Revealed Comparative Advantages in the Services Trade of Pakistan: What do they tell us?

Abstract

The purpose of this study is to determine Pakistan's export competitiveness in the construction services sector on the global market.  The competitiveness of Pakistan's service sector has been assessed using a variety of revealed comparative advantage indices from 2005-2020.  The data have been collected from International Trade Center UNCOMTRADE statistics for exports of the services sector of Pakistan. The findings of the RCA, RSCA, Vollrath index, and InRCA indicate that Pakistan benefited from comparative advantage in the worldwide market for construction services from 2007 and 2016-2020, while Pakistan faced a comparative disadvantage in 2005-06 and 2008-15. Pakistan enjoyed a competitive advantage in the imports of the construction service sector by utilizing RMA index during 2006-2015 and in the year 2020, whereas Pakistan faced a competitive disadvantage in the imports in the other selected years. The RTA index portrays that Pakistan faced a net comparative advantage in the concerned sector in the years 2006-08, 2013-15, and 2020, while a net comparative disadvantage was observed in the remaining years. The trade balance index (TBI) highlights that Pakistan has become a net exporter in the services sector in the years 2007, 2014, 2015, and 2020, while Pakistan faced a net importer in the reaming years of the world economy. The present study recommended a method and strategy for addressing bottlenecks in the services sector's growth and for implementing a package of policy reforms to position the services sector as a critical sector for growth, employment, and poverty alleviation Information technology (IT) is ideally suited for cluster-based development in the services industry.