ISLAMABAD, Nov 1: Pakistan needs to diversify its exports to grab its due share in the World's export market like other countries of the region, says the Asian Development Bank (ADB).

It also urged the government to improve law to attract foreign investment in the country.

"The investment climate and the uncertain national and regional political situation have kept Foreign Direct Investment low."

In its latest report - Industrial Competitiveness, the challenge for Pakistan - the Bank said that given Pakistan's cotton resources and upgrading of textile facilities it will remain a major player in world textile and apparel markets but for long run diversification of exports will be necessary.

While Pakistan's exports have moved primary products to manufactures, in manufactures it has a heavy and growing reliance on low technology products.

Pakistan's wage levels are comparable to those of India and China, but its exports structure is far more biased towards low technology activities. Also, Pakistan scores relatively low on export sophistication. Its score falls by 13.6 points, the second largest drop in the group after Hong Kong.

"What is more worrying, Pakistan's score and its relative position have deteriorated since the mid-1980s, making it only country in Asia in which the index declined over the 1985-1997 period; however, several, including all in South Asia, have declined in the rankings", the Bank said.

It added that the country's growth over 1990-2001, 4.5 percent per annum was below that of its neighbours but above that of high wage countries like Korea and Hong Kong.

Pakistan still has a fairly regulated business environment and the particular cause of concern is the delay in custom clearance.

"In terms of regulation, it is a common complaint from the private sector that Pakistan still has a fairly regulated environment".

Experience in Pakistan and elsewhere suggests that highly protected domestic markets not only reduce the incentive to export but also penalise the economy by allowing inefficient domestic producers to extract policy-induced rents from domestic consumers.

The bank pointed out in the report that delays at customs make it very difficult for businesses to keep optimal levels of inventories and undermine the notion of 'just-in-time' planning.

Pakistan, the Bank urged, must join the world economic community as a member of the group of newly industrialized countries before the current century closes.