The recently concluded SAARC economic agreements will, on the one hand, promote regional trade and, on the other, result in complementing each other member country's economy.
Pakistan, one of the two largest economies in South Asia is required to gear itself effectively seeking its due share in inter-and intra-SAARC trade in coming years.
In the present scenario of globalisation and regionalism of trade, it is imperative that Pakistan takes a fresh look at the existing bilateral trade with member countries, aiming at further promoting the relationship, mainly the industrial and technical co-operation, to the mutual long-term benefit.
Nepal, a landlocked country strategically located between India and China, offers opportunities for the export of engineering goods and technical services from Pakistan.
Though still a poor and least developed country, with a population of 26.47 million (July 2003), it is rich in natural resources that have not yet been exploited properly.
These include water, timber, quartz and small deposits of lignite, copper, cobalt and iron. Agriculture accounts for 40.6% of the GDP, and is the mainstay, as it provides livelihood for almost 80% of the population.
The agriculture produce consists of paddy (rice), sugarcane, maize, wheat, potatoes, millet, barley and jute.
Though modes, the industry has a 2l.8% share in the GDP. The manufacturing sector covers carpets and textiles, cement, ceramic, sugar, soap, jute goods, fertiliser, straw-board and iron products.
Its annual total exports are in the range of 600 to 700 million US dollars, and include carpets, pashmina (cashmere), garments, jute goods, raw jute and pulses. Nepal's imports, during the year 2003, were to the level of US dollars 1,600 million.
The imports include food, crude materials, chemicals, machinery and transport vehicles from India, China, Singapore, the UAE, Argentina, Japan, Saudi Arabia, Kuwait and Thailand.
Favourable economic policies have attracted foreign investment in the industrial sector from all over the world ie India, USA, Singapore, Norway, Germany, Switzerland, France, Denmark, Austria, the Philippines, Australia and Canada. The multinationals operating in Nepal include big names like British American Tobacco, Mitsui, Nestle, Hoechst, General Electric and Kvaerner.
Furthermore, Nepal enjoys technical collaborations and partnerships with various industrialised countries in the fields of power, food, textile, engineering and construction materials.
Pakistan remains non-representative in any of the industrial sectors of Nepal. Bilateral trade is virtually negligible.
Once a small order for the purchase of Pakistani auto-rickshaws was executed and perhaps, that is all. In the recent past, delegations from Nepal Chamber of Commerce and Industry, Federation of the Nepalese Chambers of Commerce and Industry, and Nepal Industrial Development Bank have visited Pakistan, on different occasions.
They availed the opportunity of visited various industries and satisfied themselves about the capacity and capability of our engineering industry, in particular.
Their general opinion was that the quality of our products was better than India's and the prices were more competitive. Few years ago, the Minister for Finance and Economic Affairs had led an official delegation to Nepal that was also accompanied by Pakistani businessmen.
A number of decisions were taken towards developing bilateral trade, and areas of interest were also identified. Sadly, a breakthrough could not be achieved, though the Nepalese were keen to develop an alternate source of supply and Pakistan did offer soft term loan for the export of its electrical and non-electrical goods.
In fact, Nepal presents significant prospects, even today, for the export of engineering goods, consultancy and engineering services from Pakistan, and we could capture a reasonable share of this non-traditional market.
Pakistan has recently secured a contract worth US dollar 15 million for the design of a 400-bed hospital and a health resort at Lalitpur (Patan).
Through implementation of its Industrial Policy 1992 the Nepalese Government has undertaken trade liberalisation, tariff rationalisation, tax reforms, financial sector reforms and other attractive features and incentives.
Nepal thus attracts capital - foreign as well as domestic - for investment in the industrial sector that is being developed for the reasons of import substitution and promotion of value-added exports.
These sectors include manufacturing (light engineering, electronics, cement, sugar, jute, leather and fertiliser), energy (hydropower, solar and wind), agro-based industry (food processing, fruit processing and dairy) and mineral processing (construction material, glass, processing of mica and quartz) and petroleum and natural gas.
As Nepal maintains a comparatively low cost structure, Pakistani private sector may find it profitable to establish joint ventures in Nepal in selected fields, such as textile.
Indeed, Pakistan can effectively participate in various projects for industrial development and infrastructure strengthening, currently undertaken by the government as well as private sector.
The government is committed to economic progress and prosperity, and has recently implemented salutary reforms in various sectors. Plans are underway to set up sugar mills of 2,000-ton cane-crushing capacity per day and an industrial alcohol plant (based on molasses) of a capacity 12,000 litres per day the cement industry requires modernisation and capacity expansion.
The textile industry needs up-gradation and diversification of its products. Nepal generates 2,087 million kWh electricity, mainly utilising hydel power, which is much more than its present consumption of 1,574 million kWh.
The balance electricity is exported to neighbouring countries. There is an enormous scope of exploiting hydro potential that is estimated to generate 83,000 MW of electricity.
To meet the future power demands of the industry and trade, various schemes for hydroelectric power generation are under implementation, at present.
Nepal's economy has been adversely affected in recent years by a number of factors, largely due to slump in tourism.
Yet, concerted efforts constantly being made by the government are showing results in improving its production, productivity and trade in all economic and industrial sectors.
The role of international donor agencies and organisations, such as International Monetary Fund (IMF), International Finance Corporation (IFC), World Bank, Asian Development Bank (ADB), Kuwait Fund for Development and Saudi Arabia Fund for Development, is of great significance in the progress of Nepal.
The international community practically funds more than 60% of its national development budget and 28% of total budget expenditure.
ACTIVE PROJECTS FINANCED BY THE IFC AND WORLD BANK, BESIDES THOSE RELATED TO THE EDUCATION SECTOR, INCLUDE THE FOLLOWING, WHICH INDICATE RESPECTIVE COMMITMENT AMOUNTS:
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Power Development USD 75.60 m
Project
Telecommunication 22.56
Sector Reform
Irrigation Sector Project 79.77
Road Maintenance 54.50
and Development
Financial Sector 16.00
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TECHNICAL ASSISTANCE: The World Bank targets economic and social progress in Nepal, as well as human development and growth. In this direction, the various projects in the pipeline include:
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Financial Sector 75.50 million
Restructuring Phase II USD
Nepal Education for all 50.00
Population and Health 50.00
Poverty Alleviation Fund 15.00
Rural Access 30.00
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IMPROVEMENT
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Rural Water Supply 25.30
and Sanitation
Terai Grand Water 21.80
Irrigation
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Similarly, Asian Development Bank has recently extended loans amounting to USD 321 million, over the next three years that will focus on funding rural and agricultural development, rural electrification, education and governance.
In addition, 12 million dollars are allocated for 29 projects, under the Technical Assistance Programme, aimed at capacity building and institutional strengthening.
The huge funding of ADB is reflected in the fact, that by the end of year 2002, it had offered a total of 99 loans to Nepal, amounting to two billion dollars.
The present activities undertaken, to the develop industrial, energy and infrastructure sectors, provide promising opportunities to Pakistan for the export of its engineering goods and services.
In the light of the above ongoing and pipeline projects in Nepal, the areas of interest are identified as under:
(i) supply of machinery and equipment for sugar mills, industrial alcohol plant, cement plants, tractors, mechanical workshops and transmission towers for electrification;
(ii) establishment of light engineering units for the manufacture of agricultural and industrial machinery;
(iii) construction of micro and small hydroelectric power stations upto 100 kW;
(iv) technical expertise and management services in the fields of cement, textile, electronics and hydropower generation, and
(v) engineering consultancy and advisory services for the development of power, telecommunication, irrigation, road building, water supply and other sectors.
Our engineering industry has credible references in the export markets for the supply of machinery and equipment for sugar, cement, light engineering and agro-based industries.
Similarly, National Engineering Services Pakistan (NESPAK) has valuable experience of preparation of feasibility studies, project planning, detailed designing, construction supervision and other services related to the industrial, communication, energy, environment and public health engineering sectors.
NESPAK, a leading consulting engineering company, is currently executing a number of projects in Oman, Afghanistan, Iran, Saudi Arabia, Azerbaijan, UAE and Yemen in various sectors.
Nepal can also be a promising market for our professionals and skilled workers, who could be engaged in various on-going projects.
It has a total labour force of 9.64 million, out of which 9.46 million, that is almost all, are employed. But the manufacturing and power sectors employ less than seven percent of the total employed work force.
Pakistan may also offer to impart training to Nepalese manpower in industrial fields and the education sector.
Given the right environment, Pakistan and Nepal have great potential for promoting substantive economic and trade relations.
The forum for bilateral co-operation exists under the umbrella of Pak-Nepal Joint Economic Commission.
Two regional economic agreements are also in place that can be availed for the promotion of trade and industry between Nepal and Pakistan.
South Asian Preferential Trade Agreement (SAPTA) was introduced in 1995, and the South Asia Free Trade Area (SAFTA) agreement is to be made effective by January 2006. In case necessary measures are adapted afresh to exploit the emerging opportunities in Nepal for the supply of engineering goods and technical services, it shall be to the mutual advantage of the two neighbouring countries.
It is high time that the Export Promotion Bureau of Pakistan takes the initiative in this direction, in the not too distant a future.
(Engineer Hussain Ahmad Siddiqui is former Chairman of State Engineering Corporation, Ministry of Industries and Production, Government of Pakistan)
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