How to strengthen Pak-Japan economic ties

[Neo]

How to strengthen Pak-Japan economic ties

ARTICLE (June 15 2010): Traditionally, Pakistan has adopted a "West Look" policy in both economic and political arenas. One of the major factors in Japan's swift and unprecedented growth and development has been emphasis on regional trade. Pakistan since its inception, has miserably failed to explore and exploit the rich economic and technological opportunities which exists in Japan, which otherwise offers very profitable and conducive business and trade environment for Pakistani counterparts.

The friendly relationship between Pakistan and Japan more or less started from economic relations. In the 1950s and 60s, Pakistan exported raw cotton to Japan and it processed cotton yarn into fine cloth and exported them to Pakistan and other countries. I think it would not be untrue to say that Pakistani cotton played a pivotal role in economic rebirth of modern Japan, which is now the second biggest economy in the world, with a GDP of $5 trillion.

Japan started its economic assistance to Pakistan soon after the establishment of diplomatic relations in 1952; technical assistance in 1954, yen loans in 1961, and grant-in aid in 1970. The Pakistan resident office of Japan International Co-operation Agency (JICA) was established in April 1983 and Japan Bank for International Co-operation (JBIC) in October 1989.

Since then Japan has consistently played an important role in Pakistan's social and economic development as a major trade and investor as well as a major donor, the top donor since 1990 throughout the present. Till today, the total economic assistance by Japan to Pakistan amounts to 1.1 trillion yens ($11b) in which the major size is of Japanese soft yen loans for developmental projects (78%), project and non-project grants (19%) and technical assistance (03%).

About 30 plus Japanese corporations are successfully operating in Pakistan since inception with major investments in automobile sector (72%), followed by metal (8%), financial and banking services (6%) and thermal power (5%). However, this needs to be diversified and be attracted towards wind and solar power, ship-building, agro industry and mining. The Japanese investment has been consistent and steady rising to $131.2 m in 2008.

To tap the Japanese investments into Pakistan, in 2007 the government of Pakistan announced the establishment of an exclusive Special Economic Zone for Japanese investors (JSEZ). The major purpose was not only to attract Japanese investment and technology transfer into Pakistan, but to provide an opportunity to Japanese investors to best utilise Pakistani strategic geographical location to establish export oriented manufacturing industries to feed the lucrative and fast developing markets around Pakistan. The 2000 acres (900 hectares) "Japanese village" at Port Qasim in Karachi would provide not only host of tax incentives, exemptions and facilities, but would also ensure security and privacy to the Japanese workers and officials. The Pakistani offer has attracted many investors in Japan.

Establishment and development of an export-oriented automobiles, electronics, energy and machine industry in this zone for exports to the Middle East, CAS, Iran, India and Afghanistan is need of the hour. Therefore, the GOP must implement this plan and initiate immediate steps to provide it a concrete shape.

Japanese energy-related manufacturers must be attracted to help in overcoming the present serious energy crisis in Pakistan. Japanese investment in IPPs in 1990s was exceptional. Besides, hydro, thermal and coal sectors, other unconventional areas like windmill, solar and biogas sectors, having shorter gestation periods be explored. Similarly, besides automobiles, other unexplored sectors in mineral rich Pakistan are mining (oil and gas, coal, copper, graphite, marble, gems and stones), ship-building, agro industry like preservation and canning of high quality Pakistani fruits (40% of which are wasted due to lack of these facilities), mining, housing sectors etc in which Japan has an edge must be tapped and exploited with Japanese assistance.

Similarly, infrastructure development like roads and railways are important areas in which we can improve a lot. Japan assisted us in 47.6 billion yens Indus Highway and Kohat Tunnel Project recently and in railway electric locomotives project in 1960s (Lahore-Khanewal section). Presently, its assistance is being obtained for Karachi Circular Railway Rehabilitation and Modernisation Project.

Emphasis on non-traditional items for trade is essential to expand exports like value-added items like embroided cotton textiles, ladies designers fashion clothes, household merchandise like bed sheets, duvet covers, towels etc, gems, stones, jewellery, mineral salt, hygienic seafood, fruits like apples, watermelons, peaches, mangoes, grapes, citrus fruits, having a round the year markets. However, this requires transfer of technology from Japan in plucking, preservation and packing of fruits and vegetables to meet the required Japanese standards. Moreover, all these ventures have a greater margin of profit than any other country. Japanese, with a per capita income of $38000 only require superior quality products, uninterrupted supplies of goods and with no compromise on hygienic standards.

Close and constant contact with Japanese businessmen and investors is very essential. Barriers of language and distances needs to be removed through consistent liaison and regular communications through frequent bilateral visits of businessmen, holding of trade fairs and exhibitions in both the countries.

Initiative of Economic Wing of the Embassy to translate into Japanese language all the information about investment and business opportunities, regular visits to chambers of commerce in Japan and holding of seminars for dissemination of information is paying dividends. This needs official patronage of the Ministries of Foreign Affairs, Commerce and Economic Affairs, Board of Investment (BoI) and Trade Development Authority of Pakistan (TDAP) to further augment this effort.

The embassy of Japan in Pakistan is consulted in all economic and political matters and its recommendations are awarded a high priority by the government of Japan in all decisions. Therefore, it is imperative that all ministries must establish and maintain close friendly relations with their officials, both at Islamabad and Karachi, and provide necessary information and protocol to them in the best interest of Pakistan.

In administrative area, only a section officer looks after the Japan desk in Economic Affairs Division and an Assistant Director in the Ministry of Foreign Affairs, Islamabad.

In the last two years, I have never heard of any communication or instructions or any review meeting being held by the Ministry of Commerce. This is an ample reflection of how much importance we give to Japan in our economic relations and how serious we are to promote trade and investment. This needs to be immediately rectified with the posting of at least a Joint Secretary (BS-20) level officer at both the ministries with independent Japan Desks. Due protocol and importance is required to be provided to Japanese officials during their visits to Pakistan, which at present receives a cold shoulder and a lower level of protocol than what they deserve.

(The writer is Minister of Economic at Pakistan Embassy in Tokyo)

Business Recorder [Pakistan's First Financial Daily]