Hong Kong – In Interview with Mr Lal Dino Mari Baloch — Honorary Investment Counsellor Board of Investment (BoI), Prime Minister’s Office Government of Pakistan-Hong Kong
How would you comment on Pak-China trade?
Lal Dino Mari Baloch: The trade between Pakistan and China has increased tremendously. Pakistan and China entered into trade relations in 1950s and have signed various agreements so far. The first formal bilateral trade agreement was signed between them in 1963. In 1982, Pakistan-China Joint Committee was established which was aimed at facilitating trade and technology. Both countries signed six MoUs on trade in May 2001. As a result, the bilateral trade between the two countries increased from US$ 1.07 billion in 1997 to US$ 4.26 billion in 2005.
China is ranked as the second largest export destination of Pakistan after the United States. Nevertheless, Pakistan’s exports to China are heavily concentrated in cotton and rice which accounts for 75 percent of Pakistan’s total exports to China. Notably, Pakistan’s cotton exports to China increased from US$358 million in 2006 to US$968 million in 2016. Further, China is amongst the top importers of Pakistani cotton yarn followed by Bangladesh.
China now occupies the largest share in Pakistan’s total imports (i.e. 29 percent), followed by the UAE (13 percent). These imports mainly include electrical equipment, high-tech machinery, nuclear reactors, iron and steel, organic chemicals, manmade filaments, etc.
In fact, more than half of Pakistan’s imports of electrical equipment and machinery come from China. A more lucid picture of these top import items from China may more aptly be captured when looked at the HS-2 import level data, as a substantial rise was exhibited in these products after signing of FTA in 2007.
Your comments on CPEC:
Lal Dino Mari Baloch: CPEC is a part of One Belt One Road (OBOR) and is a game changer project between China and Pakistan. China’s total contribution and investment in the China Pakistan Economic Corridor (CPEC) project was analyzed by Planning Commission’s Centre of Excellence (COE) for CPEC and it came to light that the investment will cross $100 billion by 2030.
The current projects that are going on and the upcoming new projects will add up the total contribution by China and it will definitely cross the $100 billion by 2030. Currently, the investments for CPEC projects have already pushed up from $55 billion to $62 billion.
Do you think the revised Free Trade Agreement between both the countries would help the economy of Pakistan grow?
Lal Dino Mari Baloch: China Pakistan Free Trade Agreement (CPFTA) was signed on 24th November 2006, which came into effect in July 2007. The prime objective of this agreement was to promote bilateral trade and provide enhanced market access to the products on reciprocal basis.
As per the Tariff Reduction Modalities (TRM), both sides offered each other elimination of tariffs on almost 36 percent of the total tariff lines during the first three years of implementation of Phase-I (which ended in 2012). The second phase of CPFTA negotiations started in 2013, which was aimed at further lowering tariffs and normalizing trade procedures. However, this phase is not yet concluded, and the negotiations on trade concessions are still underway.
As per recent revised FTA, out of the total 7,120 tariff lines, the Commerce Division held out an assurance to China to reduce duties to zero percent on 6,000 tariff lines while protection will be provided only to the remaining 1,120 tariff lines, mostly textile products. The duties will be brought down to zero in a period of 15 years in three phases. One-third of these tariff lines will be removed immediately, half of the remaining will be exempted from duties in the next five to seven years while the rest will be eliminated within 15 years. These are the benefits which both countries will avail for a longer period.
Your views on the economy of Pakistan:
Lal Dino Mari Baloch: Pakistan’s economy still has some challenges which are temporary problems. Pakistan’s recent devaluations of the rupee have been a boon for exports, which surged most recently in March this year.
The exports in the first nine months of FY 2018, which ends in June, were unable to keep pace with the ever-increasing imports, likely weighing on economic growth and stressing the current account deficit. Imports have risen quickly on the strength of domestic demand. Over all, the CPEC investments made the faster economic growth, which will have good impact to achieve the desired goals in the near future.
Your views on the Chinese investment in Pakistan:
Lal Dino Mari Baloch: Chinese investments in Pakistan are the historic investments in various sectors. An unprecedented Chinese financial and construction effort is rapidly developing Pakistan’s strategically located Arabian Sea port of Gwadar into one of the world’s largest transit and transshipment cargo facilities.
Beijing is developing Gwadar as part of the China-Pakistan Economic Corridor. Moreover, lots of state-owned companies, listed companies, private companies and individual investors from China are flowing their investments into Pakistan as their first choice.