Pakistan's export performance and trade potential in central Asian region: Analysis based on constant market share (CMS) and stochastic frontier gravity model

Abstract

By using statistical tools of revealed comparative advantage, trade complementarity, constant market share, and stochastic frontier gravity model, this study inspects the export performance and trade potential of Pakistan in the Central Asian region. The range of the study is from 2003 to 2017. The study finds that Pakistan has the highest comparative advantage in pharmaceutical merchandises with the central Asian region as a whole, while it has a very low level of trade complementarity. Yet, a massive trade potential is existing between Pakistan and Central Asian countries, especially with Uzbekistan followed by Turkmenistan. The results also show that GDP, trade openness, distance, exchange rate, and tariff rate are the prime determinants of Pakistan's export to the Central Asian region. The empirical analysis also indicated that “behind the border” factors confine the exports of Pakistan from reaching to its potential level. Therefore, Pakistan needs to sign a free trade agreement at the earliest and should focus to secure full tariff concessions on its top exported products.