A worthwhile visit

Prime Minister Shaukat Aziz's recent visit to Japan has been very successful from an economic standpoint. The Japanese Government has pledged to revive the yen loans under the Overseas Development Assistance (ODA), suspended after Pakistan's nuclear tests seven years ago.
The total amount is estimated at $440 million; however, the first instalment towards its release as approved by the Japanese Cabinet amounts to $167 million for this year, inclusive of two loans and three grants. The loans are for Lower Chenab Canal Rehabilitation Project ($111.8 million) and Load Dispatch System Upgradation at National Power and Control Centre in Islamabad ($34.3 million). An 11 million dollars grant is earmarked for the establishment of an environmental monitoring system, a $6 million grant for flood protection in Lai Nullah basin, a dire need for the country that surfaced in the aftermath of the floods earlier this year, and a $5.8 million grant for the Children's Hospital Phase III.
The loans will be made at a concessional rate of return, 1.3% per annum, and the amortisation period will be 30 years, with a 10-year grace period. This lending is in line with the present government's declared policy of seeking foreign resources, at concessional rates, in an effort to upgrade the existing infrastructure projects and undertake new ones, which, in turn, are targeted to sustain the high growth levels that Pakistan has experienced in recent years.
The projects are also expected to increase employment opportunities in the country and improve the output of the manufacturing sector. Critics of the government may well maintain that the projects should have been more focused on poverty reduction given the rise in poverty levels in recent years, yet even they would be hard pressed to challenge the type of investments the ODA will make.
In addition, Japan has already indicated an interest in providing support to Karachi's urban sector together with Asian Development Bank. This was also noted by the Prime Minister in his Press conference. However there are issues in this particular assistance related to the refusal of the Sindh Government to get the loan directly from these lending agencies and in insisting that the federal government must be the borrower in this instance. One would have hoped that the Prime Minister would have resolved this issue prior to announcing it in the Press conference.
There is, of course, another element to our relations with Japan and that consists of private sector investments. Plants assembling a number of Japanese cars have been established in the country and the Prime Minister indicated that the Japanese car manufacturing companies in Pakistan have shown an interest in expanding their operations. This would no doubt be a reflection of an increase in demand for the cars in Pakistan and, therefore, the decision had little to do with the Prime Minister's visit and more to do with the perception of profit for these companies.
However, it has been noted that the cars assembled in Pakistan do not have the same security elements as those produced in Japan. One would have hoped that the Prime Minister would have mentioned this to the companies' top executives and requested that cars be made under the same specifications irrespective of where they are assembled. Finally, the Prime Minister said that several other Japanese companies had shown an interest in investing in refineries and hydel and thermal projects in Pakistan. However, indication of interest as we have learned from past visits by our heads of state and government abroad do not necessarily translate into investment. Be that as it may, the Japanese visit was a success and one would hope that the proposed visits in future would produce similar tangible results.