German Review

Pak-German economic and trade relations

by Dr. Noor Ahmed Memon
Germany, the largest and the healthiest economy in the European Union have long ties with Pakistan. German textile machinery has played an important role in the development of Pakistans textile industry. Germany remains one of the vocal and staunch supporters of Pakistan and has taken extreme measures to aid the South Asian country in its economic and governmental hardship. Commercial trade between Islamabad and Berlin has also been very essential in recent years. Germany maintains a healthy diplomatic presence in the country, with an embassy in Islamabad, a consulate in Karachi and honorary-consulate in Lahore, Peshawar, and Quetta. Germany also is one of the European countries, who play a vital and an influential role in country's upcoming political events, others being Saudi Arabia, China, United States and the United Kingdom. Trade between Pakistan and Germany is conducted in freely convertible currency in terms of the Trade Agreement signed in 1957. Germany is Pakistans largest trading partner within the European Union, accounting for 20% of Pakistans total exports to the EU and 21% of Pakistans total imports from the EU. The total trade volume was over US$ 2.32 billion between the two countries during the year 2011-12. Pakistans exports to Germany have increased from US$830 million in 2009-10 to US$1.07 billion in 2011-12. Imports from Germany have increased from US$ 1.07 billion in 2009-10 to US$1.17 billion in 2011-12. During the past six years, the balance of trade remained in Germanys favour, except in the year 2010-11. The PakGerman trade volume is given in Table 1. 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, cotton yarn, bed wear, cotton bags and other made-ups textiles, besides textile and clothing articles. Germany also imports a variety of other products from Pakistan, which include: leather clothing, leather gloves, sports goods and surgical instruments.

Table 2: Export of Textile Products from Pakistan to Germany (Major Items) Value : US$ 000 Items
Raw Cotton Cotton Yarn Knitwear Fabrics

2011-12 2010-11 2009-10

468 8,841 43 4,217 15,316 23 327,939 129,789 28,652 253,821 30,702 1,380 17,791 809,630 1 4,549 30 164,047 74,930 19,200 150,265 28,810 422 10,503 452,757

Readymade Garments 281,010 Knitwear Textile Made-ups Bedwear Towels Tent and Canvas Synthetic Textiles Total 99,208 28,501 170,062 27,745 1,408 13,274 630,560

Source: Trade Development Authority of Pakistan.

Due to the good order situation, VDMA Textile Machinery adjusted the 2012 sale in Pakistan. Export of German textile machinery in Pakistan increased from Euro 25.69 million in 2011 to 2 Euro 29.04 million in 2012, thus showing an increase of 13%. Spinning machinery remained the largest seller of German textile machinery with an export value of Euro 19.43 million in 2012 from Euro 19.06 million in 2011. The growth of knitting (hosiery) machinery was also increased to 135%, to reach Euro 4.56 million from Euro 1.94 million in 2011. Germany sold Euro 3.53 million of finishing machinery and Euro

1.51 million of weaving machinery in 2012 to Pakistan. Category-wise export of German Textile Machinery to Pakistan is given in Table 2 and export of major textile items from Pakistan to Germany is given in Table 3. Major machinery items export of German Textile Machinery to Pakistan is given in Table 4. Presently, Germany is the eighth largest investor in Pakistan and several German multi-nationals 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. Germany has always supported the Pakistani efforts to get greater access to

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

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Table 3: Export of German Textile Machinery to Pakistan Value Euros 000 Machinery
Spinning Weaving Knitting and Hosiery Finishing Total

Export
712 826 803 830 1,216 1,147

Import
1,205 1,322 1,072 1,075 947 1,175

Balance of Trade
- 493 - 496 - 269 - 245 + 269 + 28

2009
6,677 519 1,757 2,725 11,678

2010
17,305 5,127 3,166 4,178 29,776

2011
19,058 1,172 1,940 3,516 25,686

2012
19,431 1,515 4,560 3,530 29,036

Source: State Bank of Pakistan Annual Reports.

Source: German Textile Machinery Association, VDMA.

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German Review
EU markets including the recently approved Pakistan specific autonomous trade preferences. Germany is expected to continue as an advocate of Pakistan within the European Union. Encouragingly, Germany has now become the largest trading partner of Pakistan in Europe and fifth biggest source of foreign investment in the country. Several German multinational have been making lucrative businesses in Pakistan for decades. The number of Pakistani companies participating in industrial fairs in Germany has grown continuously in recent years. Pakistan is also one of the first of Germanys partner countries to make use of innovative development funding instruments. Under the so-called debt conversion scheme, the Pakistani government is rewarded for making public investments in contractually agreed development programmes by debt cancellation worth twice the amount invested. This enabled a total of Euro 166 million to be invested in education, health care and disaster prevention till the end of 2012. In 2012, a total of 500 young Pakistanis received support under various programmes in Germany largely in cooperation with the HEC. Germany is one of the most popular destinations for young Pakistani researchers wishing to pursue a PhD, alongside the USA, the United Kingdom and France. Engineering and natural science programmes are the most in demand among Pakistanis studying in Germany. In 2012, there were a total of some 2,000 Pakistani students in Germany, most of them paying their own way. According to German Ambassador Dr Cyrill Nunn Germany fully supports Pakistan in getting generalised system of preferences (GSP) plus status from the European Union and intends to invest in Pakistan as a production base for exports to other SAARC countries. Germany is committed to further enhancing trade relations and many German companies are keen to invest in Pakistan, especially those in the energy and power sector. In addition to the economic benefits that Pakistan will receive due to GSP plus status, this scheme will also be favourable for Germany in political terms, after the implementation of GSP plus status. The trade relations between Pakistan and Germany would further flourish in future due to the Investment Protection Treaty signed by the former Prime Minister Syed Yusuf Raza Gilani during his visit to Germany in December 2009.

Table 4: Export of Textile Machinery from Germany to Pakistan (Major Items) (Value : Rs .000) 2011-2012 Machinery
Carding Machines Cone / Bobbin Winding Machines Textile Winding Machines Textile Fibre Machines Weaving (Shuttle less) (<30 CM) Circular Knitting Machines Top and Flat Card Clothing Card Clothing Spindles Flyers Ring Travellers Parts of Weaving Machines Sinkers Needles Coating /Lamination Machines Stentering Machines Other Drying Iron Other Drying Machines

2010-2011 Quantity
147 26 49 39 70 66 58 63 42 42 140 54 7 45 63

unit Quantity
No No No No No No 000 Kg 000 Kg 000 Kg 000 Kg 000 Kg No No No No 82 3 17 72 12 23 53 54 26 20 87 13 -14 18

Value
765,072 37,161 390,123 224,517 19,102 18,477 177,732 132,226 176,581 47,093 196,267 156,666 -197,654 81,223

Value
735,135 171,887 452,840 136,454 198,987 75,331 109,879 103,886 195,337 84,968 292,079 202,387 249,587 530,206 344,880

Source: Federal Bureau of Statistics, Government of Pakistan.

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