German Review


Germany: Prominent trading partner of Pakistan
by Prof. Dr. Noor Ahmed Memon, Dadabhoy Institute of Higher Education.

The economy of Germany is a highly developed social market economy. It has the largest national economy in Europe, the fourth-largest by nominal GDP in the world, and fifth by GDP (PPP). According to the IMF Germany is a founding member of the European Union and the Eurozone. 

Pak-Germany economic and political relations are always considered important and analyzed on larger domestic and international trajectories. 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.

Germany has been a prominent trading partner of Pakistan and has always extended its support for the betterment of the country in both commercial and social sectors. One of the major push to Pak-Germany trade relations is now attributed to the Generalized System of Preferences plus (GSP+) granted by EU in January, 2014. 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.

Import of Major Products from Germany to Pakistan

Products

Share

 Machinery

20%

 Electrical Machinery
 and Equipments

20%
 Vehicals 17%

 Mineral Fuels

13%

 Pharmaceutical
  Products

7%
 Plastics and Articles
 thereof
6%
 Optical 5%
 Organic Chemicals 5%
 Iron and Steel 4%
 Articles of Iron or
 Steel
3%
Total 100%

 Source: State Bank of Pakistan Annual Reports.

In Pakistan, German businesses are symbolized on the one hand by multinational corporations, who 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 the metropolitan city of Karachi and at least another 5 companies have merged with other multinationals being headquartered in the port city. Another 5 German companies are located in Lahore and one in Quetta. Of all the multinational companies’ present in Pakistan, 55% of them are from the pharmaceutical and chemical industries. The second largest sector turns out to be the electronics industry with a share of around 20%. The services sector (15%) is followed by the transport sector and textiles machinery with 5% each.

Trade Relations

Germany has been a prominent trading partner of Pakistan and has always extended its support for the betterment of the country in both commercial and social sectors. At present 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 2017-18 Germany’s bilateral trade with Pakistan stood at US$ 2.46 billion. German exports to Pakistan amounted to US$ 1.10 billion and German imports from Pakistan US$ 1.36 billion. During the past five year’s balance of trade remained in Pakistan’s favor. Pak-German trade is given in Table 1.

Table 1: Pak - German Trade
                                                                       Value: US$ Million

Year

Export

Import

Balance of Trade

2013-14

1,171

987

+ 184

2014-15

1,215

895

+ 319

2015-16 1,217 969 + 248

2016-17

1,237

1,095

+ 141

2017-18

1,363

1,097

+ 266

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. Export of textile and other products from Pakistan to Germany are given Table 2.

Table 2: Export of textile and other products from
Pakistan to Germany
   (Major Items)
                                                                           Value : US$ 000

Items

2017-18 2016-17

2015-16

 Cotton fabric

98,956 96,356 99,781

 Readymade Garments

324,659 307,802 271,367

 Knitted

218,624 181,868 151,812

 Bedwear

240,845 210,449 192,086

 Towels

42,273 43,604 42,433
 Textile made ups. 42,450 31,591 28,567
 Tents and canvas. 597 1,535 813
 Art silk & synthetic textiles. 15,210 7,620 9,431

 Rice

10,083 6,679 7,735

 Leather tanned.

12,383 12,019 13,567

 Leather garments

82,397 77,957 77,968

 Leather gloves

24,113 20,684 23,386

 Footwear

32,549 26,218 23,117

 Sport goods

47,740 45,268 50,197

 Carpets and rugs

6,174 6,420 7,859

 Surgical instruments

51,729 46,718 48,972

 Fruits

7,248 8,181 17,025

 All other items

10,4970 105,031 150,884

 Total

1,363,000 1,236,000 1,217,000

 Source: Trade Development Authority of Pakistan.

Pakistan’s main imports from Germany are chemical products, machinery, electrical goods, motor vehicles and iron goods.  Germany’s export of modern machinery for textile to Pakistan, especially for value added textile sector would help Pakistani textile manufacturers improve the quality of their products and reduce cost of doing business.

Import of various textile machinery from Germany to Pakistan decreased from euro 55 million in 2017 to euro 52 million in 2018, thus showing decline of 5.4%. Imports of textile machinery from Germany to Pakistan are given in Table 3.

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

Sector

 

2017

2016

2015

2014

 Spinning

37,718 38,785 36,689 18,868 21,319
 Knitting and Hosiery 1,647 4,417 2,809 1,306 3,048
 Finishing 9,432 9,064 10,415 5,136 9,671
 Weaving 2,871 3,178 1,177 734 1,130

Total

51,668 55,444 51,126 26,044 36,168

Source: German Textile Machinery Association, VDMA.

References

  1. German Textile Machinery Association (VDMA).
  2. Pakistan-Germany Bilateral Trade-2017, Trade Development Authority Pakistan 
  3. Pakistan Bureau of Statistics.
  4. State Bank of Pakistan-Annual Reports.
  5. Trade Development Authority of Pakistan.

 

 
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