Newsletter No. 462
News-Analysis
December 12, 2006

 

Two stories on Japan-Pakistan relations have recently appeared in the Pakistani press.

JAPANESE LOANS TO HELP FUND KARACHI CIRCULAR RAILWAY

Karachi Governor Ishratul Ebad Khan approved on the 4th a plan to revive the Karachi Circular Railway (KCR) project with Japanese financial assistance. The KCR project is expected to cost about US$1 billion and take about three years to complete. A US$872 million loan will be provided by Japanese financial institutions. Additionally, the main feasibility report will be produced by JETRO. It is hoped that the KCR will help relieve the pressure on Karachi's overcrowded public transportation systems.

The KCR will be constructed by Pakistan Railways, but after its completion it will be transferred to the Karachi Urban Transport Corporation (KUTC). The KUTC will be governed by the provincial and city governments of Karachi, as well as Pakistan Railways itself. The KCR will have twenty-two underpasses and overhead bridges to facilitate smooth service, and will be linked to key bus stations and transport corridors.

The Japanese loan will be repaid with 50% interest over a period of forty years, with a ten-year grace period.

JAPAN AND PAKISTAN NEGOTIATING A NEW BILATERAL TAX TREATY

Japan and Pakistan signed a bilateral tax treaty in 1959, but some defect in that agreement has been found, so a new treaty is now being negotiated. Apparently, Tokyo has been calling for this since the mid-1980s, but Islamabad has been dragging its feet. At the current juncture, however, both sides are expecting a significant increase in Japanese investment in Pakistan, so the tax treaty issue has resurfaced as an important matter.

A team of Pakistani officials are expected to visit Tokyo next February, and they hope to be able to sign the new agreement shortly after that.