ANALYSIS: Pakistan-China trade and investment —Muhammad Aftab
The founding of the Pakistan-China Trans-Border Economic Zone, upgrading avenues for trade, overland and across the Karakoram mountains, and steps being taken for integrated border management will enable both Pakistan and China to optimally utilise the “natural complementarities of the two countries”
Despite the tense situation in which terrorism has landed Pakistan, China, once again, has decided to help Pakistan. Besides boosting trade, it will invest in energy, mineral exploration, motorways construction, special industrial zones, and customs and tariffs harmonisation.
These plans were unveiled during Prime Minister Yousaf Raza Gilani’s just-concluded visit to China on the eve of the 60th anniversary of the establishment of diplomatic relations between the two countries.
Chinese steadfastness is unmatched. “No matter how the global situation may change, the resolve and determination of the government and the people of China in developing its relations with Pakistan will never be swayed,” Jia Qinglin, chair of the powerful Chinese Peoples Political Consultative Conference (CPPCC) said at a reception for Gilani.
Gilani invited a joint business forum, and said “There is a great potential for the participation of Chinese corporations in the development of the energy sector in Pakistan. This includes hydro, thermal and renewable energy.”
“Joint ventures with equity participation of Chinese corporations and financial institutions, can transform Pakistan’s economic landscape and will certainly prove to be a win-win scenario,” Gilani assured the Chinese businessmen, investors, and experts. Islamabad would like Chinese corporates to focus on Pakistan in their strategic plans, as the two countries have a proven record of good relations in all fields and sectors. As a result of these close ties, Chinese investors, businessmen and traders get a very high priority at the government and private level, and all facilities are quickly provided to investors. Chinese Premier Wen Jiabao and Gilani, and top Chinese leaders lauded mutual ties and urged their “further strengthening”.
Trade is the top gainer since the two countries signed a Preferential Trade Agreement (PTA). The two-way trade rose 27.7 percent in 2010 to $ 8.7 billion. “Our two countries have set a target of attaining $ 15 billion in trade in coming years,” Gilani said at the business forum that was co-hosted by the China Council for Promotion of International Trade (CCPIT) and the Embassy of Pakistan in Beijing.
Beijing, in an official statement this week, also said, “Chinese government will encourage the Chinese enterprises to expand investment in Pakistan and strengthen their cooperation in trade, finance and science and technology.” The two countries have also enhanced cooperation in defence production, ranging from tanks to fighter jets, and civilian technology.
The latest example of cooperation is the May 19 opening of a Chinese-built nuclear power station at Chashma in central Pakistan. China will build two more nuclear power plants, under a just-signed contract.
The head of China’s Hudian Group informed Gilani the group would immediately invest $ 400 million and establish a 350 megawatt (MW) thermal power plant at Lahore. The group has expertise in hydro and coal-fired power projects. It is currently working on several projects in East and South Asia.
A report prepared by the US administration projects that in view of Pakistan’s huge energy shortage and leaping future demand, at least $ 21.8 billion can immediately be invested in this country. Its priority target is to immediately start generating 6,950 MW of power that will cost $ 21.8 billion. “It needs at least $ 7.7 billion to complete its six thermal power projects on a top priority basis,” chiefly on a government-to-government level. An additional $ 14.1 billion investment is required from the foreign private sector.
Many projects are likely to materialise following the Beijing talks. Li Ruogu, chairman of the Chinese Export-Import Bank (EXIM Bank) announced the bank would finance the multi-billion dollar Gwadar-Karachi-Faisalabad motorway. The motorway will connect the newly built Chinese deep-sea port at Gwadar, located at the mouth of the Straits of Hormuz, with Pakistan’s biggest industrial hub and financial centre of Karachi, and the third biggest industrial region of Faisalabad. The three cities have fast developing business links with Dubai and the Gulf Cooperation Council.
This bank already has financed huge Chinese projects in Pakistan. These include Chashma Nuclear Power Plants, Karakoram Highway that connects Pakistan with Eastern China through the Karakoram Range, and Saindak Gold and Copper Mining Project in Balochistan.
Pakistan-China Joint Commission on Economy, Trade, Scientific and Technical Cooperation, in addition, announced last December that China will invest $ 13.2 billion in Pakistani projects, spread over energy, water, industry, agriculture and fisheries. The founding of the Pakistan-China Trans-Border Economic Zone, upgrading avenues for trade, overland and across the Karakoram mountains, and steps being taken for integrated border management and customs and tariffs harmonisation will enable both Pakistan and China to optimally utilise the “natural complementarities of the two countries”, as China and Pakistan describe it.
Mark the significance of these projects. Their strategy is that, besides selling to the Pakistani market, China and Pakistan plan to export the production to Dubai, GCC, Middle East, Africa and other markets.
The writer is an Islamabad-based journalist and former Director General of APP