PRELIMINARY FINDINGS AND INTRODUCTION TO THE CASE STUDY OF PAKISTAN
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1 PRELIMINARY FINDINGS AND INTRODUCTION TO THE CASE STUDY OF PAKISTAN Presented by Dr. Peter Holmes Stakeholder Outreach Workshop Islamabad, Pakistan Tuesday May 16, 2017 and executed by DEVELOPMENT Solutions. Any views expressed are those of the consultant and do not represent an official view of the Mid-term Evaluation European of the EU Union GSP
2 Content Case study approach Trade between Pakistan and the EU Impact of the EU s GSP+ Economy in Pakistan Labour and social rights in Pakistan Environmental protection in Pakistan Human rights in Pakistan Good governance in Pakistan Preliminary conclusions and next steps 1
3 Case study approach Quantitative and qualitative assessment of: Economic impact in particular on economic development Social impact in particular on poverty reduction and distribution of gains Environmental impact Human rights impact Good governance impact Implementation of GSP+ covered international conventions Role GSP+ and its monitoring framework Unintended consequences of GSP+ Stakeholder input and contributions National workshop in Pakistan Interviews and meetings Online Public Consultation 2
4 Evaluation questions To what extent are the objectives of the current GSP on track to be achieved? What has been the impact of the present scheme on developing countries and LDCs? What are the (positive and negative) factors influencing the achievements observed? What unintended consequences, if any, can be linked to the design, implementation, or use of the current GSP? To what extent is the current GSP efficient? To what extent is the current GSP coherent with the EU s relevant policies? To what extent is the current GSP scheme relevant to the development needs which it is intended to address? 3
5 Pakistan-EU trade Since 2014 Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) Main beneficiary of the GSP+ in 2015: 69% of all GSP+ imports to EU High coverage rate: 93% in 2015 EU is the main export destination for Pakistan s exports 40% of global exports in ,000 6,000 5,000 4,000 3,000 2,000 1, Pakistan's total exports to EU (in millions of EU) Share of Pakistan exports to EU in Pakistan total exports Source: ITC TradeMap; Eurostat 40% 35% 30% 25% 20% 15% 10% 5% 0% 4
6 Pakistan-EU trade Over 76% of exports, including textiles and clothing, enter the EU under GSP+ Representing almost 20% of Pakistan's global exports Before GSP+ status, only 2 out of Pakistan s 20 main exports (at HS 2-digit level) had duty-free access to the EU market under Standard GSP Average tariffs of main Pakistan exports GSP+ Standard GSP EBA MFN Ready-made garments 0 % 9.08 % 0 % % Cotton 0 % 5.3 % 0 % 6.35 % Leather 0 % 1.26 % 0 % 5.05 % Man-made staple fibres 0 % 5.15 % 0 % 6.44 % Optical, measuring, medical instruments 0 % 2.01 % 0 % 2.9% 5
7 Pakistan-EU trade Relatively limited export diversification focus on ready made garment (RMG) 1,800 1,600 1,400 1,200 1, RMG exports represented almost 65% of Pakistan s exports to EU in 2016 Other important products include cotton, leather, staple fibres, toys, cereals and optical instruments Other made up textile articles Articles of apparel, knitted or crocheted Articles of leather Toys, games and sports requisites Articles of apparel, not knitted or crocheted. Cotton Man-made staple fibres Cereals Optical, measuring, medical instruments and apparatus Source: EuroStat 6
8 Share of EU market Growth and share of main exports In 2016, RMG and cotton exports increased their export value and share in the EU market ( = imports from Pakistan as percentage of EU imports) Other products maintain a relatively small share in the market i.e. optical and measuring instruments only hold a 0.18% share in the EU market and experienced negative growth over % Optical, measuring, medical instruments 20.00% 15.00% 10.00% 5.00% Cereals Toys, games and sports requisites Man-made staple fibres Articles of leather Cotton Articles of apparel, knitted or crocheted Source: EuroStat 0.00% % % -8.00% 2.00% 12.00% Exports value growth Articles of apparel, not knitted or crocheted. Other made up textile articles 7
9 GSP+ utilisation rate 110% 100% 90% 80% 70% 60% Change in Rules of Origin Revised GSP scheme 50% 40% 30% 20% Other made-up textile articles Cotton Man-made staple fibres Toys Optical, measuring and medical instruments Articles of apparel and clothing accessories, not knitted or crocheted Articles of apparel and clothing accessories, knitted or crocheted Articles of leather Cereals Raw hides and skins Total utilisation rate Source: DG TRADE, European Commission 8
10 Competition with other beneficiaries Pakistan faces direct competition from other GSP beneficiaries Tariff regime Average advalorem tariff for all exports GSP+ 0.01% Standard GSP Vietnam and Sri Lanka (GSP) and Bangladesh and Cambodia (EBA) have steadily increased their exports and share in the EU market over the past years 3.15% EBA 0% EX-GSP 4.7% Variation in Average export growth Country EU market share Pakistan 6.23% 11.67% 0.02% 0.10% Paraguay 7.37% -2.45% 0.00% -0.01% Mongolia -9.90% -0.81% 0.00% 0.00% Vietnam 30.82% 16.60% 0.63% 0.68% India 3.83% 2.20% 0.00% 0.12% Sri Lanka 2.14% 3.29% -0.01% 0.01% Bangladesh 15.87% 14.51% 0.18% 0.31% Cambodia 35.97% 22.17% 0.08% 0.12% Brazil 0.34% -4.04% -0.23% -0.25% Kazakhstan 16.13% % 0.38% -0.67% Malaysia -1.18% 6.79% -0.16% 0.21% 9
11 in million EUR RMG exports and share in EU market 18.00% 16, % 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 14,000 12,000 10,000 8,000 6,000 4,000 2, % Sri Lanka Cambodia Vietnam Pakistan Bangladesh Pakistan share in EU market Bangladesh share in EU market Vietnam share in EU market Cambodia share in EU market Sri Lanka share in EU market 0 Source: International Trade Centre, TradeMap; Eurostat 10
12 IN MILLION USD Economy in Pakistan Constant economic growth over the past decade Average GDP growth at 4.1% per year Projected economic growth at 5.2% in 2017 and 5.5% in 2018 Services main contributor to GDP growth Nearly 55% of value added in 2015 Agriculture second largest contributor to GDP growth 300, % 55% Value added as % of GDP 21% 20% 26% 25% 250, , , ,000 50, Industry Agriculture Services GDP GDP growth Source: World Bank Source: World Bank 11
13 Social conditions in Pakistan Continuous improvement on a variety of social indicators Increasing life expectancy Increasing years of schooling Increasing GNI per capita Reduction in population growth rate Large population which is culturally, economically and socially diverse Complex constitutional setting 18 th Constitutional Amendment gave more power to provincial authorities 80 Life expectancy at birth (in years) 8 Poverty gap at $1.90 a day Pakistan Afghanistan China India Iran Source: World Bank Pakistan China India Iran Source: World Bank 12
14 Social conditions in Pakistan Constitution foresees free and compulsory education for all children 2.6% of total GDP is spent on education in 2015 Increase in private schooling Challenges in access (rural/urban, gender), low completion of primary education and lack of adequate training and teaching materials Well-developed health infrastructure involving a wide variety of actors Challenges in duplication and wastage of resources, high maternal and infant mortality rates and women s health 5 Public spending on education (% GDP) Literacy rate 4 Global average 3 2 Women 1 0 Men Pakistan Afghanistan India Iran Source: World Bank Source: World Bank 13
15 Labour rights in Pakistan Estimated total labour force of approximately 65 million Low female participation rate % Large informal sector 72.6% Considerable efforts to expand and ensure labour rights by federal and provincial governments Labour Policy adopted in 2010 Focus on legal framework, rights of workers and employers, skill development and manpower export Industrial Relations Act adopted in 2012 In context of ILO Conventions No. 87 and No. 98 on freedom of association and right to organise To consolidate and rationalize the legislation on forming trade unions To improve relations between employers and employees Employment by sector, 2013 Services, 35 Industry, 22.8 Agriculture, 42.2 Source: Labour Force Survey 14
16 ILO Conventions on labour rights Pakistan has ratified 36 ILO Conventions, of which 33 are in force Pakistan had already ratified the required ILO Conventions on labour rights Devolution of power to provincial governments through 18 th Constitutional Amendment Largely compliant with the reporting obligations under the Conventions Out of cycle direct request to respond to ITUC and ILO observations on Convention on the Right to Organise and Collective Bargaining 15
17 GSP+ impact on labour and social rights The GSP aims to increase a beneficiary s exports to the EU, thereby contributing to economic growth and sustainable development How has the GSP supported social development in Pakistan? The GSP+ aims to support a beneficiary in its compliance with ILO Conventions on labour rights How has Pakistan s compliance with the ILO Conventions been impacted? What has been the role of the EC s monitoring mechanism in this? RMGs are Pakistan s main export product to the EU What has been the impact of the GSP+ on labour and social rights in the textile sector? What are the unintended consequences of the GSP+ in Pakistan on labour and social rights? 16
18 Environmental protection in Pakistan Geographically diverse area spanning over different altitudes Mountains and glaciers, deserts, riverine, wetlands and long coastline Essential for Pakistan s economic development Pakistan is particularly vulnerable to effects of climate change Prone to natural disasters, i.e. glacial melt, variable monsoons, recurrent floods, sea intrusion, droughts Increased public awareness and governmental action on climate change Continuously reducing CO2 emission Biological and socio-economic processes resulting in degradation Water pollution with coliforms, toxic metals and pesticides Soil and land degradation, especially salinisation Result of expanding urban centres, growing industrial activity, use of chemicals and fertilisers in agriculture and manufacturing 16
19 Environmental protection in Pakistan National Climate Change Policy adopted in 2012 Aims to ensure that climate change is mainstreamed Aims to steer Pakistan towards climate resilient development Framework for Implementation of Climate Change Policy Adaptation and mitigation measures to ensure climate change resilience National Forest Policy adopted in 2015 Aims to expand, protect and ensure sustainable use of national forests and habitats Aims to improve livelihoods and human health in line with national priorities and international agreements Draft Bill on Climate Change published in 2016 To address the effects of climate change To meet obligations under international conventions relating to climate change To establish a Climate Change Authority, Council and Fund 17
20 UN Conventions on environmental protection Pakistan had already ratified the required UN Conventions on environmental protection and climate change Devolution of power to provincial governments through the 18 th Constitutional Amendment Lack of compliance with the reporting requirements under some Conventions Latest annual report for CITES has not been submitted Some older reports for CITES, Basel Convention, Stockholm Convention and Cartagena Protocol are missing Pakistan made efforts to catch up on reporting since 2014 Submitted missing and overdue reports for Basel Convention, Stockholm Convention and Cartagena Protocol 18
21 Environmental impact textile industry Increased production of cotton to meet demand Use of pesticides and fertilisers Leads to soil degradation Inadequate waste management Release of harmful pollutants in air, water and land Use of water for processing textile Bleaching, mixing, washing and cleaning On average 2,000 2,500 gallons per day Only 1 per cent of Pakistan s waste water is treated 19
22 GSP+ impact on environment The GSP aims to increase a beneficiary s exports to the EU, thereby contributing to economic growth and sustainable development How has the GSP supported environmental protection in Pakistan? The GSP+ aims to support a beneficiary in its compliance with UN Conventions on environmental protection and climate change How has Pakistan s compliance with the UN Conventions been impacted? What has been the role of the EC s monitoring mechanism in this? RMGs are Pakistan s main export product to the EU What has been the environmental impact of the GSP+ in the textile sector? What are the unintended consequences of the GSP+ in Pakistan on environmental protection and climate change? 21
23 Human rights in Pakistan Constitution guarantees fundamental human rights, i.e. right to life, liberty and security, freedom of speech, freedom of assembly and freedom of religion Human rights are set in a difficult context, including Large, diverse and poverty stricken society Terrorism and violence targeted at every section of society Lack of awareness of human rights Reported excessive use of capital punishment and death penalty Allowed for terrorism-related cases and for all capital crimes Impeded access to legal aid and procedural appeals Reports of death penalty for children and people with mental health problems and disabilities Reported restricted freedom of expressions Aimed at media outlets, reporters and journalists Restrictions on work of international non-governmental organisations 20
24 Human rights in Pakistan Action Plan for Human Rights adopted in 2016, based on six thematic areas: i. Policy and legal reforms ii. Implementation of key human rights priorities iii. Crosscutting interventions for the protection of human rights iv. Implementation of international and UN treaties v. Establishment and strengthening of national human rights institutions vi. Establishment of an implementation and monitoring mechanism for the Action Plan Government of Pakistan aims to improve the implementation of international and UN treaties on human rights Identifying gaps in domestic legislation Establishing mechanisms to ensure effective implementation 21
25 UN Conventions on human rights Pakistan had already ratified most of the required Conventions on human rights Pakistan ratified the Covenant on Civil and Political Rights and the Convention against Torture in 2010 In 2011, a number of reservations were withdrawn to be eligible for GSP+ Devolution of power to provincial governments through 18 th Constitutional Amendment Largely compliant with the reporting requirements under the Conventions Except for the Report on Convention on the Elimination of All Forms of Discrimination Against Women due in March 2017 Pakistan made efforts to catch up on reporting since 2014 Submitted missing and overdue reports on the Convention on the Elimination of All Forms of Racial Discrimination, the Convention on the Rights of the Child, the Covenant on Economic, Social and Cultural Rights and the Convention against Torture 22
26 GSP+ impact on human rights The GSP aims to increase a beneficiary s exports to the EU, thereby contributing to economic growth and sustainable development How has the GSP supported human rights protection in Pakistan? The GSP+ aims to support a beneficiary in its compliance with UN Conventions on human rights How has Pakistan s compliance with the UN Conventions been impacted? What has been the role of the EC s monitoring mechanism in this? What are the unintended consequences of the GSP+ in Pakistan on human rights? 25
27 Good governance in Pakistan Pakistan ratified the UN Convention against Corruption in 2007 National Accountability Bureau to eradicate corruption and corrupt practices Comprehensive approach to corruption through National Anti-Corruption Strategy Decreasing perception of corruption Pakistan ratified UN Conventions on illegal drugs and substances Single Convention on Narcotic Drugs Convention on Psychotropic Substances Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances Creation of authorities to tackle drug trafficking and use Anti-Narcotics Force Drug Demand Reduction Cell Drug Regulatory Authority 23
28 Preliminary conclusions and next steps The GSP aims to expand exports from developing countries to support poverty eradication, sustainable development and good governance Pakistan has increased its exports to the EU Increased trade can have positive impacts on the economy, social and labour rights, environmental protection and good governance Consistent economic growth Positive developments on social indicators Positive influence on the ratification and implementation of international conventions and compliance with the Conventions reporting requirements Increased trade can also have unintended consequences (negative impact) Certain sectors have detrimental effects on social and labour rights, environmental protection and good governance Next steps: We welcome your input on the impact of the GSP+ in Pakistan Through the workshop, interviews or the Online Public Consultation 24
29 Thank you for your attention! WE WELCOME YOUR INPUT! Contribute to the Online Public Consultation Stay up to date on the evaluation process GSP Evaluation and executed by DEVELOPMENT Solutions. Any views expressed are those of the consultant and do not represent an official view of the Mid-term Evaluation European of the EU Union GSP
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