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China opening trade doors to Pakistan

Discussion in 'Pakistan Economy' started by ajpirzada, Jun 17, 2010.

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    By Syed Fazl-e-Haider

    KARACHI - China has pledged to provide trade concessions to Islamabad that it is not getting from the United States and European Union, according to a Pakistan government official after a visit to the country last week by Chinese Vice Prime Minister Zhang Dejiang.

    At meetings with Pakistani officials in Islamabad, Zhang called for strengthening economic and trade linkages through improved transportation, communication and energy corridors. China has given assurances it will provide trade concessions that will have a positive impact on Pakistan's economy, Business Recorder reported, citing Federal Commerce Secretary Zafar Mahmood. The US and EU are not prepared to give trade concessions to Pakistan owing to the international economic recession, he said.

    Early this month, the European Union and Pakistan failed to



    come up with any breakthroughs on liberalizing bilateral trade when they set out a five-year plan for improving ties boosting ties. EU-Pakistan trade has an annual turnover of about US$10 billion.

    Last week, US Ambassador to Pakistan Anne W Patterson led a delegation of Pakistani business leaders to the US to highlight the country's investment opportunities, The Hindu reported. Pakistan's Minister of State for Investment Saleem H Mandviwalla was also among the travelling group, the third such delegation visiting the US since April 2009 as part of the Pakistan Business Ambassadors Programme, the report said.

    Zhang's visit to Pakistan will lead to increased trade with China and more investments by China's public and private companies over the next 12 months, local analysts said. China is already challenging the EU and the US in the top-three ranking of Pakistan's largest trading partners as it has increased investment in numerous sectors, including port development, roads, railways, mobile telephony, communication technology, hydro and thermal power, mining, electronics, and nuclear energy.

    China has supported Pakistan in its goal of building a gas pipeline from Iran, a project agreed to this month, and has said it will build two new nuclear power plants, Chashma-3 and Chashma-4 in Punjab province, both moves over the strong opposition of Western countries, including the US.

    Pakistan needs to boost exports as it seeks to contain its trade deficit, which in May was $1.60 billion, up from $1.09 billion a year earlier, according to the Federal Bureau of Statistic. The country's total trade deficit in the first 11 months of the fiscal year that ends this month eased to $13.88 billion from $15.31 billion in the corresponding period last year.

    Under a free-trade agreement (FTA) of 2006, China and Pakistan are committed to increase bilateral trade from the current $6.9 billion to $15 billion in the next three to four years.

    The two countries have established a joint investment company for direct investment and joint ventures. Chinese President Hu Jintao in 2006 inaugurated the Pakistan-China Haier Ruba Economic Zone (HREZ) in Lahore, the first industrial park outside China supported by the Chinese government and exclusively for Chinese investment. Under the FTA deal, China is committed to consider duty-free access into China for all products manufactured in the park.

    Vice Prime Minister Zhang met senior military figures during his visit last week and called for the development of common approaches to secure common strategic and economic interests. Zhang also visited the head office of ZONG, the first venture outside China of the country's leading mobile phone operator, China Mobile. With an investment to date of $1.6 billion in Pakistan, ZONG is expanding its network in all four of the country's provinces.

    The China Council for Promotion of International Trade (CCPIT) and Pakistan's Federation of Pakistan Chambers of Commerce and Industry (FPCCI) have also entered an agreement to foster bilateral economic cooperation. Tariq Sayeed, a former president of FPCCI, and Li Jiashou, CCPIT executive vice chairman and chairman of the CCPIT sub-council in southern Yunnan province, recently signed a memorandum of understanding in the Yunnan capital of Kunming, according to the Dawn newspaper.

    The two sides aim to upgrade efforts to promote trade and investment and to involve their governments and enterprises to strengthen contact at the public and private sector level.

    Zhang's visit comes at a crucial time for Pakistan-China trade, which has been hit hard since a landslide early this year closed the Karakoram Highway. The road connects China's Xinjiang region with Pakistan's Gilgit-Baltistan and is a vital cross-border trade link. Due to a lake developing behind the landslide, traders had to evacuate Sost, the Chinese-built dry port on the Pakistani side of the border. The facilities at Sost have proved a boon in helping to facilitate customs clearance and other formalities for goods crossing between the two countries.

    In the nuclear sector, China has so far been the only country willing to cooperate with Islamabad. Chinese companies, as announced in April, are to build at least two new 650-megawatt reactors at Chashma over the next seven years. These could prove central to Pakistan's long-term efforts to overcome energy shortages that cause widespread and prolonged power blackouts. China began building a reactor at Chashma in 1991 and broke ground on a second one in 2005, which is expected to be completed next year. The Chashma-3 and Chashma-4 nuclear power plants are being built by Pakistan Atomic Energy Commission and China Zongyuan Engineering Corporation.

    Washington is concerned over the security risk of nuclear materials in Pakistan, where the Taliban movement is waging a bloody offensive, but has been restrained in the level of its criticism.

    "President Barack Obama will not openly criticize the Chinese export because Washington, in the context of a bilateral security dialogue with Islamabad, may be sensitive to Pakistan's desire for civilian nuclear cooperation in the wake of the sweeping US-India nuclear deal," said a report released by the Carnegie Endowment for International Peace in Washington. The US administration, however, might object to it inside the Nuclear Suppliers Group, which oversees such transactions. These objections, however, "cannot prevent China from exporting the reactors," the report added.

    Syed Fazl-e-Haider (Syed Fazl e Haider) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at sfazlehaider05@yahoo.com.

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