Pakistan signs up for China's cash
By Syed Fazl-e-Haider
KARACHI - Chinese Premier Wen Jiabao left Islamabad on Sunday after a three-day official visit that included a commitment to invest about US$20 billion in Pakistan within the next three years and further agreement on private-sector trade deals worth about $15 billion.
Wen, who arrived in Islamabad on December 17 on his first visit there in five years, vowed to boost trade, investment and strategic cooperation with Pakistan. The signed agreements are of considerable importance to Pakistan, whose economy was dealt a big blow by catastrophic flooding this year and which suffers from sluggish foreign investment. China donated $229 million to help the country recover from the floods as well as granting Pakistan a soft loan of $400 million.
The scale of agreements, aimed at increasing bilateral trade to $18 billion by 2015 from about $7 billion last year, were larger than the $16 billion worth of deals China signed earlier in the week during Wen's visit with India, although trade between those two countries is targeted to double to $100 billion a year by 2015.
Agreements with Pakistan include improving the Karakoram highway, which links with China's Xinjiang province, development of oil, gas and mineral resources in Pakistan and help in building up the South Asian country's strength in the space industry, oceanology, and the electronics and heavy industries.
"The future of economic cooperation between the two countries is very bright," Agence France-Presse reported Wen as saying. "China is Pakistan's all-weather strategic partner."
While funds will flow from China to Pakistan, Beijing in return further strengthens access to a close, cheap source of natural resources to fuel China's growing economy and to the seas and trade routes of the Persian Gulf and Arabian Sea region.
As a sign of the importance of the relationship, Wen inaugurated a $35 million cultural center on the outskirts of Islamabad built as a monument to Pakistani-Chinese friendship. The countries have had diplomatic relations for nearly 60 years, and 2011 has been declared the "Year of China-Pakistan Friendship".
Almost 260 Chinese delegates and 150 representatives of Pakistan from different investment sectors participated in a Pakistan-China business cooperation summit, which concluded on Saturday. The two countries agreed to conduct currency swaps, which will help to promote bilateral trade, while the Industrial and Commercial Bank of China (ICBC), the world's second-largest bank, is to open branches in Islamabad and the southern port city of Karachi, Pakistan's financial hub. Analysts said that the presence of the bank in Pakistan would also help to enhance investment and trade dealings between the countries.
Agreements and memorandums of understanding relating to investment worth $10 billion are to be implemented under the public-private partnership basis while $5 billion of investment is to be undertaken under the private sector to private sector investment initiatives, according to the Associated Press of Pakistan.
In his address to the summit, Pakistani Prime Minister Yousaf Raza Gilani expressed hope that trade between the two countries would rise to between $15 billion and $18 billion over the next five years. Wen said China was aware of Pakistan's desire for cooperation to bridge the pressing supply-demand gap in its energy sector and would continue to cooperate in the peaceful use of nuclear energy with Pakistan.
Islamabad also wants to increase Pakistan's share of outgoing trade with China, which has global imports worth over $1 trillion, which Wen recognized by saying his country was aware of Pakistan's reservations about its low exports, a cause of a heavy trade imbalance. China has a $3.26 billion trade surplus with Pakistan.
China is Pakistan's second-largest source of imports and seventh-largest export market. The country has failed to improve its exports to its fast-growing northern neighbor, while, despite its weak economic performance, Pakistan has become an attractive export destination for China.
Pakistan plans to participate in 15 exhibitions in China and send eight trade delegations in a bid to improve its exports. The Trade Development Authority of Pakistan (TDAP) on Saturday launched a web portal to link businessmen and traders of Pakistan and China by providing information on various trade issues.
"Pakistan is focused on increasing exports to China, reducing the trade imbalance which is heavily in favor of Beijing," The Express Tribune reported Tariq Puri, chief executive of TDAP, as saying.
China-Pakistan relations have made considerable headway in recent years, and the leaders from both sides have kept frequent contacts and conducted effective cooperation in areas of trade and investment.
Local analysts believe Wen's visit is likely to open strategic transport links and trade doors between the countries and increase China's stakes in Pakistan, where China's investment has expanded from resources and home appliances to communications and finance.
Some analysts, however, contend that China's support to Pakistan will come at a price that could increase as Beijing moves closer to superpower status. China will expect Pakistan to be more forthright in counter-terrorism as Beijing has its own worries about militancy in western China, where it wants to develop Kashgar city into a major industrial and economic center.
"Pakistan can help China because of its geographical position, but it has to first control terrorism," Agence France-Presse reported local analyst Hasan Askari as saying. "China expects Pakistan to be a reliable partner in the region."
The countries in 2006 signed a free-trade agreement that came into effect on July 1, 2007. During the past two years, the volume of bilateral trade has increased about 30% annually, but it has largely been in favor of China.
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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