Pakistan-Japan investment relations

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The Japan's economy is the 3rd largest economy of the world after USA and China. One of the major factors in Japan's swift and unprecedented growth and development has been emphasis on the regional trade.

Japan focused on three factors to prevail on the global economy, the inventions, the innovations and the advancements in the world of technology. The friendly relationship between Japan and Pakistan 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.

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%).

Historically, Pakistan's performance in attracting investments has been impressive and FDI has emerged as a major source of private external flows. Liberalised investment regime and investment friendly policies have paid rich dividends. Japan being the 2nd largest investor after USA in the world in 2011, and her output FDI was US $114 billion. There are a total of 69 Japanese affiliated companies operating in Pakistan, mainly in the automotive sector and Trading Houses.

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. The Japanese can bring in the technology in some projects relating to fruit processing for increasing the shelf life of perishable items; perhaps Pakistan can export its fruit treasures to all over the world. In several areas, Pakistan and Japan can cooperate and strengthen economic, trade and investment relations. Pakistan has cheap labour, inputs and soft investment policies. Japan on the other hand, has surplus capital, modern technology and good management skill. Combining the above can lead to produce competitive goods and both the countries can benefit from such co-operation.

The establishment of SEZ anywhere in the country over a minimum area of 50 acres will support the investment in manufacturing sector.

It is hoped that this initiative would provide the much needed impetus to Pakistan's Manufacturing Sector. Japanese companies can relocate their business to these Zones and can enter into Joint Venture with Pakistani companies. These zones could be used as a platform for outsourcing as well.

The major projects, which have been funded by the Government of Japan, include the Indus Highway Project, a number of power projects in various provinces of Pakistan, Rural Roads Construction Project and the Children Hospital PIMS Islamabad Project. Presently the Kohat Tunnel Project and the Ghazi Brotha Dam Project are being completed with the help of the Japanese assistance.

Pakistan's Public Private Partnership has achieved significant milestones over the last few years. The journey ahead contains more initiatives and go-aheads. However, with a robust policy framework as well as a strong commitment and resolve, these initiatives will be implemented according to the need of the time. We assure that the Public Private Partnership Program will further strengthen the relation between Pakistan and Japan in the coming years and become a success story.

During the last years the economic instability has pushed all nations on the back foot. Foreign companies have started to pull out their overseas shareholding. However, Government's strategy to adopt stringent policy reforms has once again put Pakistan on the map of foreign investment companies. The Federal and Provincial Governments are working in tandem to develop policies to promote investments in all sectors of the economy. There is no doubt that Pakistan's economic transformation puts it on a firm footing to achieve higher levels of a business friendly environment. The country welcomes investors to join it on its journey towards economic progress.

Pak-Japan have different natural resource endowments, they should specialise in the production of the goods and services in which they have higher natural resources endowments and should involve in bilateral trade. In this way production and consumption level will be higher and social and economic well being of both the countries. Because Japan is an industrialised country, deficient in natural resources and raw materials, which rely heavily on its value added exports to pay for these imports. Pakistan stands in the category of developing countries, deficient in technology and endowed with natural resources of fertile agricultural land and raw materials. The natural resource endowments and economic backgrounds of both the countries make a very strong case to develop these economies through international trade and investment.

Courtesy: Business Recorder

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