KARACHI, Nov 25: Pakistan and China have been the best of friends in the geo-political arena. But how far up the Great Chinese Wall has to be scaled on the economic front, has not really received a serious thought.
The strategic relationship of the two countries has still to mature into close economic ties. Be it bilateral trade, mutual investments (direct/ portfolio or both), joint ventures, aids/loans provided to each other, the gap between the potential and the real is wide.
Scores of formal agreements have pushed total trade volume between Pakistan and China from under $1 billion in 2000-2001 to about $5 billion by the end of 2006. India trade figures were better by a few million in 2000-2001. Today China-India total trade volume stands at $18 billion.
According to information collected from different sources there were about 145 private Chinese companies in Pakistan in 2003. After three years, in 2006 there are in all 52 Chinese companies left in Pakistan. Over the same period, according to our sources in Pakistan German Business Council, presence of German companies in Pakistan increased from 80 to 190. Same seems to be true for several other Western countries.
Except for National Bank of Pakistan no other Pakistani bank has any presence in China. Not a single Chinese bank has so far come to Pakistan.
The apex body of private sector Federation of Pakistan Chamber of Commerce and Industry (FPCCI) does not have any office anywhere in China. Its counterpart next door Federation of Indian Chambers of Commerce and Industry has number of sub stations in China.
Over the last few years West has aggressively penetrated deep into Pakistani society through specialised institutions, NGO sector and through direct contact between professional and traders. No firmed up data was available but there are several dozen organisations jointly manned by Westerners and Pakistanis specialising in issues related to corporate governance, competitiveness, etc. Chinese interaction has been comparatively limited.
These facts beg explanation. Why steps taken to bring economic actors on two sides closer have failed to persuade them into cashing on the opportunities?
Leaders of private sector here when contacted by Dawn expressed great enthusiasm. They admitted that this time round the government kept business class of the country fully involved in the process of defining the parameters of trade relations with China.
FPCCI President Chaudhry Saeed told Dawn from Islamabad that the chamber was in the process of opening the office in Shanghai. He felt that the private sector was oriented towards West and it would take some time before they re-evaluate and reposition their businesses to suit the changed rules of the game.
High profile exchange of visits over the last five years, particularly that of President Pervez Musharraf earlier this year and President Hu Jintao current visit with a 200-member strong delegation, has contributed to further solidify a relationship based on convergence of economic and strategic interests of two countries.
A peculiar feature of closer understanding during the current phase is added emphasis on the economic dimensions of relationship between two nations. It reflects realisation on both sides that in order to sustain a comprehensive relationship substantive economic cooperation was absolutely necessary.
Since 2001 when Chinese Prime Minister Zhu Rongji visited Pakistan, the two countries have signed some 60 trade agreements and MoUs. A joint declaration on direction of bilateral relations was signed during President Musharraf’s visit to China in 2003. It was a road-map determining the direction and scope of Pakistan-China bilateral relations clearly laying emphasis on expanding economic cooperation. Two countries also signed Preferential Trade Agreement (PTA) in November the same year.
In 2004 during Prime Minister Shaukat Aziz visit, besides signing number of trade agreements Pakistan announced ‘free market economy’ status for China. Reciprocating China committed to provide $150 million for Chashma Nuclear Power Plant (phase II).
During a landmark visit of Chinese Prime Minister Wen Jiabao in 2005, the two sides signed a treaty of friendship, cooperation and good neighbourly relations. Agreement on ‘Early Harvest Programme’ was also signed that has become operational since January 1, 2006. Under the agreement China has brought to zero tariffs on 767 items.
Two days back two countries succeeded in concluding the Free Trade Agreement (FTA) clearly reflecting willingness at the state level in two countries to enhance quantum of mutual trade.
For people of Pakistan, China is a time-tested friend that provides them with a variety of consumer items within their reach.
The ‘made in China’ products have penetrated deep into Pakistani market. There are questions asked about the quality of Chinese products but as an ex-Chinese trade commissioner said you get value for money spent. “You get what you pay for. Gone are days when China could not produce quality,” he said. “Today if you are willing to pay you can get good quality products made in China”.
There is no denying the fact that cheap Chinese products have driven many local manufacturers out of domestic market. Probably this has also led to creation of suspicion about China amongst local private sector.
An interesting feature is the fact that numbers of Chinese exports from China to Pakistan are much larger than numbers reflecting Pakistani figures of imports from China.
Still so long China’s formal trade with Pakistan has been a fraction of its trade with the rest of the world. On Pakistan’s side situation is still worse. With its trade oriented towards far off West China hardly figured till the year 2000 with hardly five per cent of Pakistani exports directed to destinations in China.
The world looked on with awe at evolving closer relationship between Asian dragon China and Asian elephant India. How long will it take for India and China to get rid of the legacies of past to foster ahead with full confidence is not clear?
What is crystal clear, though, is the fact that if Pakistan and China can cross over a few barriers, greater mutual economic integration has the potential to further improve Pakistan’s economic growth story in the region. It also raises the stakes for China as a world leader with its sphere of influence extending to Middle East and Central Asian states through the Pakistani Port at Gwadar.
