A Roadmap to Diversifying Pakistan’s Exports
December 18, 2025
Insight
Using the The Observatory of Economic Complexity (OEC) database and employing standard estimations of product and economic complexity, Chaudhry and Andaman (2023) incorporate product space analysis and “proximity” metrics to identify new products Pakistan could export based on its current capabilities. Due to low economic complexity of Pakistan, many of these “nearby” products are not significantly high value-added, meaning that diversifying into such products will not improve Pakistan’s export sophistication by a high margin.
This creates a strategic challenge:
How do we jump from low-sophistication goods to higher-value products that align with Pakistan’s current production capabilities and also support long-term competitiveness?
To avoid diversification into low-complexity products, the paper applies a dual-filter approach to ensure that diversification supports quality, not just quantity. It recommends products that are:
- Technologically feasible for Pakistan to produce
- More sophisticated than current average economic complexity of Pakistan
Key Takeaway
Pakistan’s exports are trapped in low-complexity products with limited upgrading potential. The product-space analysis shows clear, data-driven roadmap and feasible pathways into more sophisticated, higher-value goods. Moving into these nearby more complex products can raise export earnings and build productive capabilities.
Why It Matters
A more sophisticated, higher value added and diversified export basket would:
-Strengthen external sector’s resilience
-Reduce balance-of-payments vulnerabilities
-Support higher long-term economic growth
-Build productive capabilities
-Move Pakistan toward globally competitive industries
Product space analysis highlights realistic pathways into more sophisticated, higher value-added products - critical for sustained, long-term economic growth. A targeted industrial policy aligned with these feasible product transitions is therefore essential.
Source
Chaudhry, A., & Andaman, G. (2023). A Roadmap to Diversifying Pakistan’s Exports: Operationalizing the Product Space. In Policy Challenges for Macroeconomic Management and Growth in Pakistan. Lahore School of Economics. (https://lnkd.in/eZxr-89T) [Click here]
Access the book, Policy Challenges for Macroeconomic Management and Growth in Pakistan, and all its chapters here: (https://lnkd.in/eKAcGNkc) [Click here]
Labels: Economic Growth, Industrial Policy, Pakistan Economy, Trade Policy
posted by S A J Shirazi @ 12/18/2025 01:47:00 PM,
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