China to Invest in Pakistan's Export-Oriented Industries, Buy More Pakistani Products

The bulk of Pakistan's exports consist of low value commodities like chadar, chawal and chamra (textiles, rice and leather). These exports have declined from about 15% to about 8% of GDP since 2003. Pakistan's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable.  What must Pakistan do to improve it? What can Pakistan do to avoid recurring balance of payments crises?  How can Pakistan diversify and grow its exports to reduce the gaping trade gap? How can Pakistan's closest ally China help? Can China invest in export oriented industries and open up its huge market for exports from Pakistan? Let's explore answers to these question. 

Exports as Percentage of GDP. Source: World Bank
East Asia's Experience:

East Asian nations have greatly benefited from major investments made by the United States and Europe in export-oriented industries and increased access to western markets over the last several decades. Asian Tigers started with textiles and then switched to manufacturing higher value added consumer electronics and high tech products. Access to North American and European markets boosted their export earnings and helped them accumulate large foreign exchange reserves that freed them from dependence on the IMF and other international financial institutions. China, too, has been a major beneficiary of these western policies. All have significantly enhanced their living standards.


Pakistan Among World's Top 10 Textile Exporters. Source: Statista 


Chinese Investment and Trade:

Pakistan needs similar investments in export-oriented industries and greater access to major markets. Given the end of the Cold War and changing US alliances, it seems unlikely that the United States would help Pakistan deal with the difficulties it faces today.

China sees Pakistan as a close strategic ally. It is investing heavily in the Belt and Road Initiative (BRI) which includes China-Pakistan Economic Corridor (CPEC). A recent opinion piece by Yao Jing, the Chinese Ambassador in Pakistan, published  in the state-owned China Daily, appears to suggest that China is prepared to offer such help. Here are two key excerpts from the opinion piece titled "A community of shared future with Pakistan":

1. China will actively promote investment in Pakistan. The Chinese government will firmly promote industrial cooperation, expand China's direct investment in Pakistan, and encourage Chinese enterprises to actively participate in the construction of special economic zones. Its focus of cooperation will be upgrading Pakistan's manufacturing capacity and expanding export-oriented industries.

2. China will also actively expand its imports from Pakistan. In November, China will hold the first China International Import Expo in Shanghai, where, as one of the "Chief Guest" countries, Pakistan has been invited to send a large delegation of exporters and set up exhibitions at both the national and export levels. It is hoped that Pakistan will make full use of this opportunity to promote its superior products to China. The Chinese side will also promote cooperation between the customs and quarantine authorities of both countries to facilitate the further opening-up of China's agricultural product market to Pakistan. China will, under the framework of free trade cooperation between the two countries, provide a larger market share for Pakistani goods, and strengthen cooperation and facilitate local trade between Gilgit-Baltistan and China's Xinjiang Uygur autonomous region. And China will take further visa facilitation measures to encourage more Pakistani businesspeople to visit China.

Pakistan's Role:

Pakistan needs to take the Chinese Ambassador Yao Jing's offer to increase Chinese investments and open up China's market for imports from Pakistan.  Pakistan's new government led by Prime Minister Imran Khan should take immediate steps to pursue the Chinese offer. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen to develop a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries. Pakistan must make full use of its vast network of overseas diplomatic missions to promote investment and trade. 

Summary:

 Pakistan's exports have declined from about 15% of GDP to about 8% since 2003. The nation's trade deficits are growing at an alarming rate as the imports continue to far outstrip exports. This situation is not sustainable. Chinese Ambassador Yao Jing has offered a helping hand to increase Chinese investment and trade in Pakistan.   Pakistan's new government led by Prime Minister Imran Khan should take the Chinese Ambassador's plan seriously. Finance Minister Asad Umar needs to form a high-powered team of top bureaucrats and leading businessmen on a comprehensive plan to attract investments in export-oriented industries and diversify and grow exports to China and other countries.

Comments

Riaz Haq said…
#US-#China Cold War is playing out in #Pakistan. So does it mean America & Pakistan are finally breaking up? The short answer is NO.Both states are fed up with each other, but they remain far too co-dependent to simply walk away. #Afghanistan #India https://qz.com/india/1377225/

What we are seeing instead is a tough and protracted re-negotiation over the terms of the relationship. The question of Pakistan’s role in Afghanistan is not necessarily the hardest issue; there might even be convergence given the greater realism in Washington, Rawalpindi, and Islamabad.

The far bigger question hanging over the Pompeo-Dunford visit is what India and Pakistan’s role will be in the emerging cold war between the US and China. Despite Pakistani hopes, China is not yet willing or able to spend what it takes to completely replace America as Pakistan’s primary strategic partner. US economic and financial cards remain hard to match, and the result, for the time being, is likely to be a series of compromises that are uncomfortable and dissatisfying for all parties.

The US government began paying Pakistan what it calls “Coalition Support Funds” (CSF) back in 2002, shortly after it began military operations against the Taliban. In theory, the CSF compensates Pakistan for specific costs incurred in deploying tens of thousands of additional troops to the Afghan border, and for the use of Pakistani airfields, ports, and roads to resupply American forces in Afghanistan.

In reality, the Americans treated the funds as a reward to cement a long-term commitment to its cause from the Pakistan Army in the face of deep and wide popular opposition over the violations of Pakistani national sovereignty and significant civilian casualties.

Pakistan has not yet retaliated by squeezing US supply lines to Afghanistan, but it has not scaled back its covert support to the Haqqanis or the Afghan Taliban either. However, this cycle of denial and punishment may have an end in sight. Caught between converging US and Chinese interest in a peaceful and stable Afghan endgame, the Pakistani military appears to be more open to a settlement that Washington DC could live with.

For that matter, the US has begun quietly negotiating with the Taliban without any of the preconditions it previously held. All of this is likely to form a major element of Pompeo’s meetings with the new government of Imran Khan and general Dunford’s discussions with army chief general Qamar Javed Bajwa.

There is no doubt that many in New Delhi are concerned the result might be a settlement that allows the Taliban to retain arms and gain a share of the national government, while still remaining tethered to Rawalpindi. This draws attention to the larger truth that US-Pakistan relations (and even US-India relations) are more inextricably impacted by the state of US-China relations than ever before.

Pakistan’s urgent need for up to $12 billion in relief from its looming balance-of-payments crisis dwarfs the question of military aid and constitutes the strongest source of American leverage. Given the Trump administration’s determination to use all available means of persuasion, it is particularly significant that the US has not linked the bailout to questions of Afghanistan or terrorism, but instead to China’s role in Pakistan.
Riaz Haq said…
Opinion: New government in Pakistan and future of CPEC
Zamir Ahmed Awan


https://news.cgtn.com/news/3d3d674d3345444d7a457a6333566d54/share_p.html


It has been announced that the Chinese foreign minister, Wang Yi, will visit Pakistan from September 7-9 at the invitation of his counterpart Shah Mehmood Qureshi. Wang Yi's visit will be very important as this will be his first trip to Pakistan since the general election there on July 25.

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Imran Khan constituted a nine-member high powered cabinet committee for the CPEC to be headed by the Minister of Planning, Development and Reforms Makhdoom Khusro Bakhtiar.

The members of the committee are Foreign Minister Shah Mehmood Qureshi, Minister for Law and Justice Naseem, Minister for Finance Asad Umar, Minister for Petroleum Division Ghulam Sarwar, Minister for Railway Sheikh Rashid and the PM's advisers on commerce, textiles, industry, production and investment.

The committee will focus on the CPEC and its related issues. It is a very high level and powerful committee which will focus on the progress of the projects in various areas of energy, infrastructure and industrialization.

More emphasis will be given to special economic zones (SEZs). The prime minister also has constituted several other committees on various areas like energy and privatization and an economic council.

The new government is aware of national issues and priorities. Economic development is at the top of the agenda. The CPEC is the mode of economic development in Pakistan. The government is giving China a very high priority and committed to turning CPEC into a more beneficial and fruitful endeavor for both countries.

The new government is in the stage of planning and consultation. The federal cabinet may be expanded and the induction of professionals and advisers in various positions in government are ongoing, as only a strong team can take the nation out of the crisis.

The new Minister of Planning, Development and Reform, Makhdoom Khusro Bakhtiar, held an important meeting with the Chinese Ambassador to Pakistan, Yao Jing, to discuss Pakistan-China relations and the future of CPEC.

The minister stressed the importance of creating more and more employment opportunities for the local population which he wished to tap through CPEC. They discussed how to implement China’s development model in Pakistan.

Tourism, industrialization and agriculture were identified as priority areas. Development of SEZs is in the planning stage and close consultation is going on with the Chinese to learn from their experience.

The Chinese ambassador assured the minister that he will request his government to bring Chinese investors to Pakistan to aid Pakistan's economy.

In fact, the new Government is more serious on CPEC and giving it very high importance. The Chinese side has been requested to extend its best possible cooperation to the new government and make the best use of new incentives and policies for the benefit of both countries.

A stronger and prosperous Pakistan, with Chinese assistance, may be more proud of China too. Let the two “Iron Brothers” enhance cooperation and set up an example of international friendship and cooperation for the rest of the world.
Riaz Haq said…
CPEC spurs Pakistan’s industrial growth, up by 5.4% in FY18

https://dailytimes.com.pk/286581/cpec-spurs-pakistans-industrial-growth-up-by-5-4-in-fy18/

The country’s large scale manufacturing (LSM) sector has witnessed growth of 5.38 percent during the fiscal year 2017-18 (FY18) compared to the corresponding period of last year, but, below the government’s FY18 target of 6.3 percent.

LSM grew 3.13 percent in 2015-16, 3.38 percent in 2014-15, 5.39 percent in 2013-14, 4.28 percent in 2012-13 and 5.6 percent in 2016-17.

The factors, according to the central bank, which facilitated LSM growth mainly included increased capacity utilization due to ease in energy supplies; high credit off-take owing to low interest rates; output stimulus in associated industries due to widespread construction activities; and an improved business environment on the back of CPEC related projects and favorable law and order situation.


Construction allied and consumer durable industries registered a notable growth. However, sugar industry was not able to capitalize on record sugarcane production; in stark contrast to last year, when it was the main driver of LSM growth.

The Quantum Index Numbers (QIM) of large scale manufacturing industries was recorded at 147.07 points during July-June 2017-18 against 139.55 points during same period of last year, according to latest data of Pakistan Bureau of Statistics (PBS).

The State Bank of Pakistan (SBP) said industrial production has witnessed the highest growth in the current fiscal year since FY08. The performance can be traced to noteworthy contributions from construction and manufacturing activities. Public sector development program (PSDP) and CPEC related expenditure have had a spillover impact on manufacturing sub-sectors such as steel, cement and automobiles. However, the industry could not achieve the growth target set for FY18 on account of a lower increase in gross value addition (GVA) by electricity generation and gas distribution.

The highest growth of 13.24 percent was witnessed in the indices monitored by Oil Companies Advisory Committee (OCAC) followed by Ministry of Industries with 5.04 percent and the indices of Provincial Bureaus of Statistics (PBOS) with 4.4800 percent.

On month-on-month basis, the industrial output increased by 0.51 percent in June 2018 compared to June 2017 while it decreased by 8.30 per cent if compared to May 2018.


Meanwhile, the major sectors that showed growth during the said fiscal compared to same period of the previous year, included textile (0.38 percent), food beverages & tobacco (2.78 percent), coke and petroleum products (13.24 percent), pharmaceuticals (2.94 percent), non metallic mineral products (11.04 percent), automobiles (17.78 percent), iron and steel products (21.78 percent), electronics (32.43 per cent), paper and board (9.38 percent), engineering products (7.58 per cent), and rubber products (6.21 percent).

On the other hand, the industries that witnessed negative growth include f, chemicals (0.23 percent), fertilizers (9.88 percent), leather products (0.19 percent), and wood products (37.75 percent).

The provisional QIM is being computed on the basis of the latest production data of 112 items received from sources including Oil Companies Advisory Committee (OCAC), Ministry of Industries and Production (MoIP) and Provincial Bureaus of Statistics (PBoS). OCAC provides data of 11 items, MoIP of 36 items while PBoS proved data of remaining 65 items.
Riaz Haq said…
50 Auto Factories' Production Improved With JICA Support

https://www.urdupoint.com/en/business/50-auto-factories-production-improved-with-j-425957.html

Small and Medium Enterprises Development Authority (SMEDA) has improved production systems of 50 Auto Factories with the support of Japan International Cooperation Agency (JICA).

Small and Medium Enterprises Development Authority (SMEDA) has improved production systems of 50 Auto Factories with the support of Japan International Cooperation Agency (JICA).

SMEDA Chief Executive Officer Sher Ayub disclosed this here Wednesday while commenting on second term of SMEDA-JICA joint project being run for technical support of auto parts manufacturing industry in Pakistan.

The project, he said, was being conducted in coordination with Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM).

He acknowledged services of the Provincial Chief SMEDA-Sindh Mukesh Kumar to make this project successful in close coordination with PAAPAM.

He said that Auto sector was one of the rapidly growing sectors in Pakistan. Its contribution towards the national economy in the form of technology transfer, employment and revenue generation is visible, he said and pointed out that the sector had a significant room to further improve quality, bring innovation and flexibility of manufacturing system which is being addressed with the support of JICA. He observed that Japan's technical support had helped the local auto parts manufacturers to get prepared for export market by improving quality and productivity of their products, as per world's requirements.

Earlier, at a ceremony held at PAAPAM Office, the SMEDA (Sindh) Provincial Chief Mukesh Kumar gave a briefing on the activities to be conducted under second term of SMEDA-JICA joint project for technical support of Auto sector in the country.

Yoshihisa Onoe - senior representative of JICA Pakistan Office, Hiroshi KANEKI - Chief of JICA Technical Team, Hiroshi SASAKI-Deputy Chief of JICA Team, Ikuta, Ishitaki, Sato (JICA Experts) and Muhammad Ashraf Sheikh, Senior Vice Chairman PAAPAM also spoke on this occasion.

Yoshihisa Onoe-the Senior Representative of JICA, in his address, assured to continue the technical support for Pakistan's industry to compete in the world market in terms of technical know-how and the modern manufacturing techniques.

He acknowledged that JICA's collaboration with SMEDA and PAAPAM had proved to be very useful for the local auto parts' manufacturing industry in Pakistan.

He was glad to note that productivity of the sector had increased to an optimal level, whereas, the rejection rates to be witnessed in the manufacturing processes had reduced to the lowest possible level. He said that the SMEs, engaged in auto parts manufacturing, had a great potential to compete the world market and assured to extend fullest technical support of JICA to impart the best practices being exercised in auto sector of the developed world.

Muhammad Ashraf Sheikh, Senior Vice Chairman (PAAPAM) appreciated SMEDA initiatives to get JICA's technical cooperation for auto parts industry.

He said that PAAPAM members had greatly availed of the assistance to increase their productivity and reduce rejection rates in their manufacturing processes. He urged SMEDA and JICA to continue the program even after completion of the set period.
Riaz Haq said…
#Pakistan's #PTI government led by #ImranKhan plans to review or renegotiate #CPEC agreements with #China. #Chinese FM Wang Yi visiting #Islamabad indicates #Beijing open renegotiating its 2006 trade deal with Pakistan. https://www.ft.com/content/d4a3e7f8-b282-11e8-99ca-68cf89602132

Pakistani ministers and advisers say the country’s new government will review BRI investments and renegotiate a trade agreement signed more than a decade ago that it says unfairly benefits Chinese companies.

The projects concerned are part of the $62bn China-Pakistan Economic Corridor plan — by far the largest and most ambitious part of the BRI, which seeks to connect Asia and Europe along the ancient silk road.

They include a huge expansion of the Gwadar port on Pakistan’s south coast, as well as road and rail links and $30bn worth of power plants.

“The previous government did a bad job negotiating with China on CPEC — they didn’t do their homework correctly and didn’t negotiate correctly so they gave away a lot,” Abdul Razak Dawood, the Pakistani member of cabinet responsible for commerce, textiles, industry and investment, told the Financial Times.

“Chinese companies received tax breaks, many breaks and have an undue advantage in Pakistan; this is one of the things we’re looking at because it’s not fair that Pakistan companies should be disadvantaged,” he said.

Wang Yi, Chinese foreign minister, who visited Islamabad at the weekend, indicated that Beijing could be open to renegotiating its 2006 trade deal with Pakistan. “CPEC has not inflicted a debt burden on Pakistan,” he told reporters. “When these projects get completed and enter into operation, they will unleash huge economic benefits.”

But Islamabad's second thoughts follow other recent setbacks for BRI, which is seen by many as a bid by China’s President Xi Jinping to extend Beijing’s influence throughout the world. Governments in Malaysia, Sri Lanka, Myanmar and elsewhere have already expressed reservations over the onerous terms of Chinese BRI lending and investment.

Imran Khan, the former cricket star who was elected Pakistan’s prime minister last month, has established a nine-member committee to evaluate CPEC projects. It is scheduled to meet for the first time this week and will “think through CPEC — all of the benefits and the liabilities”, said Mr Dawood, who sits on the new committee.

“I think we should put everything on hold for a year so we can get our act together,” he added. “Perhaps we can stretch CPEC out over another five years or so.”

Several other officials and advisers to the Khan government concurred that extending the terms of CPEC loans and spreading projects out over a longer timeframe was the preferred option, rather than outright cancellation.

Pakistan is in the middle of a financial crisis and must decide in the coming weeks whether to turn to the IMF for its 13th bailout in three decades, as pressure on the Pakistani rupee makes the burden of servicing foreign currency debt more onerous.

Asad Umar, Pakistan’s new finance minister, told the FT he was evaluating a plan that would allow Islamabad to avoid an IMF programme, which several people close to the government say would i nvolve new loans from China and perhaps also from Saudi Arabia.

Mr Umar and Mr Dawood both said Pakistan would be careful not to offend Beijing even as it takes a closer look at CPEC agreements signed over the past five years. Mr Khan was elected on a platform of anti-corruption and transparency and has pledged to publish details of existing CPEC contracts.

“We don’t intend to handle this process like Mahathir,” Mr Umar said, referring to the newly elected nonagenarian Malaysian prime minister who has warned about the risk of Chinese “neo-colonialism” Malaysia has cancelled three China-backed pipeline projects and put a showpiece BRI rail link under review.
Riaz Haq said…
#Chinese buying mission to visit #Pakistan. #Chinese Ambassador in #Islamabad: “Such buying missions will be of great importance for #Pakistani #exporters and the overall export growth of the country.” #CPEC #exports #trade #China https://tribune.com.pk/story/1803428/2-chinese-buying-mission-visit-pakistan/

Adviser to Prime Minister on Textile, Commerce, Industry and Production Abdul Razak Dawood has underlined the need for enhancing exports from Pakistan to China as well as to the global market.

“It will require better access to the Chinese market,” he said while talking to Chinese Ambassador Yao Jing who called on the minister on Friday.

The adviser emphasised that in addition to strong political affinity, Pakistan and China enjoyed excellent trade and commercial relations bonded further by the signing of the China-Pakistan Free Trade Agreement in 2006.

He added that agreement on the China-Pakistan Economic Corridor (CPEC) opened another dimension to the ever-growing trade and economic relations between the two countries.

Jing announced that a Chinese buying mission would visit Pakistan. “Such buying missions will be of great importance for Pakistani exporters and the overall export growth of the country,” he stressed.

Dawood appreciated China for organising the China International Import Expo, which would be held in November 2018 in Shanghai, and expressed gratitude for declaring Pakistan as the “Guest of Honour” during the event.

Both sides agreed to work more closely to build a brighter and prosperous future for the region
Riaz Haq said…
Joint venture: #Pakistan, #China firms to build $200m glass #manufacturing complex for production of premium, #export-quality #glass products in special economic zone. https://tribune.com.pk/story/1834085/2-joint-venture-pakistan-china-firms-build-200m-glass-manufacturing-complex/

Deli China and JW SEZ Group have joined hands for establishing a $200 million modern glass manufacturing complex in Pakistan for the production of premium, export-quality glass products.

In this regard, the groundbreaking ceremony was held at the Prime Minister’s Office where prominent businessmen, government officials and a Chinese delegation were present.

Commenting on the initiative, Prime Minister Imran Khan said initiatives like ‘Make in Pakistan’ were immensely important for the economic development of the country.
“We need to promote such initiatives and the government will fully support such projects which are aimed at producing jobs and boosting the economy,” he said. “This investment is an indication of foreign investors’ confidence in the market of Pakistan.”

Pakistan, China may sign deal for investment in agriculture

The two sides have established Deli-JW Glassware Company Limited for the project. Pak-China Investment Company is facilitating Chinese investment in Pakistan and is also assisting in financing the project.

The project will utilise natural resources in Pakistan and use latest technology to convert into glassware, float glass and other kinds of glass products.

The project will be set up in the Industrial City M-3, Faisalabad whereas the unit for the processing of key raw material will be set up in Risalpur, Khyber-Pakhtunkhwa.

Pakistan needs to improve competitiveness to attract FDI

The main glass manufacturing complex will comprise glassware manufacturing units, float glass units and other value-added glass products. The groundbreaking for phase-I of the project was held on Thursday and it will start production by the end of 2019.
Riaz Haq said…
Sock supplier for #Nike plans biggest #Pakistan private sector IPO. The company plans to raise as much as 6.8 billion rupees ($51 million) to expand its sock #manufacturing capacity by around 20 percent and enter the denim business. #exports https://www.bloomberg.com/news/articles/2018-11-09/sock-supplier-for-nike-plans-biggest-pakistan-private-sector-ipo via @markets

Interloop Ltd., which makes socks for Nike and Adidas, is planning Pakistan’s biggest ever initial public offering by a private firm.

The company plans to raise as much as 6.8 billion rupees ($51 million) to expand its sock manufacturing capacity by around 20 percent and enter the denim business, said Chairman and Co-Founder Musadaq Zulqarnain. It will offer 12.5 percent of the business in the sale, likely to take place in January, and is aiming to lift revenue by 77 percent over five years, he said.

“Our capacity is already full,” Zulqarnain said in an interview at the company’s head office in Faisalabad. Interloop can see more growth, so will “take that risk” to expand, he said.

The listing comes as Prime Minister Imran Khan tries to spark an export revival to make up ground that Pakistan has lost to low-cost manufacturing destinations like Vietnam and Bangladesh. The new government has announced plans to cut gas and electricity prices to support companies selling abroad, although the push has been criticized for relying too much on subsidies.

Imran Khan’s Answer to Pakistan’s Ailing Exports: More Subsidies

The Interloop offer will surpass the previous record for a private company, when Pakistan Stock Exchange Ltd. raised 4.5 billion rupees two years ago. There have been larger sales by state-controlled companies in Pakistan.

Interloop was founded in the early 1990s by Zulqarnain and his brother, Chief Executive Officer Navid Fazil. The company now employs around 16,000 people and makes more than half a billion pairs of socks a year. Revenue for the 12 months through June was 31 billion rupees, according to Zulqarnain.


The sale consists of 109 million shares that will be offered at a floor price of 45 rupees a share with a maximum price band of up to 40 percent, according to Shahid Ali Habib, chief executive officer at Karachi-based Arif Habib Ltd., the financial adviser to the transaction.

“They are one of the most well-managed companies in Pakistan, so they should not have a problem with demand,” said Amjad Waheed, chief executive officer at NBP Fund Management Ltd. in Karachi. “Investors are sitting with cash on the sidelines after the market drop over the past year.”
Riaz Haq said…
#Pakistan asks #China to diversify #investments, PM adviser Razzak Dawood says. Country wants more #Chinese money in #agriculture, #industrialization and #education. #CPEC https://asia.nikkei.com/Spotlight/Belt-and-Road/Pakistan-asks-China-to-diversify-investments-PM-adviser-says

So far, most CPEC projects have focused on power and infrastructure. But Dawood said the country has actually canceled some power projects due to them being "too large and unnecessary."

"Now, we are saying, 'No thank you.' Pakistan is asking China to look at industrialization, agriculture and education in line with the CPEC," he explained.

He said Pakistan have to diversify CPEC projects. After being criticized about its loan shark-like tactics related to the Belt and Road Initiative, China has been reconsidering its approach. An expert in Chinese politics pointed out, "Now the Chinese leadership is reviewing CPEC by mobilizing their research institutes. They are paying much more attention to the situations in recipient countries and their sentiment toward China."

Pakistan is going through hard times. The country has suffered a severe financial crunch due to huge expenditures on infrastructure, especially in the power sector, and too many imports of electrical equipment, steel products and other necessities related to the CPEC. As a result, its current-account deficit has skyrocketed and foreign reserves have dropped to their lowest level in four years.

In its latest outlook, the International Monetary Fund sees Pakistan's economic growth slowing to 4% in 2019. But Finance Minister Asad Umar recently pointed out that the economy is already on the road to recovery.

Dawood explained that Umar is not talking about growth rate, but about stabilizing the economy. "We will go through a period of lower growth for one or two years, then our economy will pick up," Dawood said.

Now, both domestic industrialists and foreign investors are closely watching the country's negotiations with the IMF over an $8 billion bailout package.

Dawood stressed, however, that Pakistan is not relying solely on the IMF. "We are approaching friendly countries, that is, Saudi Arabia, the United Arab Emirates and China, " he said. Pakistan has already confirmed receiving aid packages from Saudi Arabia and UAE.

According to Dawood, Pakistan "will make necessary arrangements" to overcome its current difficulties.

The country is also trying to meet the IMF's call for tax reform. Dawood noted Pakistan has introduced a reform package that includes simplification of tax layers and the rebalancing of direct and indirect taxes. "The informal sector does not pay tax, so widening the tax net is important," he said.

This autumn, the country launched the "Make in Pakistan" initiative to boost exports, cut the trade deficit and develop the country's skills. "We are giving incentives again to manufacturing in Pakistan. We also reduced custom duties, and are talking a lot to get market access to China, Indonesia, Malaysia and so on," he said.
Pakistan is pinning its export hopes on manufactured goods like motorcycles, tractors, refrigerators, washing machines and transformers. It also hopes to tap into the global demand for information technology products and workers. "We have around 35,000 technical graduates every year," Dawood pointed out. "We know competition is very tough, but now Pakistan is exporting $3 billion of IT services and software annually."

Regarding foreign investment in Pakistan, Dawood gave some examples. "Unilever, Coca-Cola, Telenor and Suzuki Motor have made investments. Now, Exxon Mobile has re-established its office in Pakistan after more than 20 years, and announced a $250 million investment."
Riaz Haq said…
Faisalabad based Interloop, world’s biggest socks maker and supplier to Adidas and Nike, raised Rs 5 billion in an IPO at Karachi stock exchange today

https://www.thenews.com.pk/print/443994-interloop-ipo-raises-rs5-025bln

Interloop Limited has successfully raised Rs5.025 billion through the largest private sector Initial Public Offering (IPO), placing itself among the top 50 companies listed on the Pakistan Stock Exchange (PSX) by market capitalisation, the company said on Thursday.


The company that supplies foot-hosiery to global sportswear giants like Nike and Adidas said, the two-day book building process was oversubscribed by 1.37 times with the price closing at Rs46.10/share.

The total demand received was Rs6,727 million against total issue size of Rs 4,905 million, oversubscribed by Rs1,822 million or 1.37 times.

Arif Habib Limited is the consultant to issue for the IPO, while Ismail Iqbal Securities has been the book runners.

The Interloop offer has surpassed the previous record for a private company, when Pakistan Stock Exchange Ltd raised Rs4.5 billion two years ago. There have been larger sales by state-controlled companies in Pakistan.

Interloop is one of the world’s largest hosiery manufacturers and has an annual turnover in excess of Rs30 billion.

The company in a statement said one of the main objectives for the IPO was to expand hosiery production by opening a new plant and simultaneously and entry into the apparel business by opening a denim plant in Lahore, for which land had already been acquired.

Interloop Ltd., which makes socks for Nike and Adidas, is planning Pakistan’s biggest ever initial public offering by a private firm.

The company plans to raise as much as 6.8 billion rupees ($51 million) to expand its sock manufacturing capacity by around 20 percent and enter the denim business, said Chairman and Co-Founder Musadaq Zulqarnain. It will offer 12.5 percent of the business in the sale, likely to take place in January, and is aiming to lift revenue by 77 percent over five years, he said.

“Our capacity is already full,” Zulqarnain said in an interview at the company’s head office in Faisalabad. Interloop can see more growth, so will “take that risk” to expand, he said.

The listing comes as Prime Minister Imran Khan tries to spark an export revival to make up ground that Pakistan has lost to low-cost manufacturing destinations like Vietnam and Bangladesh. The new government has announced plans to cut gas and electricity prices to support companies selling abroad, although the push has been criticized for relying too much on subsidies.


The Interloop offer will surpass the previous record for a private company, when Pakistan Stock Exchange Ltd. raised 4.5 billion rupees two years ago. There have been larger sales by state-controlled companies in Pakistan.


https://www.bloomberg.com/news/articles/2018-11-09/sock-supplier-for-nike-plans-biggest-pakistan-private-sector-ipo
Riaz Haq said…
#Chinese businesses pledges US$ 5 billion #investment in #Pakistan in next 5 years in sectors including #construction, #machinery, glass, #automobile, electrical, $power, #transportation, information #technology and #telecom among others. #CPEC #China https://www.business-standard.com/article/pti-stories/chinese-businesses-pledges-usd-5-bn-investment-in-pakistan-in-next-five-years-119071201256_1.html#.XSkTS6IVh9Y.twitter

Over 55 executives and CEOs of leading Chinese companies on Friday called on Pakistan Prime Minister Imran Khan and pledged to invest USD 5 billion in the cash-strapped nation over the next five years, according to an official statement.

The visiting Chinese business delegation represented various sectors including construction, machinery, glass, automobile, electrical, power, transportation, information technology and technological research among others.


"Chinese business executives expressed confidence in the business friendly policies of the government and committed to invest USD 5 billion over a period of five years in various small and medium size industrial sectors," the statement said.

Pakistan has so far received billions in financial aid packages from friendly countries like Saudi Arabia, China and the UAE during the current fiscal year.

During the meeting, Khan welcomed the Chinese delegation and stated that China has always been a trusted partner of Pakistan.

The sagacity, wisdom and vision of the Chinese leadership for peace & development, good governance and poverty alleviation is highly impressive and worth emulating, said Khan.

He added that the interest of Chinese companies towards investment and relocating business and industrial units to Pakistan reflected the trust of the Chinese side in the growing economy of Pakistan.

He said the Chinese side have a strong desire to translate Pak-China equation into a win-win economic partnership.

Our Government is facilitating investors and reducing impediments in ease of doing business'. Partnership with Chinese companies and their investment will reap multiple benefits for both the countries including employment generation, transfer of technology and economic growth," he said.

Talking about China-Pakistan Economic Corridor (CPEC), Khan reiterated that ambitious project will prove to be a game-changer with respect to enhancing trade activities and further cementing Pak-China relations.

The CPEC, which connects Gwadar Port in Balochistan with China's Xinjiang province, is the flagship project of Chinese President Xi Jinping's ambitious Belt and Road Initiative (BRI).

"Fast-track implementation of the CPEC projects is our priority for which a special unit is overseeing implementation of various projects in Planning Division," he said.

China's Ambassador Yao Jing said that Chinese investors have observed fundamental improvement of policies and facilitation of foreign investors in Pakistan.

"Chinese government will extend all possible support towards realising the vision of a strong, stable and prosperous Naya Pakistan, Yao said.

Riaz Haq said…
#China to provide duty-free market access to 90% of #Pakistani goods. It is estimated this will increase Pakistan’s #exports to China by $500 million, under the free trade agreement phase-II between two countries.https://www.thenews.com.pk/print/521491-china-to-provide-market-access-to-90pc-pak-goods

China will provide market access to 90% of Pakistani commodities at zero duty to help the latter correct trade imbalances. It is estimated this will increase Pakistan’s exports to China by $500 million, under the free trade agreement phase-II between two countries.


According to a China Economic Net’s report, China will invest $1 billion in 27 projects in education, health, agriculture, irrigation, human resource development and poverty alleviation sectors.

Official statistics show that the CPEC initiative has created 70,000 direct jobs for the locals in the past five years, and per capita income has increased by 23%. Based on incomplete statistics, 17 projects under CPEC paid taxes of $930 million to the Pakistan government. Pakistan’s GDP growth in the 2013-2014 fiscal year after the start of the construction under CPEC increased from 3.7% in the previous fiscal year to 4.14%, and has since then maintained growth, hitting 5.79% in the fiscal year 2017-2018. According to a recent report by the Economic and Commercial Counselor’s Office of the

Chinese Embassy to Pakistan, under second phase of CPEC, promotion of industrial cooperation on the basis of special economic zones will be a priority area, and investment in private sector and establishment of joint ventures will be encouraged. Recently, while meeting with Yao Jing, Chinese Ambassador to Pakistan, Muhammad Hammad Azhar, the newly-appointed Federal Minister for Economic Affairs of Pakistan, has reaffirmed his support for China and the China-Pakistan Economic Corridor (CPEC).

The envoy stated that Minister Azhar has rich experience in financial and economic work, and believed that he will lead the Economic Affairs Ministry to play an important role in the economic and social advancement of Pakistan.

China-Pakistan cooperation in energy has progressed rapidly in the past five years, seeing the completion and roll-out of seven energy projects which meet the electricity demand of 8.6 million households. In 2018, the Port Qasim Power Station and the Sahiwal Power Station combined to generate more than 16 billion kWh of electricity, accounting for a quarter of Pakistan’s generating capacity.

The Sahiwal Power Station was dubbed by the Pakistan government as a miracle in the country’s history of electric power. In the field of infrastructure, the Pakistani “Orange Line” rail transit project undertaken by the Chinese enterprise was put into operation in 2018, and it reduces travel time from two-and-a-half hours to 45 minutes, thus saving about 70% of the time for locals.
Riaz Haq said…
#CPEC 2.0 Focus on Boosting #Exports: Promotion of business to business relationship for #technological, #industrial investment & development to augment #Pakistan’s capacity to #export products, Says #Chinese Envoy to #Islamabad https://www.app.com.pk/pakistans-capacity-of-export-to-be-augmented-under-cpec-2nd-phase-envoy/ Associated Press Pakistan

Chinese Ambassador in Pakistan Yao Jing on Friday said that under second phase of China Pakistan Economic Corridor (CPEC), promotion of business to business relationship for technological and industrial development in order to augment Pakistan’s capacity to export was a priority area for the Chinese government.

He was speaking to Federal Minister for Economic Affairs Muhammad Hammad Azhar here at the minister’s office, said a press release.

The envoy congratulated Hammad Azhar on his elevation as Federal Minister.

The Ambassador reiterated commitment of his government to the strategic relationship with Pakistan and hoped that appointment of Federal Minister for Economic Affairs will further strengthen relationship between the two countries.

The Ambassador updated the minister on the progress made on account of implementation of CPEC related projects.

The envoy stated that in the second phase socio-economic sector projects, with grant financing for direct benefit of common man were also priority areas.

The minister stated that the CPEC is a flagship programme of Belt and Road initiative which is now entering into a new phase. He reiterated commitment of his government for implementation of next phase of CPEC for the benefit of people of Pakistan.

He acknowledged the historic relationship with China and the generous support it has been extending to Pakistan.

The minster also acknowledged the economic and financial assistance provided by China to Pakistan during difficult times. China’s position on the current situation in occupied Kashmir was vehemently appreciated.
Riaz Haq said…
China has given immediate duty-free access for 3,707 (45%) tariff lines. A further 30% of tariff lines will have duty-free access by 2030. Tariffs on 412 tariff lines will be reduced by 20% in five years while tariffs will remain at base year (2013) levels for 1,867 (20%) tariff lines.

https://tribune.com.pk/story/2266948/china-pak-ties-fta-ii-a-significant-milestone

CPFTA-II will significantly improve Pakistani exporters’ access to the $2 trillion Chinese import market and thus help address the country’s trade deficit.

The tariff structure applicable to Pakistan under CPFTA-II shows a marked improvement over CPFTA-I. On over 80% of CPFTA-II product lines that China imports, Pakistan is now offered tariffs that are lower than or equivalent to those applied to China’s main trade partners.

Tariffs on nearly 40% of CPFTA-II products that China imports have been reduced compared to CPFTA-I and 45% of the tariff lines are now being offered duty-free access to China. Potential items that Pakistan could export to China include seafood, garments, synthetic blankets and knitwear shirts.

“Focus on these items in exports to China can provide Pakistan with easy gains in the short to medium term,” said Khalil. In the long term, “Pakistan needs to export those items which China imports but Pakistan does not export at present,” he said.

As a starting point, Pakistan can gain market access for export of machinery, mechanical appliances, electrical equipment and parts, mineral fuels, optical, photographic and surgical equipment, plastics, vehicles and essentials.

Industrialisation in the country and production of these goods must be the top priority of the government in a bid to ease the burden of imports and gain access to the Chinese and other global markets.

Market demand

With this opportunity, a question arises whether Pakistan can produce goods according to demand in the Chinese market?

“In order to evaluate Pakistan’s ability to produce good-quality goods as per Chinese market demand, it is important to see it in the context of Pakistan’s trade performance in general,” suggested Khalil.

Pakistan’s global export performance has declined over the past two decades – reasons for this include low competitiveness and exports of low value-added and non-unique products.

Apart from the textile sector, Pakistan has largely lost the world market over the past five years. Low value-added products are the main hindrance in the way of meeting Chinese market demand.

“Industrialisation is the need of the hour for building capacity to produce sufficient goods, which can satisfy domestic and international demand,” said Khalil.

“There is also a substantial information deficit facing Pakistani businesses. Factors behind this include a lack of research on China, identifying Chinese partners and meeting regulatory requirements,” he said.

“In order to translate the improved tariff concessions into sustained exports, the government must address the issues related to capacity building amongst Pakistani businesses and issues pertaining to ease of doing business – both of which affect the ability to deliver orders of the scale required in China within the specified time,” said the former KCCI official
Riaz Haq said…
Pakistan’s trade deal with #China makes it an ideal re-exporting hub. #US companies can build #manufacturing facilities in #Pakistan and add value to #American goods there, enabling those goods to access the Chinese market as Pakistani #exports. #economy https://www.atlanticcouncil.org/blogs/new-atlanticist/biden-needs-a-new-pakistan-policy-this-is-what-it-should-look-like/

The United States cannot match China’s economic investment in Pakistan or in the region for that matter, but it can influence the direction Pakistan takes. That possibility is greater now than at any time in recent memory as there are significant changes to fundamentals that have long defined Pakistan’s strategic calculus.

First, the United States is no longer fixated on terrorism, which means it is no longer paying attention to Pakistan in the ways it did after the 9/11 attacks. Pakistan is keen to find new ways to engage the United States. These sentiments, exhibited at the highest levels of military and civilian leadership in Pakistan, are motivated by the pragmatic realization that the country can no longer take US interest for granted as the United States shrinks its presence in Afghanistan.

Pakistan has offered a new approach based on economic security that seeks collaboration with the United States on climate change, technology, and a host of other non-security issues. Translating this new approach into a reality is going to take a lot of work, as Pakistan falls short in keeping its own economic house in order.

This is related to the second fundamental change: the economy. Dwindling foreign aid, dips in labor remittances owing to the collapse of Gulf Cooperation Council economies, and decreases in Pakistan’s textile and manufacturing exports have put the country in dire straits. Pakistan has long borrowed to finance existing debt. That is no longer possible, and payments on its short- to medium-term debts are converging. Pakistan needs international assistance, preferably via loans and economic aid, and it must grow its exports to boost its economy. The United States should take note that under these circumstances Pakistan will be more open to policy compromises that could provide relief on these fronts.

Third, Saudi Arabia no longer serves as Pakistan’s strategic depth. After nearly five decades of close ties, Saudi Arabia is decisively distancing itself from Pakistan. Last year it canceled a three-billion-dollar loan after Islamabad complained about lack of Saudi support for Pakistan over Indian suppression in Kashmir.

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Fifth, the paradigm for India-Pakistan relations is changing. With Saudi Arabia, China, and the United States de-linking conflict between India and Pakistan from their respective relationships with those countries, Pakistan is being forced to reevaluate how it engages its traditional partners on the defining feature of its foreign relations with many countries: competition with India.

The cumulative effect of these five developments has been to unmoor Pakistan’s strategic calculus, leaving the country somewhat adrift and unsure of its standing and future direction. The changes introduce serious questions for policymakers. For example, what will the end of an Islamic foreign-policy paradigm mean for Pakistan-based militancy, which has long enjoyed the patronage of financiers based in Persian Gulf states? What will the distancing of China and Saudi Arabia from India-Pakistan tensions mean when the two neighbors come to the brink of nuclear war?

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