Newsletter No. 495
News-Analysis
January 25, 2007

 

PAKISTANI COMMERCE MINISTER TO JAPAN -- MOVE IT OR LOSE IT!

As expected, the third “Pakistan-Japan Joint Public and Private Dialogues” were held this week in Karachi. For a bilateral trade dialogue, it seems to have been more interesting than usual.

The Pakistani side played the China card. There message to the Japanese delegation was blunt: The time for a Japan-Pakistan FTA is now. If Tokyo doesn’t step up, then they should be prepared to lose their market share to the Chinese, especially in regard to auto parts and machinery.

Commerce Minister Humayun Akhtar Khan, who delivered this message, was otherwise positive about the most recent talks, saying that, “the Joint study group will remove the hurdles in the ways of exports of Pakistan to Japan.” Another Pakistani trade official noted, “We have said in the meeting that law and order has improved tremendously in Pakistan. We also told them that the image of Pakistan is not what Japanese think in their country, as the ground realities are very different here. Pakistani society is very tolerant and the business atmosphere is very conducive [to trade].”

The Japanese side was even more upbeat. Toru Tsuji, Chairman of the Japan-Pakistan Business Cooperation Committee stated that “there is a huge potential for the expansion of economic interchange between Pakistan and Japan since the Japanese economy has shifted on to a recovery trend and Pakistan with its population of 150 million people is an attractive trade and investment partner.” Michiyo Takagi, the Japanese Parliamentary Secretary who led the Japanese side in the dialogue, said that there was “a new thinking in Japan regarding Pakistan.”

There was thus agreement to set up a Joint Study Group to examine the possibility of a Japan-Pakistan FTA.

An interesting repost to the China issue came from the JICA delegates. They produced a study arguing the Pakistani industry will be making a big mistake if they rely on Chinese components and models to develop their markets. The JICA study says that China will be able to produce low-quality products more cheaply than Pakistan, and that Pakistani industry could not compete internationally, or even in Pakistan’s domestic market. JICA therefore recommends that Pakistan focus on high-quality and high-value products with internationally-recognized brands, positing Thailand and Malaysia as good role models.

The Associated Press of Pakistan notes that the Pakistan-Japan Joint Public and Private Dialogue series has its origins in a proposal by then-Prime Minister Yoshiro Mori to President Pervez Musharraf when the Japanese leader visited Pakistan in August 2000. All of the dialogues have so far been held in Pakistan, with the first in September 2001 and the second in March 2005. The meeting of private business delegates is said to have included about sixty Pakistani and forty Japanese businesspeople.

An Analytical Note:

Since about October of last year, we’ve seen an up-tick in stories about Japan-Pakistan trade relations. I’ve reported these stories based on what has emerged from the Pakistani press, but I haven’t been quite sure why Japan-Pakistan trade is now getting attention from the Japanese government when it had previously been languishing.

The comments of Commerce Minister Humayun Akhtar Khan may have provided the necessary clue. The Abe Administration came into power in late September. The China-Pakistan FTA was signed on November 24, 2006. Tokyo’s renewed interest in Pakistan and the “new thinking” mentioned by the Japanese delegate is probably yet one more reflection of Abe’s desire to “strategically” contain Chinese power and influence. Abe’s interest in India and Australia are well-documented. We have previously noted his interest in engagement with Central Asia as well. Now it occurs to me that the Abe regime may be so interested in Pakistan because of the China-Pakistan connection.

Islamabad seems to recognize this, and that explains why they are now playing the China card in these trade negotiations. At present, Japan is Pakistan’s third-largest trade partner after the United States and the UK. Enhancing Pakistan-Japan trade and signing an FTA would be another feather in the cap for the Musharraf Administration.