Pakistan Economy - News & Updates - Archive

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$1.5bn export target Govt to help jewellery sector​

Wednesday, December 19, 2007

KARACHI: Federal Minister for Industries, Production and Special Initiatives Salman Taseer has said that the government will provide maximum support to the gems and jewellery sector in order to help it achieve $1.5 billion export target by 2017.

He expressed these views while talking to media after being briefed on Pakistani gems and jewellery industry by the Pakistan Gems and Jewellery Development Company (PGJDC) at the office on Tuesday.

The minister said the sector retains huge potential and currently there are approximately one million Pakistanis working in the sector which can be increased manifold if they are provided with latest technology, training and supportive infrastructure.

Briefing the minister PGJDC Chief Executive Officer Fawwad Khan said Pakistan’s current official Gems and Jewellery exports stands at around 40 million dollar, which can be increased by branding the Pakistani jewellery in international markets.

To promote the different products of this sector PGJDC is participating in different international jewellery exhibitions where Pakistani companies are not only getting heavy export orders but also learning about the latest trends in jewellery designs as well as the requirements of international markets, he said

The minister was further told that PGJDC is working to raise value chain productivity, improvement of industry marketing and branding, strengthening of policies for increased competitiveness, investment in workforce development and innovative capacity and for strengthening industry organization and supporting institutions.

$1.5bn export target Govt to help jewellery sector

 

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ADB keen to promote industrial sector ​

Wednesday, December 19, 2007

ISLAMABAD: The Asian Development Bank (ADB) has termed the private sector an engine of growth and showed interest in the promotion of Pakistan’s industrial sector with the collaboration of chambers of commerce.

ADB Senior Economist Donghyun Park, in a meeting with Islamabad Chamber of Commerce and Industry President Nasir Khan, said the chambers were playing a vital role in the process of industrialisation. They wanted to establish technical institutions to produce skilled labour, he added.

Park showed satisfaction that the law and order situation in Pakistan “is well” and they were moving freely everywhere in the country, said a news statement issued here. Earlier, ICCI President Nasir Khan said political stability was necessary to attract foreign investment. He expressed concern that Pakistan had only one textile college in Faisalabad while the country’s main export product was textile.

The textile industry had been facing difficulties for the last two years, he said, adding “we are exporting cotton at cheaper rates while making its import at higher prices.” High interest rates were also a cause for worry in the process of industrialisation, he said. Khan said the industries were facing shortage of gas and production was declining. However, he added the construction and building sector was doing well.

ADB keen to promote industrial sector

 

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$785 million US aid approved​

WASHINGTON, Dec 18: The US House of Representatives has passed a $785 million aid package for Pakistan for the fiscal 2008 despite its reservations over the state of emergency imposed on Nov 3.

The US Senate is also expected to approve the package, which includes $300 million of military assistance, by Tuesday evening.

The other major item on the approved list is that of $350 million for economic support fund.

The package for Pakistan includes $50.9 million of development assistance, $39.8 million for child survival and health, $10.3 for anti-terrorism activities, $32 million for anti-narcotics efforts, and $2 million for training and education of military officers in the United States.

This is part of a five-year $3.5 billion package signed in June 2003, when President Pervez Musharraf visited the Camp David presidential resort for a meeting with President George W. Bush.

The bill approved by the House also includes a provision authorising the US administration to provide assistance to build the capacity of Pakistan’s other security forces critical to the success of counter-terrorist operations.

These include the Frontier Corps and other internal security forces specifically responsible for counter-terrorism operations. Forces responsible for border protection and interdiction, including the forces that guard coastal waters, will also benefit from this provision.

Several powerful lawmakers had suggested conditioning US aid to the return of democracy in the country.

The House and the Senate are separately considering some resolutions on this issue. One resolution calls for conditioning US military assistance to “demonstrable progress by the government of Pakistan in achieving certain objectives” towards the restoration of full democracy.

But the Bush administration warned the lawmakers not to attach conditions to US assistance to Pakistan.

BIDEN’S CALL TO MUSHARRAF: Earlier, a leading presidential candidate and chairman of the US Senate Foreign Relations Committee Joseph R. Biden telephoned President Pervez Musharraf, urging him to restore an independent judiciary and a free media.

A statement issued by his office quoted him as telling the president that while US lawmakers appreciated his decisions to quit the army and lift emergency, they believed it was not enough.

$785 million US aid approved -DAWN - Top Stories; December 19, 2007

 

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Russia for establishment of Pakistani trade house in Moscow​

KARACHI: Russia desires to establish a Pakistani trade house in Moscow to create awareness about the vast potential of Pakistani products and their competitive pricing. A four-member delegation of Russian Federation led by Ambassador Sergey N. Peskow expressed this desire in a meeting with Chief Executive Officer, Trade Development Authority of Pakistan (TDAP), Tariq Irkam here on Tuesday. Consul General of Russian Federation Valdimir V. Seliverston and others were also a part of the visiting delegation.

The delegation also called for the revival of Pakistan-Russian Business Council and for a joint business body. It expressed desire to expand trade opportunities with Pakistan and displayed keen interest in single country exhibition. Russian delegation also informed their hosts of setting up two Pakistani banks viz. National Bank of Pakistan and Askari Bank to facilitate exporters in Moscow. Tariq Ikram told the delegation that during the last eight years Pakistan’s export to Russia went up from $20 million to $140 million.

He gave the delegation an analysis of export of Pakistani products pointing out where imports declined and where the opportunities exist for further expansion of trade ties between the two countries. He spoke of competition and pricing in textile, garment and leather goods where Pakistan has a competitive edge and could be enhanced to the benefit of both. He also assured the delegation to consider setting up of a Pakistan display center as a warehouse that TDAP wishes to establish in Moscow. Mr Ikram asked the delegation to look into possibilities of joint ventures for promotion of trade. He said that there existed a lot potential for export fruits, vegetables, sports goods, man-made textile apparel, footwear, seafood, electronic equipment, pharmaceutical goods etc.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan second largest importer of palm olien ​

KARACHI: In the first 15 days of December, Pakistan imported 68,700 metric tonnes of palm olien that ranked it as the second largest importer of the commodity after China, which imported 213,000 metric tonnes during same period, importers told Daily Times on Monday.

“Import increases around 20 percent in coming two months on the back of growing domestic demand and consumption due to decline in temperature in the country”, senior member of the Pakistan Vanaspati Manufacturers Association (PVMA), Nasir Ibrahim said. The European Union (EU) imported around 114,000 metric tones during same period and ranked third.

The country import during November 2007 witnessed a surge of around 3.31 percent against import in same period last year, which stood at 189,159 metric tonnes.

As the international prices of palm oil surged by around $56 per tonne to $876-$890 per tonne, importers and millers paid around Rs 21 per kg more as Malaysian crude palm oil futures surged on increased international demand in exports.

Pakistan imported around $892 million worth of palm oil during July-June 2007 as against $717 million in the same period last year.

Mr Ibrahim said, “This was due to the higher domestic demand as it is going to rise on the back of Eid ul Azha”. He said however, Pakistan will reduce tariff on palm oil by 10 percent MOP on January 01, 2008. The prices of palm oil in the international market have witnessed an unprecedented increase. Malaysia and Pakistan sign a free-trade agreement (FTA) that is expected to boost Malaysian palm-oil exports.

Malaysia is the world’s largest producer of palm oil and counted Pakistan as its second-largest customer in the first eight months of this year. The importers have to pay around 45 percent duty on import value besides paying 50 percent import landing tax to the government, he added. Pakistan imports mostly Malaysian palm oil and olein to meet domestic demand of 1.99 million tonnes, as locally produced cottonseed meets rest of the demand. Edible oil import costs around $ 989 million every year.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan seeks $1.3 billion for power projects​

ISLAMABAD: Pakistan has sought a soft loan of $1,320.54 million from South Korea for extending its electricity supply network and sustain financial losses of the electric supply corporations, sources told Daily Times on Tuesday.

Sources said that government needed around $2,692.55 million to materialise such projects. The Ministry of Water and Power is seeking $1,320.54 million from Korea and the Economic Affairs Division has sent a formal request to South Korea in this regard.

Sources further said that government would use the money obtained under these heads also for the revamping/rehabilitation of irrigation system in provinces. The money would also be used for a 220-kv grid station and a Dadu-Khuzdar 220-kv transmission line. The project also includes provisions for IESCO (6th secondary transmission and grids), PESCO (6th secondary transmission and grids), FESCO (6th secondary transmission and grids), Punjab Barrages rehabilitation and modernisation project (excluding Khanki barrage) and 6th secondary transmission and grids of GEPCO.

Sources said that ministry of water and power has approached the Economic Affairs Division (EAD) to generate required funds as soft loans from different countries and financial institutions.

The EAD had sent a loan request to Korea but the country is giving money only for the GEPCO project. While this project that will extend six phase of GEPCO will cost $76.5 million; the ministry requires $18.8 million for the project.

Showing reservations over the other projects worth $1,301.74 million, the government of Korea has conveyed that these were commercial projects it could not provide funds as soft loans, an official said.

Sources said that the agreement for the loan is still under consideration.

Daily Times - Leading News Resource of Pakistan

 

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ADB keen to facilitate industrialisation​

ISLAMABAD: Senior Economist of the Asian Development Bank (ADB), Mr Donghyun Park in a meeting with the President, Islamabad Chamber of Commerce and Industry (ICCI) Nasir Khan has said that the private sector is main engine of growth and ADB want to promote Pakistani industry with the collaboration of its chambers.

He added that chambers are playing a vital role for the country’s industrialization.

Mr Park said that they wanted to establish technical institutions to produce skilled labour. He also showed satisfaction over the law and order situation in Pakistan and said that they are moving freely everywhere in the country.

Earlier, ICCI President, Nasir Khan said that political stability is necessary to attract investment. Mr Khan showed his concern over the fact that Pakistan has only one textile college in Faisalabad and textile products are the country’s main export. He appreciated ADB’s is collaboration with chambers. Mr Khan said that industries are facing shortage of gas, energy and production is decreasing.

Daily Times - Leading News Resource of Pakistan

 

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IPDF processing 44 PPP projects worth $1.4 bn​

ISLAMABAD: A high level meeting on Tuesday was informed that Infrastructure Project Development Facility (IPDF) is currently processing some 44 projects worth approximately $1.4 billion under Public Private Partnership (PPP) in CNG Buses Project in Karachi urban mass transport, roads, energy and municipal services.

Federal Minister for Finance Dr. Salman Shah, while chairing the board meeting of the IPDF here said that the newly approved PPP Policy of the government of Pakistan will enhance the confidence of private investors to invest in Pakistan’s infrastructure opportunities.

The IPDF board meeting was attended by its members including Secretary Finance Division Ahmad Waqar, Dr. sania Nishter, Mr. Salim Raza, Shehzad Ata Elahi, CEO, IPDF, Aijaz Ahmed. Dr. Ashfaq Hasan Khan, Special Secretary Finance, Senior representatives of Ministry of Finance and IPDF also attended the meeting.

Dr. Salman Shah emphasized the need for creating an enabling environment though a combination of policy reforms, institutional support, incentives and financing modalities to encourage private sector participation in the financing and managing of infrastructure projects. He stated that the Public Private Partnership policy would go a long way in this regard.

In this context, Dr. Ashfaq Hasan Khan presented the Risk Management Framework to ensure the sustainability of the development of infrastructure projects under the PPP modality. The meeting also reviewed IPDF’s project pipeline currently consisting of 44 projects worth approximately $1.4 billion and emphasized the need for building a robust pipeline of projects in urban mass transport, roads, energy and municipal services. The board, while reviewing the project pipeline emphasized the need for the requisite institutional and administrative measures to support this effort.

While reviewing the progress on specific projects, the board was updated on the pilot Charsadda Solid Waste Management project and the CNG Buses Project in Karachi. The Nazim of Charsadda Tehsil Municipal Administration Mian Manzoor Ahmed and Director General, Karachi Mass Transport Cell City District Government Karachi Malik Zaheer-ul-Islam attended the meeting by special invitation for their related items.

The meeting directed that all concerned should extend all support to make these projects successful as these projects would not only help alleviate the sanitation and transportation problems facing the citizens of Charsadda and Karachi but would also have a visible demonstrable effect on the development of infrastructure projects under the PPP modality.

A number of initiatives are already under way, including, Islamabad IT Park, Multipurpose Water Reservoirs, FBR Automation Project and Kalinger Water Supply. Some other projects proposed to be implemented under the PPP Modality, include: Islamabad Rawalpindi Mass Transit Project, Karachi circular rail, Bus Rapid Transit System Karachi, Intra-City Bus Terminal Facilities Karachi, Hyderabad-Mirpurkhas road, Building of Bridges in Sindh over river Indus, Lahore and Faisalabad Solid Waste Management, Lahore and Faisalabad Water Metering and Billing systems and Office Complexes in Islamabad.

The meeting was also apprised about the Pakistan Investors Conference scheduled for April 2008 wherein a number of infrastructure projects will be showcased to potential investors, operators and financiers. The multi-faceted forum will primarily serve as an investor’s conference, bringing together various stakeholders from within Pakistan and around the world.

Daily Times - Leading News Resource of Pakistan

 

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'Metallic mineral' exploration kicked off in Sindh ​

KARACHI (December 19 2007): A local mining company has kicked off 'metallic mineral' exploration/development in Nagarparkar district with an initial investment of around 50-100 million dollars.

The sources in Sindh Mines and Mineral Development Department told Business Recorder on Tuesday that initially, the department had allocated an area of 1,000sq-km to Zaver Mining Company, a subsidiary of Hashwani Group, to carry out mopping up for one year.

The company plans to start exploration with the help of satellite images and latest geological, geophysics and geo-chemical technology, the sources said. The successful reconnaissance will lead to the exploration and development of metallic minerals, the sources added. A memorandum of understanding (MoU) was singed between Directorate General of Mineral Development, Sindh Mines and Mineral Development Department and Zaver Mining Company on October 29, 2007 to develop the deposits and produce gold and other minerals in the area.

The geological map of Sindh reveals East of Thar Desert has exposures of very old rocks, which have been found containing huge deposits of metallic minerals. The sources hoped that the exploration of metallic mineral particularly of gold and silver and their import would earn precious forex for the country.

Business Recorder [Pakistan's First Financial Daily]

 

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SBP to keep a wary eye on export finance loans ​

KARACHI (December 20 2007): The State Bank of Pakistan (SBP) has taken stern notice of misuse, by exporters, of loans under export finance scheme and has advised banks to ensure utilisation of the loans for right purpose. The State Bank said it had received complaints that exporters were not utilising for export purpose the loans obtained from banks under EFS.

Under the EFS, SBP disburses over Rs 100 billion annually soft loans at interest rate of 7.5 percent as compared to over 10-15 percent interest charged on other loans: Under the EFS, SBP disburses over Rs 100 billion annually soft loans at lowest interest rate of 7.5 percent as compared to over 10-15 percent interest being charged on other loans, banking sources said.

They said that it had come to the knowledge of SBP that exporters were using these soft loans for hoarding different commodities or in some other businesses. Therefore, the central bank has taken serious notice of the complaints regarding misuse of export finance loans and has instructed the banks to ensure utilisation of the funds for the purposes they are disbursed. In this regard, the SBP on Wednesday issued MFD Circular No 07 to Presidents, CEOs and country heads' of banks.

"It has come to SBP notice that some of the exporters are not using their funds obtained from their respective banks at 7.5 percent for the purpose of execution of the export order," the circular said. This is violation of the instructions of the SBP under EFS as contained in Para 3 of Application/Undertaking for obtaining loan under EFS, SBP added.

SBP said that under these instructions banks are also required to ensure effective internal monitoring system to prevent diversion of funds for the purposes other than for which they have been availed. The central bank has also advised the exporters to avoid these types of practices and use the loans for their right purpose.

"Misusing practice of export loans by the exporters to gain interest arbitrage may attract imposition of fine; exporters are thus advised to avoid from the same practices," SBP warned in the circular. SBP has also advised to the banks that to make ensure that funds obtained under EFS are not utilised for purposes other than execution of export orders.

"However, we shall appreciate if these instructions are not used as a reason for denying export finance facility at 7.5 percent for transactions otherwise eligible under EFS," SBP told the banks. The outstanding amount under EFS stood at Rs 134 billion on June 30 2007 and before July 2007 complete amount of loans was distributed by SBP from its own resources.

However, the central bank has decided to gradually extricate itself from export refinance scheme and transfer it to the banks. Therefore, SBP has introduced some modifications, which have recently been announced in the Monetary Policy by amending the EFS rules and regulations.

On July 31, 2007 SBP had taken some measure under the monetary policy to curb inflation and some 30 percent share was diverted to the banks. Therefore, it expects that banks will provide Rs 40.2 billion loans from their own resources to exporters under the Export Finance Scheme (EFS) during fiscal year 2008, as the central bank has refined composition of EFS by setting the 70:30 ratio.

Business Recorder [Pakistan's First Financial Daily]

 

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Barclays granted license to operate in Pakistan ​

KARACHI (December 20 2007): The State Bank of Pakistan has granted license to Barclays Bank Plc, UK, to start banking operations in Pakistan. SBP Governor Dr Shamshad Akhtar handed over the license to Chief Executive of Emerging Markets, Global Retail and Commercial Banking, Barclays Bank, Ahmed Khizer Khan, at a simple ceremony held at the SBP on Wednesday.

Khizer announced the appointment of Mohsin Nathani as country head and Managing Director of Barclays in Pakistan. Speaking on the occasion, Dr Akhtar said the entry of Barclays in Pakistan would not only strengthen the banking system of the country, but it would also bring a significant amount of foreign direct investment (FDI) to the country and technology to launch innovative financial products.

The Governor highlighted the speed and efficiency with which both the SBP and Barclays concluded this deal. Referring to the Barclays' extensive network and experience, she said looked forward to Barclays as a partner in development of Pakistan, which would gear itself in due course to enhancing the competition and efficiency in the banking system.

Dr Akhtar said the entry of Barclays in Pakistan reflected the confidence of foreign banks in the coutry's banking system. She further said that in line with the recently released Financial Stability Review, Pakistan's banking system had illustrated its capability to be a strong and robust system, which had great prospects and potential to grow given the retail market of this country as captured by its population base and growing per capita incomes. Pakistan's banking assets in the last five years had grown from Rs 2,223 billion to Rs 4,884 billion; advances from Rs 1,062 billion to Rs 2,603 billion; and deposits from Rs 1,678 billion to Rs 3,691 billion, she added.

Barclays will be established in Pakistan as a foreign banking company and operate in a branch mode with a capital of 100 million dollars and will initially set up 10 branches in various cities of the country.

The issuance of license to the Barclays will add to the presence of foreign banks. It will be the seventh foreign bank operating in Pakistan in a branch mode in addition to a number of foreign banks, having locally incorporated subsidiaries. As per the agreement of the license, Barclays will need to comply with the SBP guidelines if it plans the conversion of its status from branch mode to a local subsidiary.

Barclays has established a track record of successful and sustainable banking operations across the world. The Pakistani operations will benefit significantly from the synergies and knowledge that Barclays, as one of the largest financial service providers, can offer. Further, their presence in the market will translate into superior customer service and also contribute to financial inclusion and modernisation.

Barclays Bank Plc, the second largest global bank in assets size with a regulatory capital of 68.138 billion dollars, is a subsidiary company of Barclays Plc Barclays Plc is listed on London, New York and Tokyo stock exchanges.

Barclays Bank is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. The bank operates in over 50 countries employing 123,000 people and has customer/client base of over 27 million. Barclays Bank and its companies operate 3,913 branches in over 50 countries.

Business Recorder [Pakistan's First Financial Daily]

 

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Neelum-Jhelum power project awarded to Chinese firm ​

LAHORE (December 20 2007): Water and Power Development Authority on Wednesday awarded contract of 969 MW Neelum-Jhelum hydroelectric project costing Rs 90.9 billion to a top class Chinese firm to be executed by 2015.

Speaking on the occasion after the singing ceremony, Wapda Chairman Shakeel Durrani said the total cost of the project is Rs 128 billion, which also includes acquisition of land and other expenditures.

He said 5.15 billion units worth Rs 25 billion will be produced annually with excellent 26 percent rate of return which is highest than all other existing projects in the country. About the funding, Shakeel said Rs 60 billion will be arranged by the Government of Pakistan and Wapda while the remaining will be managed through banks. Regarding the security of staff at the site, he said foolproof arrangements have already been made at all under-construction projects across the country.

He said energy is the basic ingredient of development of a country. The fast-growing energy requirements in Pakistan needed to be met to achieve full economic and social development.

The chairman said the government is focusing on the development of indigenous hydropower resources, as Pakistan possessed colossal potential, which can be fully exploited on long-term basis for provision of power at much lower costs. Member (Water) Muhammad Mushtaq Chaudhry, Member (Power) Fazal Ahmad Khan and other senior officials of both the stakeholders were present on the occasion.

Business Recorder [Pakistan's First Financial Daily]

 

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Oil and gas production remains stagnant ​

ISLAMABAD (December 20 2007): The efforts by the government to exploit natural carbon resources for increasing indigenous share have been a failure as total local oil and gas production has remained stagnant during 2004-05 to 2006-07.

An official report, giving comparison of last three fiscal years' oil and gas production, indicated that Pakistan's total oil production in 2004-05 was 66,079 barrels a day.

It declined to 65,577 barrels a day in 2005-06. The quantity indicated upward trend in 2006-07, touching 67,438 barrels level, but it did not have any considerable impact to help Pakistan get increased share in total consumption and cut down import in terms of volume and cost.

Gas production also did not show any increase, in contrast to government claims that it was doing a great job by finding new carbon reserves. The report mentioned that domestic gas production in 2004-05 was 3.685 mmcfd and it went up to 3.838 mmcfd in 2005-06. It did not show any increase in 2006-07 and remained stagnant at 3.877 mmcfd.

LPG production increased from 1051 tons in 2004-05 to 1462 tons a day, showing a healthy trend, to supplement the rising domestic consumption. However, it fell almost flat as next years per day production was 1523 tons.

This period was important for oil and gas sector as the government gave a number of lucrative incentives to the exploration and production (E&P) companies and approved ambitious exploration programme for public sector companies with the hope to get increased local share in total production and consumption.

Oil and gas sector experts say that domestic oil production ranges between 60,000 and 66,000 barrels a day for the last many years. It experiences phenomenal decline, or increase, depending on E&P companies' activities. But this trend could not be considered as a major achievement to increase domestic oil and gas production.

They say that Balochistan and upper region of NWFP were two areas which could make a difference for Pakistan in terms of oil and gas production, but exploration activities were almost abandoned in these areas--due to security reasons.

Business Recorder [Pakistan's First Financial Daily]

 

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China to bid for Software Development Park​

BEIJING, Dec 19: China will participate in the bidding for Software Development Park in Lahore.

A Chinese delegation visited Pakistan to examine the setting up of Software Development Park on BoT basis and submitted its findings to the Ministry of Information and Industry (MII), China.

The Counsellor Technical Affairs at Pakistan Mission, Syed Ai Tallae also accompanying the Chinese delegation said after holding meetings with the Chinese side here, they were convinced to participate in the tender.

He said the delegation informed him that after visit and meetings they understood the working procedure and now convinced to participate in the development of Park.

“It is expected that Chinese side will participate in the BoT tender for IT Park to be set up in Lahore”, he said.

The tender would be invited by the Pakistan Software Development Board, he said.

He said the government of Pakistan plans to set up software development parks in Karachi, Lahore and Islamabad.

To encourage investors, Ali Tallae pointed out that the government has offered various incentives including plan to offer free of cost land for the project.

Ali Tallae said a high-level Chinese delegation of MII is expected to visit Pakistan early next year to attend the second meeting of the working group for which Chinese side has already held a meeting with him.—APP

China to bid for Software Development Park -DAWN - Business; December 20, 2007

 

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Pakistan-China trade​

THE launch of the $200m Pak-China Investment Company should be regarded as a major push to the fast-growing economic ties between Islamabad and Beijing. The joint investment company will set up its subsidiaries to undertake projects in the financial, infrastructural, industrial, mining, manufacturing and other sectors of the economy in Pakistan. That is expected to usher in a new era of economic collaboration between the two neighbours. Pakistan’s economic and trade relations with China are evolving fast and the Free Trade Agreement, which became effective from July this year, is indicative of this trend. Bilateral trade has surged in recent years — the volume of trade went up to over $5bn in 2006 from $4.23bn in 2005 and a mere $875m in 2001. Chinese investment, though still very small in size, is also on the increase. The Free Trade Agreement is projected to triple two-way trade to $15bn in five years, and an agreement on services being negotiated under the FTA would further cement economic cooperation between Pakistan and China.

While the increase in bilateral trade is a sign of maturing economic collaboration, the current trade imbalance in favour of China is worrying many. Should we be concerned about this imbalance? It is our considered opinion that the current trade gap signifies the change in the source of imports into Pakistan from the West to China, which is anything but worrisome. At the request of Islamabad, Beijing is already taking action to bridge the trade imbalance by earmarking $200m for the import of goods from Pakistan. In addition, some conditions have been relaxed on the import of Pakistani fruit and vegetables. Enormous opportunities exist for Pakistani exports, particularly basic and finished textiles, to a country whose economy is growing at an amazing pace. The economic boom in China has raised the income levels of its population. Pakistan is the only major textile producer to have entered into an FTA with the world’s second largest economy. It is high time that Pakistani industry steps forward to capture the world’s largest market.

China intends to zero-rate yarn imports from July next year. It has already reduced import duty on Pakistani fabric and home textiles and plans to halve the duty on garments to eight per cent by 2010. Besides, Pakistani exports to China have also been declared exempt from import tax under the FTA. Yet Pakistan’s textile exporters are facing one problem: the 19 per cent value-added tax in China’s domestic market discourages direct textile exports to the mainland. Shipments are booked for Hong Kong and then smuggled to mainland China. This is an issue that needs to be taken up with Beijing. If Islamabad manages to convince Beijing to remove VAT on our textile exports, chances are that the balance will tilt in favour of Pakistan much sooner than expected.

DAWN - Editorial; December 20, 2007