German Review


Vast scope of enhancing Pak-German bilateral trade relations
by Prof. Dr. Noor Ahmed Memon, Dadabhoy Institute of Higher Education.

Pakistan was one of the first Asian countries to establish relations with Federal Republic of Germany (West Germany). These relations are based on shared values of democracy, pluralism, and respect for human rights, cultural and religious diversity and economic liberalism. Since inception in 1951, Pakistan-Germany relations have been on an upward trajectory.

Economic Relations

Presently, Germany is the eighth largest investor in Pakistan and several German multinationals are operating in Pakistan. Germany has also extended active support to Pakistan's initiatives with the EU for providing greater market access to Pakistani exports to EU.

There is a lot of potential for German investors to invest in energy and power sectors of Pakistan. The GSP plus status attributed to Pakistan not only benefits Pakistan’s economy, but is also favourable for Germany in political and economic terms.

In Pakistan, German businesses are symbolized on the one hand by multinational corporations, which are mainly located in Karachi and Lahore, and on the other hand by Pakistani trading agents, who represent the majority of the German companies in the areas of machinery, chemical and pharmaceuticals, instruments, automotive, and related equipment and services. Approximately, 35 German multinationals are engaged in Pakistan.

The majority have their production plants and offices in Karachi and at least another five companies have merged with other multinationals being headquartered in the port city. Another five German companies are located in Lahore and one in Quetta.

The business activities of altogether 565 German small and medium-sized companies are represented by 231 Pakistani agents. The composition of the sectorial distribution reveals that the largest sector represented by the agents in Pakistan is the machinery sector. The second largest product group is chemicals and pharmaceuticals. In this sector 132 German companies are represented by 50 Pakistani agents. The third largest group is manufacturing, electronics, steel, iron, metal products and consumer goods. Cars and technical equipment constitute the fourth largest sector, in which on average one Pakistani agent represents at least two German companies. The service sector consists of banks, insurance, consultancy, shipping and freight & cargo sector the last and sixth sector constitutes the scientific, optic, and precision instrument sector.

However, during the past years, over 500 companies from Pakistan were represented in several worlds’ biggest trade fairs and participated in 16 different exhibitions which may have helped the export sector.

The interest of German economists in the South Asian region has engaged the country in economic diplomacy with Pakistan. This is the reason that Germany is the largest trading partner of Pakistan in Europe. It is also the fifth largest source of foreign investment in the country.

Trade Relations

Germany is Pakistan’s largest trading partner within the European Union, accounting for 20% of Pakistan’s total exports to the EU and 21% of Pakistan’s total imports from the EU.

In the year 2016-17 Germany’s bilateral trade with Pakistan stood at US$ 2.33 billion. German exports to Pakistan amounted to US$ 1.09 billion and German imports from Pakistan US$ 1.34 billion. During the past five year’s balance of trade remained in Pakistan’s favour. Pak-German trade is given in Table 1.

Table 2: Pak - German Trade
                                                                       Value: US$ Million

Year

Export

Import

Balance of Trade

2012-13

1,024

974

+ 50

2013-14

1,171

987

+ 184

2014-15

1,215

895

+ 319

2015-16 1,217 938 + 279

2016-17

1,236

1,095

+141

Source: State Bank of Pakistan Annual Reports.

Germany is a good market for Pakistani textile products especially readymade garments, bed wear cotton fabrics and knitwear. The main items of exports included cotton fabrics, towels, synthetic textiles, carpet and rugs, cotton yarn, bed wear, cotton bags and other made-ups textiles, besides textile and clothing articles. Pakistan’s main imports from Germany are chemical products, machinery, electrical goods, motor vehicles and iron goods. Export of textile and other products from Pakistan to Germany are given Table 2.

Table 3: Export of textile and other products from
Pakistan to Germany
   (Major Items)
                                                                           Value : US$ 000

Items

2016-17 2015-16

2014-15

 Cotton fabric

96,356 99,781

108,881

 Readymade Garments

307,802 271,367

238,524

 Knitted

181,868 151,812

128,101

 Bedwear

210,449 192,086

216,895

 Towels

43,604 42,433

40,779

 Textile made ups. 31,591 28,567 29,762
 Tents and canvas. 1,535 813 1,059
 Art silk & synthetic textiles. 7,620 9,431 8,348

 Rice

6,679 7,735

11,026

 Leather tanned.

12,019 13,567

22,645

 Leather garments

77,957 77,968

99,097

 Leather gloves

20,684 23,386

29,563

 Footwear

26,218 23,117

30,751

 Sport goods

45,268 50,197

47,160

 Carpets and rugs

6,420 7,859

8,161

 Surgical instruments

46,718 48,972

48,202

 Fruits

8,181 17,025

22,083

 All other items

105,031 150,884

123,963

 Total

1,236,000 1,217,000

1,215,000

 Source: Trade Development Authority of Pakistan.

Germany, the largest and the healthiest economy in the European Union has long ties with Pakistan. Germany’s export of modern machinery for textile, especially for value added textile sector would help Pakistani textile manufacturers improve the quality of their products and reduce cost of doing business and German government would encourage the joint ventures with large Pakistani units. In 2017 import of German textile machinery from Germany increased from 35.17 million euro in 2014 to 55.44 million euro in 2017, thus showing an average increase of 14% per annum. In 2017 German spinning machinery imports to Pakistan reached 38.78 million euro, representing a share of 70% of total German textile machinery imports into Pakistan. Imports of German textile machinery in Pakistan for last four years are given in Table 3.

Table 3: Sector-wise Export of German Textile Machinery
                                                                       Value: Euro 000

Sector

2017

2016

2015

2014

 Spinning

38,785 36,689 18,868 21,319
 Knitting and Hosiery 3,178 1,177 734 1,130
 Finishing 4,417 2,809 1,306 3,048
 Weaving 9,064 10,415 5,136 9,671

Total

55,444 51,090 26,044 35,168

Source: German Textile Machinery Association, VDMA.

The geographical focus of German development cooperation with Pakistan is in the north and west of the country (Khyber Pakhtunkhwa Province and the Federally Administered Tribal Areas, FATA), with individual measures also being implemented in Baluchistan, Punjab, Gilgit, Baltistan and AJK (Azad Jammu and Kashmir).

References

  1. Pakistan Bureau of Statistics.
  2. State Bank of Pakistan-Annual Reports.
  3. German Textile Machinery Association (VDMA).
  4. Trade Development Authority of Pakistan.

 

 
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