Pakistan and China have signed 27 agreements and MoUs - 14 in public sector and 13 in private sector - that will further deepen bilateral cooperation in diverse fields, including energy, trade, defence, space and technology. The signing of the accords marks further strengthening of the existing bilateral relationship between the two countries that has stood the test of time.
At a news briefing after the talks with his Chinese counterpart Wen Jiabao, Prime Minister Shaukat Aziz said the focus this time was on expanding private sector cooperation from the current $5 billion to $15 billion in five years. "We have re-energised the already strong mutual bonds, the effects of which will be witnessed soon," the Prime Minister said.
Some of the major public sector agreements include an accord between KSE and the Shanghai Stock Exchange (SSE), an MoU on construction of a cable system between China and Pakistan, a treaty on mutual judicial assistance in criminal matters, as agreement on implementation guidelines for five-year economic co-operation programme, an MoU between the National Development and Reform Commission (NDRC) of China and the Planning Commission of Pakistan.
Protocol-2 added to the agreement on avoidance of double taxation, an MoU on cooperation between the Ministry of Industries and Production and NDRC of China, a framework agreement between China National Space Administration (CNSA) and Suparco on furthering cooperation in space science, an accord on economic and technical cooperation and an agreement on establishing an engineering university in Pakistan.
Major private sector agreements signed on the occasion relate to the establishment of an automobile plant in Pakistan, construction of a new airport at Gwadar, the launching of power sector and dairy development projects, and closer collaboration in auto industry, real estate, and tourism. The two sides have also discussed cooperation in nuclear energy sector.
One of the reasons for expecting improvement in trade and Chinese investment is Beijing's directive to its state-controlled enterprises to import more Pakistani products and make more project-specific investments in Pakistan. Analysts believe that the engagement of private sectors of the two countries will prove the main engine of growth in bilateral relations in future.
In its trade relations with China, Pakistan has had a chronic deficit. This has been primarily due to China competing in almost all major sectors of Pakistan's export production which happen to be quite limited also. Secondly, Pakistan's business community has largely remained contented with the US and Western Europe as their export destinations, and has hardly ever made a serious effort to diversify exports.
Chinese Prime Minister Wen Jiabao's April 2005 visit is considered a landmark visit during which the two sides had signed 21 agreements and MoUs on cooperation in economic, defence, energy, infrastructure, social sector, health, education, housing and other areas. Under the agreement on Early Harvest Programme (EHP) China has brought to zero all tariff on 767 items. This was the first step towards establishing a free trade area between the two countries. It is envisaged that by the year 2008 Pakistan and China will be able to implement FTA covering 90 percent of the commodities.
The remaining 10 percent will be on the sensitive list of commodities. Meanwhile, trade between the two countries has registered constant growth, from $1.4 billion in 2001 to $3 billion in 2004, $4.25 billion in 2005 and $5 billion in 2006. Although the current trade balance in still heavily tilted in favour of China, the opportunities for Pakistani exports to China are growing.
According to available data, Pakistani exports to China registered an increase of about 39.2 percent in 2005. And it is expected that with the current rate of Pakistan economy's growth, bilateral trade will reach around $8 billion by 2008.
The economic ties between the two have rapidly expanded in recent years. The Chinese investment has been steadily increasing. China has made a valuable contribution to Pakistan's economic development, particularly in infrastructure building and the setting up of basic industries.
However, constant increase in Chinese exports to Pakistan has resulted in a persistent trade imbalance. Unfortunately, the mix of Pakistan's products exported to China is very small. Almost 80 percent of Pakistan's exports consist of cotton yarn and fabric. Therefore, there is need for diversification of exports from Pakistan in non-traditional items as this would lead to minimising the trade deficit.
Another cause of our trade deficit with China is growing imports of Chinese products. Since these are more economical, Pakistani businessmen tend to look at China as a primary source of imports. Pakistan has thus failed to tap China's billion-plus market. There is an urgent need for the government to pay heed to this extremely important facet of Pakistan-China economic relationship. The government should ensure competitiveness of Pakistani products so that these are able to compete in the Chinese market.
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