China-Pakistan Economic Corridor (CPEC) – the new Silk Road
On April 20, 2015, Pakistan and China signed a billion -dollar deal that will develop the Sino-Pakistani economic corridor for the benefit of both countries. With a 26 billion euro investment program, China wants to revive the old Silk Road. This new Silk Road stretches 3000 km from Gwadar port in the southwestern province of Baluchistan of Pakistan to the northwestern autonomous region of Xinjiang China. This project reflects the geostrategic and political interests of China contrary. China aims to provide direct access to Central Asia and the Middle East, so that the trade route no longer has to take the detour via the Strait of Malacca, a strait in Southeast Asia – past its rival India – as it has been before.
In return, China is investing in numerous infrastructure and energy projects along the economic corridor in Pakistan. Against the background of the dramatic energy shortage, which is affecting not only the population but also the industrial sector, any investments in the energy sector are more than welcome in Pakistan. Motorways, railways and energy pipelines for oil and gas transport are to be built. Pakistan hopes this massive investment will turn the country into an economic regional center. International and Pakistani media as well as the Pakistani government call this super deal a “game and fate changer” for the region.
Despite the euphoria, China has raised concerns about the security situation in Pakistan. Chinese workers in Pakistan have been kidnapped by nationalist separatists in the past. China is also concerned that separatist groups from Xinjiang, where an oppressed Muslim minority live, could ally with Pakistani militants. The corridor is also said to run through Pakistani Kashmir, where there is still mutual fire between the border patrols of India and Pakistan.
As early as 2003, the responsibility for the construction and management of the Gwadar port was handed over to a Chinese company, which was heavily criticized by the population and political representatives of the Beluchistians. Baluchistan’s nationalists have been accusing the central government for years of not including them in decision-making processes for mega-projects and of not allowing the population of the province to participate in economic progress.
According to hyperrestaurant, Pakistan traditionally exports the following products: textiles / clothing (e.g. leather), which accounts for more than half of total exports; Foods such as rice; Chemical products, raw materials, petroleum and others. The main trading partners for export are the USA, United Arab Emirates, China, Afghanistan, Great Britain, Bangladesh and Germany. It is noticeable here that, although it is a neighbor and an important emerging country in this region, there is still little trade with India – obviously because of the long-running Indo-Pakistani conflict. The new government has set itself the goal of improving trade relations and thus also political relations.
Pakistan – also due to the withdrawal of the USA – has grown closer to its most important ally, the People’s Republic of China. China has announced that it will invest around 50 billion euros in the Sino-Pakistani economic corridor as part of the new Silk Road. However, experts point out that economic growth requires political stability. The growing tensions in the country in turn endanger this stability. Senator Akram Dashi stated that the military is ultimately risking this to advance its own interests. “The military will do everything possible to keep Sharif out of politics. That means the military is unwilling to accept that civil political parties are in charge of the country.”
Free trade agreement planned with Turkey
Pakistan and Turkey plan to sign a free trade agreement in 2019. This was announced after a state visit by Turkish President Recep Tayyip Erdogan to Pakistan at the end of 2016. According to press reports, Prime Minister Nawaz Sharif praised Erdogan’s charismatic leadership and assured him of “Pakistani solidarity”. However, according to reports from the Turkish educational organization PakTurk, 450 people (teachers and their families at the International Schools and Colleges) were asked to leave the country within three days immediately before Erdogan’s visit. The organization teaches more than 10,000 students in Pakistan and is associated with the Gülen movement. The Pakistani Interior Ministry declined to comment, according to press reports.
GSP Plus for Pakistan
The European Parliament has approved a preferential trade status for Pakistan. Germany gave Pakistan a lot of support in this regard. The so-called GSP Plus Status (Generalized System of Preference), which came into force on January 1, 2014, allows the duty-free export of over 90% of Pakistani products to the EU. This makes the EU Pakistan’s largest trading partner. While on the one hand this status promises an increase in Pakistani exports of $ 1 billion, on the other hand this free trade is conditional on the implementation of international conventions on human rights, good governance, workers’ rights and environmental standards.
Trade with Germany
German-Pakistani economic relations were very fruitful in the first few years after their establishment, but they deteriorated rapidly as the economic and political situation in Pakistan deteriorated. Germany’s bilateral trade volume with Pakistan was EUR 2.87 billion in the 2017 calendar year. German exports to Pakistan amounting to 1.2 billion euros contrasted with imports from Pakistan amounting to 1.67 billion euros. Pakistani exports to Germany mainly consist of textiles, leather goods, sporting goods, shoes and medical instruments. The Pakistani imports from Germany are primarily machinery, chemical products, electrotechnical products, vehicles and hardware. The Foreign Office provides an overview of the current economic situation (2018) in Pakistan, forecasts for the year 2019, and data on economic relations.
The Federal Foreign Office confirms that the number of German companies operating in Pakistan has been growing again since 2010, and interest in the Pakistani market is increasing, especially in the areas of energy and infrastructure. German and Pakistani companies interested in bilateral economic relations have joined forces to form the Pakistan German Business Forum (PGBF). Several bilateral agreements already exist.