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                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)

                                  FY1992    FY1993    FY1994 1/

Income, Production and Employment:

GDP (current prices)              49,044    51,813    52,877
Real GDP Growth (pct.)               7.7       2.3       4.0
GDP Share by Sector:  (pct.)
  Agriculture                       26.1      24.2      23.9
  Power/Gas Distribution             3.5       3.7       3.7
  Manufacturing                     17.8      18.3      18.6
  Construction                       4.1       4.2       4.2
  Services 2/                       48.0      49.1      49.1
  Rents                              N/A       N/A       N/A
  Financial Services                 N/A       N/A       N/A
  Government/Health/Education        N/A       N/A       N/A
Net Export of Goods & Services       N/A       N/A       N/A
Real GDP Per Capita (USD)            422       428       426
Labor Force (millions)             32.97     33.97     34.98
Unemployment Rate (pct.)            5.85      5.85      5.85

Money and Prices:

Money Supply (M2)                  4,525     3,345     3,088
Commercial Interest Rate (pct.) 3/  15.5      18.0      16.8
Saving Rate (pct. of GDP)           17.1      13.6      15.4
Investment Rate (pct. of GDP)       20.1      20.7      20.1
Retail Inflation 
  (cpi - annual pct. change)
  12 month average basis             9.6       9.3      11.2
Wholesale Inflation 
  (wpi - annual pct. change)
  12 month average basis             9.3       7.1      15.0
Exchange Rate (rupee/USD)
  Official (FY avg.)                24.7      25.9      29.4
  Parallel                          25.5      27.9      32.2

Balance of Payments and Trade:

Total Exports (FOB)                6,762     6,782     6,715
  Exports to U.S.                    891       948     1,003
Total Imports (FOB)                8,998    10,049     8,549
  Imports from U.S.                  977       942       931
Aid from U.S. 4/                      40        20         0
Aid from Other Countries           2,471     2,493     2,481
External Public Debt              18,384    20,810    22,761
Debt Service Payments 5/           2,199     2,332     2,285
Foreign Exch. Reserves (FY end)      952       461     2,305
Trade Balance                     -2,236    -3,267    -1,834
  Trade Balance with U.S.            -86         6        72

N/A--Not available.

1/ Pakistan's fiscal year (PFY) is July 1 - June 30.  PFY 1994
data covers period July 1, 1993-June 30, 1994.
2/ Includes banking, insurance, commerce, housing, storage,
transportation, communication and other services.
3/ Average annual interest rate on commercial bank loans to
private sector borrowers.
4/ Aid from U.S. in 1993 consisted exclusively of PL-480 funds.
5/ Excludes interest on short-term loans and IMF charges.

Source:  Pakistan Economic Survey 1993/94 and State Bank Report

1.  General Policy Framework

    Pakistan has been on a generally steady course toward
market liberalization and structural reform for the past five
years.  These efforts intensified in response to a
deteriorating financial situation which developed in 1992/93,
and as a result of the efforts of the interim government headed
by former Prime Minister Moeen Qureshi (July-October 1993). 
Qureshi, an apolitical technocrat, pushed forward a number of
economically sound but politically difficult initiatives and
set a high standard for subsequent political governments.  A
three-year agreement concluded by the present government with
the International Monetary Fund (IMF) in early 1994 provides a
policy framework and economic targets that have helped the
Government of Pakistan (GOP) stay that course.

2.  Exchange Rate Policy

    The Pakistan rupee has been on a managed float since 1982;
the central bank regularly adjusts the value of the rupee
against a basket of major international currencies and uses the
U.S. dollar as an intervention currency to determine other
rates.  The black market in foreign exchange has largely
disappeared since private foreign exchange transactions are now
legally sanctioned.  There is an informal parallel market for
foreign exchange that is not illegal.  On this parallel market,
there is a modest premium for attractive foreign currencies;
the premium, which has decreased over the past year, generally
amounts to approximately an additional .7 to 1.5 rupees per
dollar (or roughly two to five percent).

    In 1993-94, the GOP removed several additional foreign
exchange restrictions.  Effective July 1, 1994, the rupee
became fully convertible on current account under IMF rules. 
Exchange rate reforms instituted in 1991 had essentially
created convertibility on the capital account.  Exchange rate
policy under the managed float has contributed to an
improvement in Pakistan's trade performance.  Following a
two-stage devaluation totaling about nine percent in July 1993,
and a tightening of fiscal and monetary policy, the value of
the rupee has stabilized.  In a series of incremental
adjustments between late July 1993 (29.85 rupees to the dollar)
and late October 1994 (30.62 rupees), the rupee has depreciated
against the dollar by less than three percent.

3.  Structural Policies

    A succession of Pakistani governments over the past six
years has implemented structural reform policies which have
made the economy more free and market-oriented.  The two
principal political parties agree on the direction of economic
policy, and shifts in government have, consequently, had
remarkably little impact on the overall liberalizing trend.

    One principal element of structural reform has been trade
liberalization.  The GOP is now engaged in a sweeping tariff
reduction program to force domestic firms to improve their
competitiveness and take advantage of Uruguay Round benefits. 
From the Pakistani perspective, the key aspect of the Uruguay
Round is the integration of textile trade into the GATT.  The
GOP is aware that, in order to benefit from global trade
liberalization, Pakistan must shift to tariffs in those
industrial sectors, especially textiles, which are now
protected by import bans or quotas.  The GOP is also reducing
the maximum "all inclusive" tariff rate from 92 percent in
1993-94 to 70 percent at the start of the 1994-95 fiscal year. 
The maximum tariff rate is scheduled to be further reduced to
45 percent at the start of the 1995-96 fiscal year and to 35
percent one year later.

    A second pillar of structural reform has been the
dismantling of state control over key sectors of the economy
through privatization.  The GOP's role in the economy continues
to shrink.  In 1990, the public sector, which includes many
enterprises which were nationalized in the 1970s, accounted for
about 30 percent of value added in manufacturing.  As of
October 1994, the GOP has sold off nearly 80 of its original
list of 118 public industrial companies and plans to advertise
the remaining units over the next few months.  

    The GOP is also in the process of identifying additional
units for privatization and encouraging private sector
participation in the power generation and distribution, mining,
utilities, insurance, banking, and airlines industries.  With
World Bank technical assistance, the government is setting up
regulatory bodies to permit privatization of various
utilities.  The GOP is proceeding with a phased divestiture of
Pakistan Telecommunications Corporation (PTC) and has already
sold the first tranche of PTC vouchers.  It is also moving
forward with plans to sell two thermal power plants and one
area electricity board as the first stage in the privatization
of the Water and Power Development Authority (WAPDA), which
provides over 80 percent of Pakistan's electricity.  Portions
of Pakistan's two natural gas distribution companies are also
slated for divestiture.

4.  Debt Management Policies

    Pakistan's foreign debt continues to increase and the
debt-service ratio is forecast to exceed 30 percent of export
earnings in 1995.  High fiscal and current account deficits
over the past several years were financed by a steady increase
in external debt, which reached $28 billion in 1993.  This debt
level was 16 percent higher than the previous year and entailed
a debt-service ratio of 27.3 percent of export earnings. 
Pakistan has consistently met its debt service obligations in a
timely fashion, even during the foreign exchange crisis of July
1993, when foreign exchange reserves dipped to $185 million, or
just over one week's worth of imports.

5.  Significant Barriers to U.S. Exports

    Pakistan has traditionally maintained a complex system of
indirect taxes in the trade sector.  High basic tariffs,
additional surcharges, a variety of excise taxes, and a sales
tax, with different applicability on domestic and foreign
goods, combined to distort prices in domestic markets.  These
tariffs, established for protectionist reasons and to raise
revenue, had largely become counterproductive.  Many tariff
rates were so high that they served principally to stimulate
smuggling and corruption.  Revenue collections were similarly
undermined by many exemptions and concessions, both formal and

    Pakistan has significantly liberalized its restrictive
import regime by reducing tariffs and somewhat streamlining
import and export rules.  However, despite efforts to
streamline the import process, there continue to be complaints
about complex customs clearance practices, which slow entry of
goods and provide numerous opportunities for discretionary
decision-making by a variety of relatively low-level

6.  Export Subsidies Policies

    Pakistan seeks to encourage exports through rebates of
import duties, sales taxes, and income taxes, as well as
through concessional export financing.  The GOP has an export
processing zone (EPZ) scheme, under which industrial units
producing value-added items are exempt from payment of customs
duties, sales tax, and iqra (an Islamic education tax)
surcharge on imports, provided that the industrial unit exports
50 percent of the value of its production in the first two
years and 60 percent in the third year and beyond.  One EPZ, in
Karachi, is currently in operation.  These policies appear to
apply equally to both foreign and domestic firms producing
goods for export.  For many exports, Pakistan's nationalized
commercial banks offer financing at concessional rates.  

7.  Protection of U.S. Intellectual Property

    Pakistan is a member of the World Intellectual Property
Organization (WIPO) and a party to two  major international
intellectual property rights conventions:  the Berne Convention
and the Universal Copyright Convention.  However, it is not a
party to any major conventions on patent protection.  While the
United States has a Treaty of Friendship and Commerce with
Pakistan which guarantees national and most-favored nation
(MFN) treatment for patents, trademarks and industrial
property, intellectual property rights enforcement in Pakistan
remains weak.

    Infringement on copyrights and trademarks and the lack of
coverage of product patent protection remain serious U.S.
concerns.  As such, in accordance with the intellectual
property rights provisions of the Omnibus Trade and
Competitiveness Act of 1988, Pakistan was placed on the Special
301 "watch list" in May 1989.  Since that time the United
States has continued to encourage Pakistan to extend laws
covering intellectual property protection and to provide
adequate enforcement.

    Copyrights:  U.S. firms have complained that, although
Pakistan is a member of the Universal Copyright Convention,
enforcement of its copyright law is ineffective and the
penalties for violation are not severe enough.  Videotape
piracy is widespread and of concern to U.S. firms which are
current or potential marketers of film videos in Pakistan. 
Pakistan recently amended its copyright statute to strengthen
penalties for infringement of rights to printed texts, film
works, sound recordings, and computer software; however, there
has been little evidence of more vigorous enforcement.

    Patents:  Pakistan's patent law protects processes but not
products.  U.S. pharmaceutical companies have complained that
this regime makes it difficult to pursue infringement cases in
local courts.  The language of the statute permits applications
for compulsory licenses, although this seldom happens in
practice.  The United States has urged Pakistan to provide
product patent coverage and to amend its legislation to extend
the patent term and to restrict or abolish the procedure for
compulsory licensing.

8.  Worker Rights

    a.  The Right of Association

    The right of industrial workers to form trade unions is
enunciated in statute, but in practice there are significant
constraints on the formation of industrial unions and their
ability to function effectively.  Workers in EPZs are
prohibited from forming trade unions.  The Essential Services
Maintenance Act permits workers in government services and
state enterprises (including education, health care, oil and
gas production, and transport) to form unions, but restricts
some normal union activities, including the right to strike. 
There is no provision in Pakistani law granting the right of
association to agricultural laborers.  Union members make up
only about 13 percent of the industrial labor force and 10
percent of the total labor force.

    b.  The Right to Organize and Bargain Collectively

    The right of industrial workers to organize and freely
elect representatives to act as collective bargaining agents is
established in law.  However, the right to bargain collectively
is limited to legally constituted unions and is therefore
constrained by the limitations on union formation described
above.  Collective bargaining occurs at the plant level.  The
Essential Services Act restricts collective bargaining and
where the government determines to bar collective bargaining,
individual wage boards (made up of industry, labor, and
government members) determine wage levels.

    c.  Prohibition of Forced or Compulsory Labor

    Forced labor is specifically prohibited by law and the
Pakistani Constitution.  However, bonded labor is reported to
be common in the brick, glass, and fishing industries and to be
found in rural construction and agricultural work.  The Bonded
Labor System (Abolition) Act, adopted in March 1992, outlawed
the bonded labor system, cancelled all existing bonded debts,
and forbade lawsuits for the recovery of existing bonded
debts.  However, the provinces have not yet developed a
credible enforcement system to implement this statute.

    d.  Minimum Age of Employment of Children

    Child labor is common and results from a combination of
severe poverty, weak laws, and inadequate enforcement.  A key
factor is the absence of compulsory primary education.  Child
labor is limited by at least four statutes and Article 11 of
the Pakistani Constitution.  The Employment of Children Act,
1991, defines a "child" as "a person who has not completed his
14th year of age", prohibits their employment in hazardous
industries, and generally limits the length of their workdays. 
Although much child labor occurs in the traditional areas of
family farming or small business, it also occurs in larger
industries, such as carpet making.

    e.  Acceptable Conditions of Work

    Federal statutes govern labor regulations.  The current
monthly minimum wage is approximately $50 (1,500 rupees), but
an extensive list of exempted activities limit minimum wage
applicability to a minority of the work force.  Statutes
provide for a maximum workweek of 54 hours, rest periods, and
paid annual holidays, but exempt large segments of the labor
force.  Enforcement of labor regulations, a responsibility of
the provincial governments, has generally been ineffective. 
Enforcement is hampered by limited resources, corruption, and
inadequate regulatory structures.  In general, worker health
and safety standards are poor, and little is being done to
improve them.

    f.  Rights in Sectors with U.S. Investment

    Sectors with U.S. investment are characterized by generally
better conditions and more free exercise of worker rights than
in other sectors.  These sectors tend to add greater value to
production and exclude sectors with particularly poor labor
records (brick kilns, carpet making, traditional agriculture,
and family-run small businesses).

  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
              Category                          Amount          

Petroleum                                              71
Total Manufacturing                                    28
  Food & Kindred Products                    2
  Chemicals and Allied Products             29
  Metals, Primary & Fabricated              -2
  Machinery, except Electrical               0
  Electric & Electronic Equipment            0
  Transportation Equipment                   0
  Other Manufacturing                        0
Wholesale Trade                                         3
Banking                                               152
Finance/Insurance/Real Estate                         (1)
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  254      

(1) Less than $500,000

Source: U.S. Department of Commerce, Bureau of Economic

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