Pakistan sees bumper Chinese investment last year
New deals in roads, energy and furniture sector likely to take place
China-Pakistan Economic Corridor (CPEC), linking Gwadar to China’s Western city of Kashgar, was viewed optimistically both by the local and foreign investors for the country. The investors are optimistic that the CPEC would generate economic activity, open vistas and investment and business opportunities for Pakistan and the region at large. Further, China’s access to the markets of South Asia and Middle East would be enhanced. The corridor would also diversify China’s energy routes, and lessen the country’s dependence on the Strait of Malacca.
As per estimates, the CPEC will be a channel for the Maritime Silk Route that imagines connecting three billion people in Asia, Africa and Europe.
Pakistan is seeing soaring foreign direct investment (FDI) with improved security and the start of several major energy and infrastructure projects as part of China-Pakistan Economic Corridor (CPEC). Large-scale investments by Chinese power companies have given a significant boost to Pakistan’s FDI figures in the past year.
The year 2015 was a bumper year for investment in the country that was largely due to the “China Effect”.
As per the data, Pakistan received 39 green field investments adding to an estimated $18.9 billion in 2015, and that China emerged as the top source country for investment in Pakistan primarily due to its investments in power. About 39 Greenfield capital investments are significantly higher than 28 projects for $7.6 billion in 2014.
A consortium of Chinese companies is going to bring a $3 billion investment fund to Pakistan. The Chinese investors are also studying to explore the possibility of launching a new airline after securing requisite government permissions.
Currently, the Chinese consortium “is actively pursuing investments in infrastructure, power, aviation and tourism sectors in Pakistan,” sources in Pakistan China Chamber of Commerce & Industry (PCJCCI) said. The PCJCCI’s vision is economic integration of two brotherly nations — China and Pakistan through increased regional connectivity for mutual benefit while its mission is to accentuate on the proliferation of bilateral trade between Pakistan and China, endeavoring the identification and eradication of potential deterrents in the expansion of trade and investment opportunities.
The PCJCCI is facilitating Chinese investment in the country by playing the role as a facilitator between the investors of two countries, an official of the entity said. Pakistan, he said, was now among this year’s global top 10 improvers in Doing Business. He said that Pakistan’s investment policy was designed to provide a comprehensive framework for creating a conducive business environment for attracting foreign direct investment (FDI).
The Chinese investors appreciate the vision of Prime Minister Nawaz Sharif which enunciates that economic prosperity is an offshoot of infrastructure connectivity and self-sufficiency in the energy sector. They said that the government had done immense work in infrastructure development and attaining energy self-sufficiency.
It may be noted that under its ‘go-global policy since 2000’, the Chinese government has been encouraging its domestic companies to invest overseas for sustaining their profitability and enhancing market share, while taking advantage of the country’s huge foreign exchange reserves. As per report, China has emerged as the third largest outward investor with an investment flow of $116 billion in 2014.
In Pakistan, energy sector alone attracted over 40% of total investment stock, whereas the other two sectors enjoy a share of 17.8% and 10.1% respectively. As far as the construction contracts are concerned, energy and transport sectors have a predominant combined share of over 76% in monetary values of contracts. China is indeed building other such economic corridors in South-East Asian and Central-Asian regions under its ‘one belt one road’ initiative. Building economic corridor is one part and attracting Chinese investments, on ground, is another story.
The economic corridor may facilitate investment flow; however, Pakistan needs to take into account the competitive nature of the investment business. It will be competing against more robust economies of emerging markets for Chinese money.
Brazil, India, Malaysia and Indonesia are some of the developing countries where Chinese investment stock is much larger than in Pakistan. Trade linkages of these countries with China are much deeper.
However, critics said that Pakistan needs to take a leaf from the connection between trade and investment. A still more work is to be done by our economic managers to facilitate foreign investment.
Vast scope in furniture investment
Mr Luo Qiang, leader of the high ranking visiting Chinese business delegation said that there was a vast scope for further enhancement of bilateral trade between China and Pakistan in furniture sector and private sector of two countries can establish joint ventures in the neglected areas for investment.
The leader of the delegation during visit to 6th Interiors Pakistan exhibition here at Expo Centre praised the quality of Pakistani furniture with calligraphic engravings and admitted the fact that the furniture items produced in the country have great demand in international markets. He also offered huge trade opportunities to Pakistani business community in furniture sector and invited Pakistani counterparts to visit China to tap all untapped areas of promoting trade and exports.
Mr. Luo Qiang said the purpose of their visit to Pakistan was to share experiences and exchange views with local business community and explore new opportunities of matchmakings with Pakistani counterparts. He said many Chinese investors were expected to set up industrial units in Pakistan under CPEC and they should give preference to local people in jobs that would help in reducing unemployment and poverty from the country.
He further said that both the countries share a border and have a collective population of more than 1.5 billion, but the trade activity between the two countries still needs a boost.
Talking about Pakistani furniture, he expressed that China may have a better market for high-quality furniture goods produced in Pakistan. He said that China was the largest trading partner of Pakistan and bilateral trade had surpassed $16 billion in 2015, which was encouraging.
He vociferously acclaimed Pakistani furniture designers and craftsmen and suggested that these experts should play their part in enhancing furniture exports.
“The country has excellent craftsmen and designers, who can virtually give life to a piece of wood,” he said, adding that Pakistani craftsmen should work in this particular area to earn much-needed foreign exchange,” he added.