PAKISTAN'S TRADE TIES WITH TSUNAMI-HIT JAPAN
Mar 21 - 27, 2011
The massive 9.0-magnitude earthquake and consequent tsunami that recently lashed the Japan's northeast coast will cost its economy about $100 billion, according to Singapore's DBS Bank. The twin natural disasters have also damaged a nuclear plant, triggering an atomic emergency that authorities are struggling to contain.
Prime Minister Naoto Kan said the crisis was the country's gravest since the end of World War II. The Bank of Japan (BoJ) on Tuesday pumped eight trillion yen ($98 billion) into the financial system to soothe money markets shaken by the disaster, after injecting a record 15 trillion yen
Japan is the fourth largest investment partner of Pakistan and major sectors of Japanese investment are joint venture projects mainly in automobile sector, such as Pak-Suzuki Motor (Suzuki), Indus Motor (Toyota), Honda Atlas Cars (Honda), Gandhara Nissan Diesel (Nissan Diesel) and Hino Pak Motors (Hino).?
Pakistan's major exports to Japan are textile and textile articles and yarn, while major imports from Japan are motor vehicles and automobile parts and machinery. Power generators and textile machinery constitute the main proportion of machinery import.
A few weeks before the natural disaster hit Japan, President Asif Ali Zardari returned home from Tokyo with an offer of Rs14 billion interest-free loan and a host of investment commitments from Japanese companies including Yamaha's $150 million investment plan to set up a motorcycle manufacturing plant in the south Asian country. Zardari's three-day visit to Japan that concluded on February 23 took place at a time when his country continues to slide deeper into economic crisis after virtual derailment of the $11.3 billion loan program the country agreed to with the International Monetary Fund (IMF) in 2008. He also sought Japanese cooperation in civil nuclear technology, referring to Japanese firms, which are keen to export nuclear power generation technology and related equipment to India, which plans to build 20 new nuclear power plants by 2020.
Today, Japan is battling with a crisis triggered by damage to its nuclear plants. Japanese authorities warned radiation levels had become significantly higher around the nuclear power plant after explosions at two reactors. Japan reportedly informed the International Atomic Energy Agency (IAEA) that radioactivity was released directly into the atmosphere from the site of an earthquake-stricken reactor and that it had put out a fire at a spent fuel storage pond there. The Vienna-based IAEA said dose rates of up to 400 millisievert per hour have been reported at the Fukushima power plant site. The IAEA uses the unit to measure doses of radiation received by people. Experts say people get about 12 millisieverts from a standard CT (computed tomography) heart scan.
There are lessons for Pakistan, India and other countries struggling for nuclear power generation technology. The nuclear power plants without precise precautionary measures and safety mechanisms are dangerous. The developed country like Japan could not protect its nuclear plant from damage, as the tsunami swept away everything and destroyed every safety mechanism.
In an interview with the Japanese media in Islamabad ahead of his departure for a three-day visit to Japan last month, President Zardari said that since Japan was negotiating a deal with India to cooperate on peaceful uses of nuclear energy, the similar cooperation should be extended to his country.
"If Japan is willing to cooperate with India in nuclear technology and (is) giving nuclear technology for peaceful purposes, I do not see any reason why we should not deserve the same," APP quoted Zardari as saying.
Zardari held in-depth discussions with Prime Minister Naoto Kan and the two leaders decided to enhance mutually beneficial economic and trade interaction through establishment of Japan-specific industrial zones in Pakistan. A soft loan of Rs14 billion has been offered to Pakistan for rebuilding of the flood-hit areas in Khyber Pakhtunkhwa province. No detail of talks on civil nuclear cooperation however came in the joint statement of two leaders.
Visiting Zardari invited Japanese investors and giant business houses to avail investment opportunities in the proposed Japan Special Economic Zone (JSEZ) established exclusively for Japanese investors offering them concessions to freely export their produce from strategically located Pakistan to other countries in the region. Japan announced in September 2009 to commence construction of the JSEZ at village Dhabeji, near the southern port city of Karachi in Sindh province with an initial investment of $5 billion.
The construction of the proposed JSEZ has however been in doldrums, as Japanese authorities showed indifferent attitude to invest in the project. Some analysts see security concerns in the country as major hurdle in the commencement of the project and argue that deterioration of law and order and frequent suicide bombings in cities and towns have stopped the foreign investors to invest in the country.
In a meeting with visiting President Zardari, Hiroyuki Yanagi, President Yamaha Motors reiterated that Yamaha would spend $150 million and set up a new plant at 50 acres plot in Bin Qasim near Karachi. The company plans to bring advanced technology to Pakistan where initially 22,000 motorcycles of 125-150 cc, per year, would be manufactured in the factory with EFI engines and during the next ten years its production would reach to 750,000.
Analysts believe that Yamaha has decided to make a direct entry into Pakistan to beat China, which has proved a tough competitor to Japanese bikes in the south Asian country.
The strategically located in the neighborhood of the mega markets of China, India, energy-rich Central Asia, West Asia and the affluent Gulf region, the country can become a hub for exports to these regions.
The geostrategic location of the country gives Yamaha an added advantage to use it as a base for exports to neighboring Asian and African countries. Dawood Yamaha Limited or DYL Motorcycles Ltd. a local company is presently engaged in the manufacturing and assembling of Yamaha brand motorcycles in its manufacturing facility and assembling plant in Lasbella district of Balochistan province.
Yamaha's move to establish a plant in Karachi also reflects mistrust in the local manufacturer of Yamaha bikes, which have rapidly lost sale to Chinese bikes in the country where Japan was dominating the motorbike market. During last five years, the Japanese bike-manufacturers have been making downward adjustments in their prices.
Even after lapse of one and half year, the Japanese government could not take any positive measure to materialize the proposed $5 billion JSEZ project. Although the Sindh government has started working on the proposal of providing all utilities except electricity at JSEZ, the Japanese authority has shown indifference in this regard. Pakistan offered 100 percent equity, free flow of money with remittance of royalty and technical fee to attract Japanese investors. Islamabad reportedly tabled a list of more than 200 items for tariff reduction before the Japanese government, as Japan is a big market for country's exports.