Special Edition-07.pdf - Lahore School of Economics

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198 Samina Shabir and Reema Kazmi Table- 4: Mutual Investment between China and Pakistan Pakistan’s Investment in China (10,000 $) 2003 2004 By 2004 Number of Projects 19 21 96 Contractual Value 1949 3210 7148 Actual Investment 343 454 1700 China’s Investment in Pakistan (10,000 $) Number of Projects 4 3 34 Contractual Value 930 7344 10411 Source: Chinese Feasibility Study on Free Trade Agreement (March 15, 2005) Chinese private as well as public sector corporations are launching big budget projects, especially in the manufacturing and construction sectors, all over the country. Some of the major Chinese companies operating in Pakistan are Heirs, ZTE, Howai Technologies, China National Petroleum Corporation, China State Construction Engineering Corporation, Dong Fang Electric Corporation, CMEs, China Ocean Shipping Corporation and Air China. The successful implementation by various Chinese joint ventures will encourage more Chinese as well as other foreign investment to step into Pakistan. The signing of the FTA is projected to be beneficial for both the countries. If Pakistan is going to benefit from increased investment flows to the country, Pakistan is an important market for China to engage in the project contracting business in South Asia. In recent years, the average value of signed contracts of labor services amounted to about US$ 500 million per year. By the end of Sept. 2006, the total value of contracted engineering and labor service cooperation projects of China in Pakistan amounted to US$ 8.64 billion and the turnover was US$ 7.2 billion. By September 2006, the agreed investment of China in Pakistan was US$ 110 million and the actual investment of Pakistan in China was more than US$20 million.
Economic Effects of the Recently Signed Pak-China Free Trade Agreement 199 Fig-5 Sector-wise Chinese Investment 2004-05 ($) Communications 2228 Others, 76194 Metal 521 Transport Equipmen (Motorcycles Automobiles) 15106 Construction 18900 Source: Pakistan Board of Investment As shown above, Chinese investment in Pakistan is substantial, covering IT and telecom, oil and gas, power generation, engineering, automobiles, infrastructure and mining sectors. Yet Pakistan‘s investment in China is not on the same scale. During 2004, Chinese firms were involved in investment in Pakistan for a contractual value of approximately $ 10,411 compared to Pakistani investment of only $1700 million. Signing of an FTA provides safeguards for the promotion of investment between the two countries but given the existing investment volume and investment friendly opportunities offered by the Government of Pakistan, China will be in a better position to utilize the benefits being offered, in lieu of yields including profits/dividend/capital gains as compared to Pakistani firms operating in China.. However, they can positively contribute to the development of Pakistan by generating new employment opportunities, transfer of technology, exposure to new products and markets; but it should be kept in mind that the primary aim of any multinational is to maximize profits and there are pros and cons associated with allowance of these investments to enter an economy. V. Conclusion Pakistan’s FTA with China is another strategic link in the chain which Pakistan initiated in order to negotiate bilateral and regional preferential/free trade agreements. Pakistan aims to seek enhanced market access, by addressing tariff/non-tariff barriers, facilitating and further
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Special Edition ISSN 1811-5438 THE
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