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German Review

Germany remains one of the vocaland staunch supporters of Pakistan andhas taken extreme measures to aid theSouth Asian country in its economic andgovernmental hardship. Commercialtrade between Islamabad and Berlin hasalso been very essential in recent years.

Germany maintains a healthydiplomatic presence in the country, withan embassy in Islamabad, a consulate inKarachi and honorary-consulate inLahore, Peshawar, and Quetta. Germanyalso is one of the European countries,who play a vital and an influential role incountry's upcoming political events,others being Saudi Arabia, China, UnitedStates and the United Kingdom.

Trade between Pakistan and Germanyis conducted in freely convertiblecurrency in terms of the Trade Agreementsigned in 1957. Germany is Pakistan’slargest trading partner within theEuropean Union, accounting for 20% ofPakistan’s total exports to the EU and21% of Pakistan’s total imports from theEU. The total trade volume was over US$2.32 billion between the two countriesduring the year 2011-12. Pakistan’sexports to Germany have increased fromUS$830 million in 2009-10 to US$1.07billion in 2011-12. Imports from Germanyhave increased from US$ 1.07 billion in2009-10 to US$1.17 billion in 2011-12.

During the past six years, thebalance of trade remained inGermany’s favour, except inthe year 2010-11. The Pak-German trade volume isgiven in Table 1.

Germany is a goodmarket for Pakistani textileproducts, especiallyreadymade garments, bedwear cotton fabrics andknitwear. The main items ofexports included cottonfabrics, towels, synthetictextiles, cotton yarn, bedwear, cotton bags and othermade-ups textiles, besidestextile and clothing articles.

Germany also imports avariety of other productsfrom Pakistan, which include:leather clothing, leathergloves, sports goods andsurgical instruments.

Due to the good order situation,VDMA Textile Machinery adjusted the2012 sale in Pakistan. Export of Germantextile machinery in Pakistan increasedfrom Euro 25.69 million in 2011 to 2 Euro29.04 million in 2012, thus showing anincrease of 13%. Spinning machineryremained the largest seller of Germantextile machinery with an export value ofEuro 19.43 million in 2012 from Euro19.06 million in 2011.

The growth of knitting (hosiery)machinery was also increased to 135%,to reach Euro 4.56 million from Euro 1.94million in 2011. Germany sold Euro 3.53million of finishing machinery and Euro

1.51 million of weaving machinery in2012 to Pakistan. Category-wise exportof German Textile Machinery to Pakistanis given in Table 2 and export of majortextile items from Pakistan to Germany isgiven in Table 3. Major machinery itemsexport of German Textile Machinery toPakistan is given in Table 4.

Presently, Germany is the eighthlargest investor in Pakistan and severalGerman multi-nationals are operating inPakistan. Germany has also extendedactive support to Pakistan's initiativeswith the EU for providing greater marketaccess to Pakistani exports to EU.

Germany has always supported thePakistani efforts to get greater access to

Pak-German economic and trade relationsby Dr. Noor Ahmed Memon

Table 2: Export of Textile Products fromPakistan to Germany

(Major Items)Value : US$ 000

Items 2011-12 2010-11 2009-10

Raw Cotton 468 4,217 1

Cotton Yarn 8,841 15,316 4,549

Knitwear Fabrics 43 23 30

Readymade Garments 281,010 327,939 164,047

Knitwear 99,208 129,789 74,930

Textile Made-ups 28,501 28,652 19,200

Bedwear 170,062 253,821 150,265

Towels 27,745 30,702 28,810

Tent and Canvas 1,408 1,380 422

Synthetic Textiles 13,274 17,791 10,503

Total 630,560 809,630 452,757

Source: Trade Development Authority of Pakistan.

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

Year Export ImportBalance of Trade

2006-07 712 1,205 - 493

2007-08 826 1,322 - 496

2008-09 803 1,072 - 269

2009-10 830 1,075 - 245

2010-11 1,216 947 + 269

2011-12 1,147 1,175 + 28

Source: State Bank of Pakistan Annual Reports.

Germany, the largest and the healthiesteconomy in the European Union havelong ties with Pakistan. German textilemachinery has played an important rolein the development of Pakistan’s textileindustry.

Table 3: Export of German Textile Machinery to Pakistan

Value Euros 000

Machinery 2009 2010 2011 2012

Spinning 6,677 17,305 19,058 19,431

Weaving 519 5,127 1,172 1,515

Knitting and Hosiery 1,757 3,166 1,940 4,560

Finishing 2,725 4,178 3,516 3,530

Total 11,678 29,776 25,686 29,036

Source: German Textile Machinery Association, VDMA.

EU markets including the recentlyapproved Pakistan specific autonomoustrade preferences. Germany is expectedto continue as an advocate of Pakistanwithin the European Union.

Encouragingly, Germany has nowbecome the largest trading partner ofPakistan in Europe and fifth biggestsource of foreign investment in thecountry. Several German multinationalhave been making lucrative businesses inPakistan for decades. The number ofPakistani companies participating inindustrial fairs in Germany has growncontinuously in recent years.

Pakistan is also one of the first ofGermany’s partner countries to make useof innovative development fundinginstruments. Under the so-called debtconversion scheme, the Pakistanigovernment is rewarded for makingpublic investments in contractually agreeddevelopment programmes by debtcancellation worth twice the amountinvested. This enabled a total of Euro 166million to be invested in education, healthcare and disaster prevention till the endof 2012.

In 2012, a total of 500young Pakistanis receivedsupport under variousprogrammes in Germany –largely in cooperation withthe HEC. Germany is one ofthe most populardestinations for youngPakistani researchers wishingto pursue a PhD, alongsidethe USA, the UnitedKingdom and France.

Engineering and naturalscience programmes are themost in demand amongPakistanis studying inGermany. In 2012, therewere a total of some 2,000Pakistani students inGermany, most of thempaying their own way.

According to GermanAmbassador Dr Cyrill NunnGermany fully supportsPakistan in gettinggeneralised system ofpreferences (GSP) plus statusfrom the European Union

and intends to invest inPakistan as a productionbase for exports to otherSAARC countries.

Germany is committedto further enhancing traderelations and manyGerman companies arekeen to invest in Pakistan,especially those in theenergy and power sector.In addition to theeconomic benefits thatPakistan will receive due toGSP plus status, thisscheme will also befavourable for Germany inpolitical terms, after theimplementation of GSPplus status.

The trade relationsbetween Pakistan andGermany would furtherflourish in future due tothe Investment ProtectionTreaty signed by theformer Prime Minister SyedYusuf Raza Gilani duringhis visit to Germany inDecember 2009.�

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German Review

Table 4: Export of Textile Machinery from Germany to Pakistan (Major Items)

(Value : Rs .000)

Machinery unit2011-2012 2010-2011

Quantity Value Quantity Value

Carding Machines No 82 765,072 147 735,135

Cone / Bobbin Winding Machines No 3 37,161 26 171,887

Textile Winding Machines No 17 390,123 49 452,840

Textile Fibre Machines No 72 224,517 39 136,454

Weaving (Shuttle less) (<30 CM) No 12 19,102 70 198,987

Circular Knitting Machines No 23 18,477 66 75,331

Top and Flat Card Clothing 000 Kg 53 177,732 58 109,879

Card Clothing 000 Kg 54 132,226 63 103,886

Spindles Flyers Ring Travellers 000 Kg 26 176,581 42 195,337

Parts of Weaving Machines 000 Kg 20 47,093 42 84,968

Sinkers Needles 000 Kg 87 196,267 140 292,079

Coating /Lamination Machines No 13 156,666 54 202,387

Stentering Machines No -- -- 7 249,587

Other Drying Iron No 14 197,654 45 530,206

Other Drying Machines No 18 81,223 63 344,880

Source: Federal Bureau of Statistics, Government of Pakistan.