Modeling And Optimizing The International Trade And Logistics Services Of Pakistan

Exports are one of the most important contributors to the growth and development of aneconomy of a country. In order to strengthen the economy, many countries around the worldhave taken initiatives to increase bilateral trade and in the process reduced direct and indirectfactors affecting the same. Even though the average applied tariffs on products have declinedconsiderably, the international trade volume is still far less than expected. Apart from the directand indirect factors, there are other aspects to the equation of international trade, andtransportation infrastructure is one amongst them.This research is one of the very few and the first on Pakistan to take international trade,transportation infrastructure and economic growth collectively into consideration. The studyhighlights important regional trade blocs and the opportunity of bolstering trade, which havenever been identified before. The study also illustrates in detail the transportation network ofPakistan, which is a novelty in itself as no previous work has been done on this important sectorof Pakistan. The originality of the research continues as the relationship between economicgrowth and transport infrastructure is studied in detail from both national and provincialperspective.The international trade has been rigorously tested using the gravity model of trade,transportation infrastructure using the complex network theory whereas Granger causality hasbeen employed to test the causal relationship between economic growth (transportationinfrastructure investment) and transportation infrastructure investment (economic growth). Onthe international trade side, the major findings of this research include:1) that the internationaltrade environment of Pakistan is suffering from a huge deficit mainly due to the inability of theexporters to diversify export commodities and export markets;2) Pakistan has been unable totake advantage of trade with neighboring countries;3) Pakistan has been trading with countrieswith which trade potential is already or nearly exhausted and must target trade towards countrieswith which trade potential exist and4) the regional blocs of Organization of IslamicCooperation and South Asian Association for Regional Cooperation hold viable opportunitiesfor Pakistan to bolster its trade.The topological or structural properties of the transportation networks of Pakistan arelargely efficient and highly connected. All the networks display the small world propertieswhich mean the topological networks of highways, railways and airways are efficient with asmall average path length, small diameter and a high clustering coefficient. Even though thenetworks are not completely connected, one can easily move from one station to any another with a minimum number of transit or interchanges, regardless of geographical distances. Thedynamic structure of the networks is inefficient as they are highly decentralized, congested andvulnerable to breakdown. Also the government needs to revamp the railway as the country iscompletely dependent on its highway infrastructure.Lastly, the results of the Granger causality test show the relationship between economicgrowth (transport infrastructure investment) and transport infrastructure investment (economicgrowth). The results of the empirical analysis at national and provincial level suggest that in theshort run, there is no Granger causality between economic growth and infrastructure investment.In the long run, a unilateral causality does exist between economic development and transportinfrastructure investment at the national level. This provides that transport infrastructureinvestment is not the cause of economic growth as compared to other countries. At theprovincial level however, there is bidirectional Granger causality between economic growthand infrastructure investment in the developed Punjab and Sindh provinces of Pakistan. As faras the least developed province of Baluchistan is concerned, the results imply that economicgrowth has not impact on transport infrastructure and vice versa.In order to overcome the trade deficit and improve on the transportation infrastructure,the government of Pakistan needs a combined policy targeting not only the expansion of tradecommodities and trade partners but also restructuring of the transportation networks and finally,reduction in the regional disparities between provinces that hinder them to take opportunitiesfrom investments in infrastructure and as a result deter economic growth.