The Allocative Biases of Pakistan’s; Commercial Policy: 1953 to 1963

The purpose of this paper is to examine the allocative biases of Pakistan’s commercial policy, with a view to determining its influence on the composition of domestic investment in the private sector. Although because of the complexity of factors influencing investment deci¬sions it is well-nigh impossible to isolate the role of commercial policy in shaping the composition of domestic investment, yet a study of its allocative biases perse can shed considerable light on the nature of this role. This is so because the import component of various investment projects is high in Pakistan and private-sector imports are, in turn, regulated by commercial policy. The discussion in this paper is divided into four sections. The first section is devoted to certain preliminary matters regarding commercial policy in Pakistan. The second and third sections focus on the allocative biases of import-licensing and export-promotion policies; while the fourth section concludes the previous discussion. It may be noted at the very outset that commercial policy regulates only private-sector imports which are about 75 per cent of the total imports. Imports on government account are regulated by separate arrangements.