JVs with Chinese companies

28 July 2024

Published in: Business Recorder

The fruits of Prime Minister Shahbaz Sharif’s “special visit” to China last month are beginning to show.

First, in early July, he approved joint venture projects between Chinese and Pakistani companies regarding relocation of Chinese industries, signaling that Pakistan was now also included in the list of countries that will benefit from Beijing’s strategic shift away from high growth to a long-term focus on advanced technology and manufacturing.

Now it’s been announced that “a strategy for JVs among various companies and business organisations of China and Pakistan has been evolved”.

Apparently, seven sectors have been identified – medical and surgical equipment, plastics, clothing, leather, edible meat, fruits and vegetables, and waste and fodder.

Also, 78 businesses from China and 167 from Pakistan are going to participate in a “gigantic session which is expected to make great progress in the investment sector”, it’s been reported, although the likely dates haven’t yet been announced.

This, as noted at the time of the earlier announcement, is a priceless opportunity.

On top of all the macroeconomic benefits, like improving infrastructure, mobility and employment, these JVs also present the option of importing to export, the main reason countries from Asia to Africa have been lining up to take advantage of China’s “paradigm shift” and its novelty of moving entire industries elsewhere.

China will not abandon these industries, after all, but buy their produce to sell abroad; the ideal win-win that is at the heart of JV theory.

However, let’s not forget that the prime minister seemed to understand the pitfalls on this road when he shared this development with the nation, and ordered rapid progress on the ease of doing business front that has been stalled since forever, as well as a quick revision of the Special Economic Zones One Stop Shop Law.

Yet now that we’re hearing of both sides putting final touches on this ambitious plan, these items have disappeared from the headlines.

Islamabad knows only too well that Beijing is the largest foreign investor in this country, and therefore understands the nightmare of getting through all the bureaucratic red tape here.

So, when the federal secretary of the board of investment said, as quoted in the news, that BOI had done its “initial homework”, one would like to think that it had done something about its own trademark inefficiencies also.

It’s a shame that Pakistan’s own bureaucracy, still stuck in the 19th-20th century Raj mould (minus the efficiency), is the biggest stumbling block to enacting progressive reforms.

All other countries with the same or similar heritage, especially India, have long since identified such problems, solved them, and moved on, especially when it comes to facilitating foreign investment – the life and blood of the modern, frontier/emerging market economy.

But not us. Not that it’s not been tried. Most parties have promised bureaucratic reforms on the campaign trail, some have even tried to get the ball rolling after coming to power, but the civil service, usually the epitome of functional lethargy, springs into action to sabotage all such initiatives promptly.

This time, though, the government has no choice. Pakistan was initially kept out of this particular Chinese outreach simply because its economy was too weak to absorb it; not to mention that its official processes are not investor-friendly.

And since the economy has not changed at all in the last few years – if anything, it has only got worse – we will most certainly need to bury the red tape immediately for these JVs to even take off.

The PM has pulled off quite a deal with the Chinese, he’s also ordered the right groundwork to be laid for it. So much for theory.

Now he’ll have to show the political will to push necessary reforms through before the Chinese start landing here to sign on their contracts.