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Pakistan's trade partners: Soviet Union.

Soviet Union and Pakistan are traditional business partners. With the establishment of diplomatic relations between our countries, in 1948, the trade relations also began to progress. The inter-governmental trade agreement signed in 1956, is an important event in the progress of Soviet-Pakistan trade and economic relations as well as an essential legal basis of these relations, with further development in barter due to annual bilateral protocols of mutual deliveries.

In the early 60's, the mutual trade and economic relations considerably advanced. The principal cause in this connection was the beginning of economic cooperation between our countries when, on March 4, 1961, the first agreement on cooperation in exploration of oil and gas was signed with a respective soft state credit terms and conditions. Consequently, in the mid-sixties, the trade and economic contacts became part and parcel of the Soviet-Pakistan inter-state relations; and it met the requirements of the basic necessities of Pakistan who, contrary to the opinion of the Western countries, gave first priority to important fields of fuel, heavy industry and infrastructure.

During next years, apart from the above mentioned two agreements, the Soviet Union and Pakistan signed further five agreements pertaining to the economic cooperation in oil and gas, ferrous metallurgy, power generation, broadcasting and fishery.

The economic cooperation with Pakistani private companies also progressed. Thus, by the early 70's Soviet organisations participated in design and construction of about 20 various projects in Pakistan.

It was considerably helped by the firm policy of Zulfiqar Ali Bhutto's government to industrialise the country, promote the state sector of economy, and loosen the unilateral attachment with the Western countries.

As a result of the Soviet Union's economic and technical aid, such projects were built in Pakistan as Karachi Steel Mills (annual production of steel - 1.1 million tons), along with a large training centre, Guddu Thermal Power Station (210 MW), 11 radio broadcasting stations of various power, a tractor assembly plant and electric meter assembly plant in Lahore and cotton-spinning mill in Hyderabad. The Soviet organizations carried out great volume of geological survey for oil and gas resulting in discovery of 3 oil and 5 gas fields. A large number of Pakistani specialists got vocational training in Training Centre of Pakistan Steel Mills on construction sites and in the Soviet Union.

Karachi Steel Mills that was completely built and commissioned in the beginning of 1985 and which is the basis of the country's industrial development bears specific importance. Karachi Steel Mills is successfully attaining its designing capacity, is working profitably; and having been meeting more than 50 per cent of the country's needs in rolled products, promoting the export of the products to other countries.

In accordance with the inter-governmental agreement of December 16, 1983, the organisation of the Sides started construction of the Thermal Power Station Multan-2 in Muzaffargarh (630 MW), which will become during coming years, like Pakistan Steel Mills, the biggest project of our cooperation.

Due to progress of our economic cooperation, the turnover of trade between our countries has considerably and dynamically increased; from $ 6.7 million in 1960, to $ 67.7 million in 1975, and about $ 200 million in 1989.

At the same time, it may also be pointed out that the growth rates (volume) of the bilateral trade were not in accordance with the large possibilities of both countries. Its main reason lies in those unfavourable political relations between Soviet Union and Pakistan which emerged during last ten years due specifically to so-called Afghan issue. At present, the Soviet Union shares only 2.4 per cent of Pakistan's exports and 0.6 per cent of its imports. However, a number of the commodities pertaining to the Soviet-Pak trade plays an important role in economy of Pakistan, and have an increasing demand in the Soviet Union.

In all 65 per cent of the Soviet exports to Pakistan consists of machinery, spare parts and materials for the projects of cooperation, and, similarly, comprises tractors, construction equipment, flour-mill equipment and other machinery. Further, Pakistan is supplied with various ready made goods (tyres, glass, synthetic rubber, board etc.) as well as raw material.

At present, in Pakistan, there are more than 50 thousand of the Soviet tractors, more than seven hundred thousands of Soviet electric meters have been installed and 70 per cent of the flour-mills are equipped with Soviet machinery. Soviet imports from Pakistan consist of cotton cloth, vast variety of gent', ladies' and children's garments as well as bed sheets, towels, untanned leather and some other commodities. The Soviet Union shares Pakistan's six per cent export of cotton cloth, 13 per cent export of ready-made garments, including 50 per cent of the total export of gents' shirts, and the seven per cent export of towels. Annually, Pakistan delivers 15-18 million gents' shirts to the Soviet Union. Notably, there are real possibilities of considerably enhancing the supply of these commodities. Apart from the State corporation (WAPDA, Pak-Steel, OGDC) the important partner firms of Soviet Union in the private sector are FECTO, Mercury, Tabani, Fateh, Metro, Escorts and others, who are tangibly contributing to promote the Soviet Union's trade and economic relations with Pakistan. Two joint ventures with Pakistan's private sector were up during the current year. Establishment of another three joint ventures is in the stage of negotiations. On the basis of mutual interest, the considerably vast possibilities for an active progress of the commercial and economic relations define more clearly the present process of stabilising Soviet-Pakistan political relations. Its solid proof is that the Government of Pakistan requested in 1988 to realise more than 10 new projects, including expansion of Karachi Steel Mills to product upto three million tons of steel annually, power transmission line-500 KW, fibre-glass factory, Mirani Dam, exploitation of nepheline, phosphate and iron-ore deposits, and others. At present, an agreed draft of the inter-governmental agreement regarding expansion of Karachi Steel Mills is being finalized. The Soviet side is agreed to provide Pakistan a state credit of 100 million US dollars for 13 years with grace period of three years. The repayment of the credit will be effected as usual by import of consumer goods made in Pakistan. The experts of the sides are examining the questions of cooperation in other fields, including active participation of the private firms of Pakistan. The Pakistani requests on further expansion of Thermal Power Station Multan-2, creation of bilateral intergovernmental commission on economic and scientific technical cooperation are being positively considered. Similarly, the sides have signed the letters of prorogation of validity of the protocol of reciprocal deliveries of commodities for 1989-90. Implementation of new forms of active cooperation, including establishment of joint ventures in Pakistan and Soviet Union, is under consideration. On the line of chambers of industry and commerce, the contacts between the Soviet and Pakistan commercial circles are being strengthened. In March, last year, according to the agreed upon programme, a delegation of the Soviet Union's Chamber of Industry and Commerce paid a response visit to Pakistan. The delegation participated as observers in the meeting of the representatives of the chambers of industry and commerce of the developing countries-members of Group-77. After the negotiations between the delegations of the chambers of industry and commerce, a protocol with regard to further promotion of business contacts and provision of bilateral trade and economic ties was signed. In September last year the first ever single country exhibition of Pakistani goods was held at Expocentre in Moscow.
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Publication:Economic Review
Date:May 1, 1990
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