Mangoes, Stars and Stripes
(This is the TENTH part of a series of weekly articles which will attempt to explore the advantages/disadvantages of Barter/Countertrade as opposed to the liberal policy in vogue in Pakistan).
The United States of America is one of Pakistan’s largest trading partners, 1983 Imports US$ 500 million Exports US$ 160 million, 1984 Imports US$ 560 million Exports US$ 220 million, 1985 Imports 675 million Exports US$ 225 million, showing an imbalance of US$ 350-400 annually in favour of the US. These figures do not include imports of defence material which would be in the region of US$ 600-750 million annually. Given the level of economic and military AID in credits available every year, Pakistan constitutes, along with Egypt, Israel and Turkey, one of the pivots of US strategic interests in the world. Despite the fact that our Government has managed a deft balancing act by remaining NON-ALIGNED and maintaining excellent relations with most of the COMECON countries, somewhere deep inside the KREMLIN must be a board where Pakistan must be circled in red as a prime target, of long-term planning and opportunity.
While the AID given to Pakistan by USA is welcome (and deep down within the sub-conscious of Pakistanis deeply appreciated) as a necessary anti-dote to the encroaching EVIL EMPIRE both from the NORTHWEST and EAST, it is time our planners explained to the US Government and the American Congress that what we really require is the opening up of the vast US domestic market to our products, primarily cotton textiles and made-ups, to make up the imbalance of US$ 950 million — 1.2 billion annually. The present balance of payments is unofficially maintained in equilibrium by the illegal export of HEROIN from Pakistan to the USA. This is as much unacceptable to Pakistanis as to Americans and can never have the stamp of even unofficial government approval, albeit by being oversight. However, the fact remains that we have precious little to offer to the US in exchange for the aviation equipment, military hardware, edible oils, advanced technology, etc that are so urgent and vital to Pakistan’s military and economic well-being. While USA is skeptical of Countertrade (CT) deals officially in actual practice almost all the big US corporations, especially the MNCs with US origins, have CT departments. The US Congress remains wary of “OFFSET” deals, but one of the greatest measure of supports it can give Pakistan is to have some reciprocation in trade. Further OFFSET as a sophisticated form of COUNTERTRADE has become a basic sales tool for American Companies doing business overseas.
At the very minimum, we should be allowed to sell approximately US$ 1.2 – 1.4 billion worth of goods and produce to the States (including quite a few mangoes) annually. This will nicely balance off the trade deficit and lessen the requirements of economic and military credits needed desperately by us. Above all, it will reduce the critical burden on us to sell our finished textiles at any cost all over the world. This is the type of President Reagan’s SUPPLY-SIDED ECONOMICS that we would like. Instead of happily receiving alms, we could learn to stand on our own feet by paying hard cash from our earnings for our purchases, in whatever category. A mix of credits may still be required but these would be welcome as we fully realize that we need credits in certain cases to develop our basic industries.
Year after year, we have an INVESTORS delegation from the US visit us to look into the possibility of investments but there is precious little movement. But despite the fact that many opportunities do exist, the investment climate remains excellent, there has been no nationalisation of foreign shareholding or companies, the investors remain wary of stepping into Pakistan and its not only because the Russians are on the doorstep. In Spain, in the last year alone, foreign investment has topped US$ 5 billion — and Spain has similar conditions as Pakistan. The main reason is bureaucratic red Taoism and lip-service to ONE WINDOW operation.
Other than a cumulative package of reasons, we have never tried to direct investment into areas mutually beneficial to both partners. For example, our fruits are the best in the world. We could have gone into joint venture operations manufacturing fruit juices and juice concentrates for export, mainly oranges, kinnos, mangoes, etc. The payment by the Pakistani shareholding can be in the form of BUY-BACK. The same can be true of surgical instruments, sports goods, computers, electronics, etc. However, our biggest imports into Pakistan from the US are in the defence and aviation fields. Whereas it would be almost impossible to really duplicate “State of the Art” weapons systems, we have fairly advanced infrastructure capable of producing precision products. Precision Engineering Limited, a subsidiary of PIA, is already supposed to produce spares on an OFF-SET programme for the Boeing 737’s purchased by PIA. The Pakistan Ordnance Factories are acknowledged as world class in their range of products. Therefore, at any time, that we intend to purchase a particular product under the FMS credits we should strive to negotiate that an agreement would ensure gradual production in Pakistan on a deletion programme. Indonesia has built up a sizable industry on this pattern and is now going into exports of the related products on an impressive scale. e.g. aviation industry.
What has been aforesaid is the official government policy but it is seldom articulated in practice. The route which is usually followed is the easy one of outright purchase without any strings. From time to time, however, there have been instances of TRANSFER OF TECHNOLOGY but the exception continues to be the rule, especially in the matter of transportation (and spares thereof) which eats up a sizeable portion of our defence budget. With the advent of computers and electronics and their rapid advancement, the gap is going to multiply and stocking of inventories is liable to become a logistical nightmare.
Our policy in this respect could be coordinated by the proposed National Countertrade Authority (NCA), which can provide adequate linkage, process the actual TRANSFER OF TECHNOLOGY on a believable, redeemable OFFSET programme, monitor the export thereof and comment on the feasibility of further projects based on the statutory evaluation report prepared by them.
Take the working example of a 5 ton truck for the Pakistan army. Pakistan could perhaps negotiate with General Motors, Ford etc for manufacture on a deletion programme of its 7-10 years requirements in Pakistan on the many existing assembly lines available, but the potential partner must re-purchase 20-30% of the trucks from us. This would ensure TRANSFER OF TECHNOLOGY, quality, genuine OFFSET and a phased deletion programme where we can utilise the Pakistan Machine Tool Factory for axles and transmissions, Bela Engineering for the engines, General Tyres for the tyres, etc, making it quite clear to the VENDORS that no product less than the desired quality would be acceptable. This is exactly how Spain has attracted an enormous investment over the past year or so.
The same process can be repeated for Bell or Sikorsky helicopters or F-16s (at Kamra Aeronautical Complex) or for frigates and submarines (at Karachi Shipyard & Engineering Works). Production of light infantry weapons need no elucidation as it is being satisfactorily manufactured in POF, Wah. What perhaps is the BUY-BACK portion which can be negotiated in the calibre changeover from 7.62mm to 5.56mm and so on.
The essence of the problem is to ensure linkage and reciprocity. The fundamental premise of friendship is a “GIVE and TAKE” relationship. We must call upon our deep ensuing relationship with the US to build up our industrial infrastructure because there is no greater bulwark against an alien ideology than the provision of jobs, education, medical and municipal support all of which stem from strengthening the country’s economic fabric. The strength to guard our country’s frontiers must originate from economic confidence among the people of this country. Basically, relationships are based on economic bilateralism and pragmatism thereof. Our friends must help us, not just by giving alms or arms, but by ensuring sheer reciprocity in trade, help us in the sophisticated development of our industrial infrastructure.
Maybe the US will take a few mangoes from us – in part payment for F-16s.
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment