Special Edition-07.pdf - Lahore School of Economics

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176 Samina Shabir and Reema Kazmi results of this evolving economic cooperation would only be realized after the upcoming implementation of the agreements reached at various levels on trade and investment. Since the early 1950s, Pakistan and China have entered into trade relations; however, the first formal Trade Agreement was signed in January 1963. Later, in October 1982, the two countries established the Pakistan- China Joint Committee on the Economy, Trade and Technology. Trade between China and Pakistan had generally been conducted under the 1963 Trade Agreement, according to which both countries had granted MFN status to each other. Pakistan had, at that time, multi-modal trade with China i.e. barter trade and cash trade. However, at present trade with China is conducted almost entirely on a cash basis in convertible currency. Recently, the economic relationship between China and Pakistan has come to the forefront. Now the question arises as to why this sudden interest in trade between the two countries has suddenly been ignited. Amongst other reasons, one is that the Chinese government has persuaded its statecontrolled enterprises to import Pakistani products in order to improve the trade balance and make more project-specific investments. The private sector’s engagement, which would be the main engine for growth in bilateral economic relations in the future, is still at a low level. On the other hand, compliance with the WTO regime is imminent and thus countries are on the look out for the consolidation of ties with their most dependable trading partner. In the case of Pakistan, that dependable trading partner as well as a neighbor is China. Thirdly, logistically an all-reaching trading agreement with a neighborly state like China is economically rational and cost effective. Thus, with the rest of the world already well on its way towards economic integration with like minded allies, Pakistan has also started to follow this well treaded path. Traditionally, throughout its trade relations with China, Pakistan has had a chronic trade deficit. This is primarily because China is competing in almost all the major sectors of Pakistan’s potential export areas, which happen to be very limited. Secondly, the Pakistani business community remained content with their established export destinations i.e., the US and the Western Europe, and hardly made serious efforts to either diversify the export base or to explore other areas and regions for enhancing the volume of their exports. This fixation with Western markets and non-innovative export approach has consistently undermined the country’s export potential. Third, though it was feared initially that cheap Chinese products could take over the Pakistani market, this trend abated once people realized that they were of low quality, with almost no guarantee by the company. This was true for both small items, such as
Economic Effects of the Recently Signed Pak-China Free Trade Agreement 177 shoes, as well as bigger items, such as locomotives. Fourth, Chinese brands were not as famous as the western ones, so competition usually went against China. Fifth, despite being neighbors, there was a lack of effective means of communication between Pakistan and China. The Karakorum Highway, which opened in 1978, could not be used to increase the volume of trade in any substantial manner. In addition, an underdeveloped shipping industry in Pakistan further limited the trade routes and discouraged the growth in trade volume. Sixth, Pakistan’s cotton based industry is the main pillar of its exports. Since China itself is a major textile manufacturer, the trade volume could not be raised. As a result of this renewed interest in trade relations, on May 12 2001, Pakistan and China signed six agreements and one Memorandum of Understanding (MoU). At that time, Chinese financial assistance for the agreed projects was estimated to be worth over one billion dollars. This signing of agreements can be termed as the first round of a substantive initiative for expanding economic cooperation. The agreements signed included: Economic and Technical Cooperation, Tourism Cooperation, Lease Agreement on Saindak Copper-Gold Project, Supply of Locomotives to Pakistan Railways, Supply of Passenger Coaches to Pakistan Railways, White Oil Pipeline and MoU between China’s ZTE and Pakistan Telecommunications Co. Ltd. Under the Agreement on Economic and Technical Cooperation, the Chinese government agreed to provide a grant of 50 million Yuan for the promotion of economic and technical cooperation between the two countries. China, meanwhile, also reiterated support for a project which is very close to the Pakistani people’s hearts. Thus, almost a year later, on March 22, 2002, General Musharraf and the Chinese Vice Premier, Wu Bang Guo, attended the ground-breaking ceremony of the Gwader sea-port. Phase one of Gwader port was successfully completed in April 2005, and work on the second phase is in progress. In the following years, there has been a regular exchange of highlevel visits between the two countries and each visit added new dimensions and areas for economic cooperation. For example, President Musharraf’s visit in November 2003 resulted in the signing of a Joint Declaration on Direction of Bilateral Relations. It was in fact a road-map determining the direction and scope of overall Pak-China bilateral relations in the future. In December 2004, Pakistan and China again signed seven agreements in trade, communication and the energy sector and drew up a framework for greater cooperation. These agreements envisaged an increase
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Special Edition ISSN 1811-5438 THE
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THE LAHORE JOURNAL OF ECONOMICS Con
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Monetary, Fiscal and Financial Sect
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The Lahore Journal of Economics Spe
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Reforming the Government in Pakista
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18 A. R. Kemal export product would
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22 A. R. Kemal Rank Score Efficienc
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26 A. R. Kemal across the globe whi
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28 A. R. Kemal V. Conclusions Pakis
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Increasing Global Competitiveness:
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Monetary and Fiscal Policies 45 sys
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Monetary and Fiscal Policies 47 200
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Monetary and Fiscal Policies 49 (es
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Monetary and Fiscal Policies 51 The
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Monetary and Fiscal Policies 53 The
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Monetary and Fiscal Policies 55 Thi
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Monetary and Fiscal Policies 57 Whi
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Monetary and Fiscal Policies 59 exc
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Monetary and Fiscal Policies 61 mat
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Monetary and Fiscal Policies 63 Tax
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Monetary and Fiscal Policies 65 Ref
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68 Shakil Faruqi Currently, the fin
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70 Shakil Faruqi crises, or both. T
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78 Shakil Faruqi In spite of attent
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80 Shakil Faruqi change of this mag
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84 Shakil Faruqi became insolvent a
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86 Shakil Faruqi 2009, the CAR for
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88 Shakil Faruqi ratio of net inter
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92 Shakil Faruqi through a few roun
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94 Shakil Faruqi Crockett, Andrew:
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96 Shakil Faruqi State Bank of Paki
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98 Muhammad Arshad Khan and Sajawal
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100 Muhammad Arshad Khan and Sajawa
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11. All references used in the text
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The Lahore School of Economics The
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