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Fazal-ur-Rahman, director for East Asia of the Institute of Strategic Studies Islamabad (ISSI), a think tank funded by the Pakistani government, has said in an exclusive interview with Xinhua that the enhanced Sino-Pakistani economic and trade link will further consolidate and upgrade their time-tested friendly relations.

During a comparatively long period since the establishment of Sino-Pakistani diplomatic relations 55 years ago, the focus of their relations has mainly been put on political, diplomatic and defense cooperation, "with no substantive economic interaction between the two countries," said Rahman, a specialist on Sino- Pakistani relations.

After entering into the 21st century, the two countries came to realize the missing economic dimension in their relationship and started working on improving the bilateral economic and trade relations, and "now we have come a long way in promoting our bilateral economic relations," according to the 47-year-old scholar.

Economic cooperation, covering areas from trade, energy, transportation, agriculture to infrastructure projects, continues to remain hot topics during high-level talks between the two countries in recent years. There is a continuous increase in activities in trade, investments and development projects between China and Pakistan.

Trade

During the past five years, the Sino-Pakistani annual bilateral trade volume has registered an average growth rate of 30 percent, and in 2005, the annual volume amounted to over US$4.2 billion, according to figures released by the Chinese Ministry of Commerce.

Rahman said that according to sources, the 2006 volume of bilateral trade between China and Pakistan is estimated to reach US$5 billion.

Official figures show that the bilateral trade volume reached US$3. 75 billion during the period of January to September 2006, and that so far China has become Pakistan's third biggest trading partner.

China and Pakistan have come near to sign a free trade agreement, which Rahman said will facilitate expansion in trade between the two countries.

Pakistan has been a major market of contract engineering work for China in South Asia, and there has been an annual average of US$500's worth of contracted volume of engineering work and labor between China and Pakistan, Chinese officials said.

Up to the end of September 2006, the total contracted volume of contract engineering work and labor that China so far has gained in Pakistan amounted to US$8.64 billion.

Through the Early Harvest Program that has become operational since Jan. 1, 2006, Pakistan and China have reduced to zero the tariff rate of a considerable amount of items from both countries.

Investment

There is a good prospect of the future development of investments by the two countries on each other's side, Chinese officials said.

The total contracted volume of investments that China made in Pakistan has reached US$110 million, up to the end of September 2006. During the same period, Pakistan has made an actual total investment of over US$20 million.

In one of his articles, Rahman held that the private sector engagement would be the main engine for growth in bilateral economic relations in the future. "Compared to other countries, investment in Pakistan from the Chinese private sector is still very low," he said.

"We'd like to see more investments from the Chinese private sector in Pakistan," he said. "We're looking for Chinese investments (entering) into exportable items."

The two countries can enter into joint ventures in Pakistan, which will export the products to the nearby regions of West Asia, Central Asia, and South Asia, the analyst said.

The Pakistani government is striving to improve the investment environment, attract foreign money and increase its capability and variety of exportable items, which are now mostly limited to raw materials, like cotton, rice, leather and sports goods, a fact worrying many officials and scholars.

In regard to the security concern that might create setback for potential investors, Rahman said that Pakistan "is taking very special measures, trying to root out the extremism and terrorism from the country."

"Chinese investors can also look into the areas, which are economically developed, and relatively safer areas," he said. " Like the industrial zone in east province Punjab, and cities like Sialkot, Gujranwala, Faisalabad, Lahore, Multan, etc."

Rahman told Xinhua that the Pakistani government has allocated a special industrial zone for Chinese investors, especially in the Gwadar deep seaport on the Arabian Sea.

The government is also creating a special textile zone in Faisalabad and industrial areas in other parts of the country, where they "prefer the Chinese investors should come," he added.

Development projects

Around 100 Chinese companies are taking part in the construction of major engineering projects across Pakistan, among which a number of mega projects, as officials put, including the Chashma nuclear power plant and the Gwadar deep seaport, will evolve to be new landmarks that symbolize the evergreen Sino- Pakistani friendship.

Rahman said the economic infrastructure projects, like Gwadar sea port and up-gradation of Karakoram Highway, are going to help both the countries for extension of the trade, help China extend trade not only with Pakistan but also with the South Asia area.

Pakistan provides the shortest possible route to the sea from Gwader through Karakoram Highway to the western regions of China, which are undergoing a huge economic transformation, and Pakistan aims to become a trade and energy corridor for China, according to Rahman.

In a written analysis, he said that economic cooperation would not only consolidate the comprehensive bilateral relations but also help in achieving common aspirations for development, peace and stability in the region.

The visit of Chinese President Hu Jintao starting from Nov. 23 will certainly consolidate the friendly relations between the two countries and will further step up the process, which Pakistan has initiated five or six years back to "upgrade our relationship constantly and regularly," he said.

"Exchange of the highest-level visits between the two countries, if you look at each visit in the past four or five years, has taken our relationship a step ahead," he concluded. "This time the visit will also further take a step ahead in the Sino-Pakistani relations."

(Xinhua News Agency November 23, 2006)