China deepens business ties with Pakistan
By Syed Fazl-e-Haider
QUETTA, Pakistan - China stepped up its presence in Pakistan this week with the
opening on Monday of the Pak-China Investment Co Ltd (PCIC) in the business and
financial hub of Karachi to be followed with the establishment of offices in
northeastern Lahore, the second-largest city and capital of Punjab, on December
27. The move, aimed at boosting trade btween the two countries, comes amid
continued concerns over the safety of Chinese workers in Pakistan.
PCIC, established under the Pak-China Five-Year Development Program, will serve
as a window for the China Development Bank
to evaluate joint ventures between the two countries. The bank, which operates
under the State Council, or cabinet, is primarily responsible for funding large
development projects.
The countries are seeking to triple bilateral trade to US$15 billion in the
next five years from $4.2 billion in 2006 under a free-trade agreement signed
just over 12 months ago. They recently signed agreements worth around $300
million under which Pakistani products would be exported to China, involving 15
Pakistani companies and covering goods such as cotton, chrome ore, leather and
rapeseed meal.
The PCIC, established in July with paid-up capital of 4.25 billion rupees ($69
million) with the government in Islamabad a direct shareholder, will help
Pakistan to secure Chinese investment in various sectors and help Pakistani
exporters target openings in China, according to officials. The company will
perform investment banking business on a commercial basis.
Among other goals, Pakistan, estimated to have more than 780 million tons of
iron ore that contains 35% of iron, wants to import plant and machinery from
China for ore exploration to make the most of its natural resources and build
more steel capacity. The ore grade is similar to China-sourced ore, making
Chinese machinery compatible with Pakistan's needs.
Chinese investment is also being sought across a range of manufacturing, from
steel production, construction and earth-moving equipment to the auto sector.
Potential joint venture targets include naphtha cracker, oil refining and
hydropower projects, and coal mines. In agriculture, Islamabad has sought
backing to set up cattle, dairy and poultry farms and animal and poultry feed
manufacturing plants.
Pakistan is to establish separate industrial zones for Chinese investors in
Lahore and Faisalabad, both in Punjab province. The provincial government is
taking its own steps to welcome their northern neighbours, establishing a link
with the chief minister's offices for the convenience of Chinese investors to
ease hurdles and establish a favorable atmosphere.
The countries are boosting contacts as the 100 and more Chinese companies that
already operate in Pakistan remain worried over the safety of the roughly 3,000
Chinese engineers, technicians and entrepreneurs working there.
In July, three Chinese were killed in Peshawar, northern Pakistan, while in
February last year three engineers were gunned down with their Pakistani driver
in southwest Balochistan province, where they were helping to construct the
multimillion dollar Gwadar seaport, a joint venture by Pakistan and China.
Another three had been killed in Gwadar in May 2004 by a car bomb. Groups in
the area complain that they lack basic resources such as drinking water,
according to reports.
Also in 2004, kidnappers abducted two Chinese engineers working on a dam
construction project in South Waziristan province and threatened to kill them
unless several al-Qaeda members held by Pakistan were released. One was freed,
while one died in a rescue operation.
The poor law and order situation has persuaded some Chinese firms to limit
their interest in Pakistan. Three oil and gas service companies including Great
Wall, and BGP, a unit of state-owned CNPC, recently refused to sign new oil and
gas-related contracts to conduct seismic surveys and to supply rigs for
drilling in the country.
The free-trade agreement with Pakistan followed similar accords with the
Association of Southeast Nations and Chile.
Syed Fazl-e-Haider is a Quetta-based development analyst in Pakistan. He
is the author of six books, including The Economic Development of
Balochistan.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
