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Chinese investment in Pakistan

  1. Interview with Federal Minister for Petroleum
  2. Chinese investment in Pakistan
  3. Economics of production and costs

From Shamim Ahmed Rizvi, Islamabad
Jun 05 - Jun 11, 2000

China is determined to expand the existing economic and trade ties with Pakistan to a new level

The visit of the Finance Minister Shaukat Aziz to China to attend the meeting of Pakistan-China joint economic commission has proved highly fruitful. Of course the spade work for this success was done by Chief Executive Pervez Musharraf who visited China a little earlier amid an unprecedented reception. During the visit of the Finance Ministers the joint commission set up 3 groups of experts to explore the possibilities of Chinese investment of about Rs. 40 billion in Pakistan Railways rehabilitation programme, construction of Gawadar sea port and expansion and modernisation of Pakistan steel. Other areas of cooperation which have been identified are textile, agriculture and agrobased industry and infrastructure.

These decisions were taken at a high-level meeting between Chinese Minister for Foreign Trade Shi Guangsheng and visiting Pakistani Finance Minister Mr. Shaukat Aziz during the 11th session of the China-Pakistan joint economic, trade, scientific and technological commission. This was the first meeting on economic cooperation between the two countries in five years and is a follow up of the Chief Executive Gen Pervez Musharraf's visit to China in January this year. The two sides discussed several areas for cooperation and particularly focused on the rehabilitation of the Pakistan railway, the setting up of model farms with Chinese assistances, the transfer of agriculture technology to Islamabad, infrastructure projects like the Gawadar deep sea ports, the import of textiles machinery and the export of textile fabrics to China. Chinese technical and manufacturing experts have already visited locomotive and carriage factories of Pakistan and have evinced their keen interest in upgrading them to international standards.

At the meeting, Chinese and Pakistani officials pledged that the two sides would work together to bring bilateral trade and economic cooperation to higher level in the new century. Shi said that friendly relations between China and Pakistan have resulted in a mutually beneficial, friendly and cooperative trade and economic relationship. China pays great attention to its economic and trade ties with Pakistan, the minister was quoted as saying by the official Xinhua news agency. Shi stressed that China is determined to expand the existing economic and trade ties with Pakistan to a new level. He proposed that the two sides increase trade of commodities, select a few key projects for cooperation and explore new ways of cooperation. Aziz said that the relations between Pakistan and China are of historical and far-reaching significance, adding that the two countries should pay more attention to bilateral economic relations in the new century as they have conducted good cooperation in the political, economic, scientific and technological areas.

These are very positive developments. The three projects specifically identified — Railways Steel Mills and Gawadar port—are of vital importance for Pak economy. Pakistan Railways and Steel badly needed injection of fresh capital for the rehabilitation programme to save these giant organisations from total collapse and make them viable. Construction of Gawadar ports is going to play an important role in the development of our economic relations with Central Asian states who are keen to use Pakistan as hub for their import and exports trade specially the export of their huge surplus of gas and oil which they are planning to bring to Pakistan through pipe lines for exports to world over.

Despite all the progress made in road and air transportation the world over, railways still remain the most economic mode of transportation, at least for developing countries like Pakistan with a population of 140 million. But somehow along the way we lost track of priorities and got ourselves hitched to costly buses and planes as the preferred mode of travel, in the process sidelining our railways system. Overstaffing in the Pakistan Railways is only a small part of the problem afflicting the PR. The bigger problems have been mismanagement, ticketless travel and pilferage. But the biggest of them all has been the consistent failure of the successive governments since 1947 to make adequate investment in the railways to expand its capacity, improve its services and increase its reach. If this had happened over the years there would have been no problem of the PR being in a whimpering state as today. After reaching what appeared to the then governments to be a terminal point of sickness in early 1990s they got the bright but unrealistic idea of privatizing the PR in chunks. Only naive minds could have thought of this as a solution.

The Chairman of Pakistan Railways Lt. General Javed Ashraf (Retd) unfolded, what he described as, a comprehensive plan to selectively revamp, upgrade and improve railway facilities with technical assistance and credit financing from the Chinese government. A 17-member delegation of technical experts from China would arrive shortly to finalize the modalities for implementation the plan estimated at Rs. 7.7 billion.

Despite the bad experience faced by the Chinese in Saindak project, they, as good friends of Pakistan, have responded without any reservations to Pakistan's request for active assistance in the rehabilitation of Pakistan Railways. The new management inducted into the railways after the takeover of the present government on October 12,1999 has brought about a complete reversal of the previous plans which aimed at a phased privatization of the railways. The new Chairman appears to be determined to retain the railways, which has a history of over hundred years in the public sector although the organization has huge accumulated losses and worn out and obsolete facilities right from the line tracks to diesel engines, coaches, cargo wagons, telecommunication system etc.

The third group has been assigned the task of taking a closer look at the possibility of making Pakistan Steel economically viable through expansion. Here too we have lost a lot of time. The expansion should have taken place much earlier, say in the early 1980s when we had the resources to do this. At the time of its setting up it was made very clear by the Russians, who had provided the financial and technological help, that the steel mill would become economically viable only if its capacity is expanded from the original 1.1 million tonnes to three million tonnes. We did not pay any heed to this warning and in the mid-1990s, finding it almost impossible to control the accumulating looses, we started thinking of privatizing the mill. This again was unrealistic. Nobody in the country's private sector had the means, either financial or technical, to buy the PS and run it profitably. Then in the late 1990s, the Chinese public sector, which had the experience of running PS-like mills in its own country, offered to bring in the needed technical expertise and loans to expand the Karachi mill. For unexltained reasons the offer was not made use of.