliver àorressey.

'? Export performance and its determinants; demand and supply constraint By àacro

Figazza.

'? Factors affecting export performance in Thailand.

'? Economic Survey of Pakistan 1984-85

'? Economic Survey of Pakistan 1995-96

'? Economic Survey of Pakistan 2005-06

'? World Development Indicators 2008