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The Bilateral Relations


The Bilateral Relations

On the first week of December 2016, the most important italia business delegation ever visited Pakistan, guided by the UnderSecretary of State at the Ministry of Economic Development, H.E. Ivan Scalfarotto. The most influent industrial organization representatives of Italy, as well as 60 of the best italian companies were travelling with him. We think that the speach he pronounced in that opportunity is really meaningful, and actually represents us and our feelings about the Italy-Pakistan relations.



""... Dear friends, ladies and gentlemen,

Thank you for inviting me to this prestigious institution to hold a lecture on ‘Italian economic diplomacy and Italy-Pakistan

It is a real honor to address such a qualified audience, in what has recently become, as I understand, an established floor for italian governmental Representatives on their official missions to Pakistan.

I am also pleased to realize that my visit happens at a time of sustained efforts to further strengthen our bilateral ties.

As we are all aware, this is implemented through the "Strategic Engagement Plan", which provides a formal and structured framework for consultations at political and senior officials level on a wide array of fields.

Among those, bilateral trade is at the heart of my mission and will be accurately addressed by the Economic Joint Commission.

I am optimistic our shared efforts will prove successful and soon yeld the fruits we all hope for. Despite our excellent relations, however, I believe there is huge potential our countries can exploit to boost trade and direct investment.

Pakistan's and Italy's economies are complementary in many aspects and our companies enjoy know-how, technology and skilled labour in such an amount to meet the requirements of Pakistan's development projects, namely those under the CPEC in the fields of renewable energy, railway and road infrastrucure, industry machinery, just to mention a few of them.

My visit to Pakistan, in my quality of "State Undersecretary for Economic Development", is therefore meant to explore new avenues for such potential to be fully developed.

This can happen for instance through G to G and B to B interaction, which is indeed what we seek to achieve throughout our meetings round in Islamabad and Lahore, as a follow up to the business forum that was successfully staged in Rome on april the 5th. I am deeply confident that meetings and interaction at business level will encourage a sizable number of our respective companies not only to open up their market opportunies in both countries but also to consider direct investment options: pakistani companies in Italy, through an incentive package I will briefly illustrate in a while; italian companies in Pakistan, thanks to its business friendly environment, thus overcoming the biased perception international media often fuel about this amazing country.

Meetings and contacts alone cannot however bear fruitful outcomes. We are fully aware of that. A far reaching strategy and a set of operational tools are all the same vital in boosting trade and investment opportunities.

This applies all the more to an export-led economy like Italy, in its efforts to increase its market shares in emerging economies, among which Pakistan plays in our view a promising role.

Such operational tools, falling under the broader concept of "Economic Diplomacy", are available in Italy to help italian small and medium-sized companies win new markets, as well as encourage foreign companies to invest in Italy.

Economic diplomacy is carried out through an institutional body by the name of "Control room for international Italy" in charge of promoting and coordinating internationalization policies.

Co-chaired by the Ministry for Economic Development and the Ministry for Foreign Affairs and International Cooperation, it reflects efforts engaged by central, regional and provincial governments jointly with business unions to coordinate Italy's internationalization strategies and policies, systematizing marketing initiatives, analysis tools and market penetration, and focussing the use of financial resources towards specific and shared objectives.

Our trade and diplomatic network worldwide, consisting of Embassies, consulates, trade offices, Chambers of Commerce and Institutes of Culture is a key element for the implementation of such policies.

Reporting on local political environment and business opportunities and closely interacting with business and financial institutions enables network operators to inform the italian governmental institutions, outlining areas of possible cooperation.

Enhancing our presence abroad, however, is only one side of the coin. In today's globalized world, as we are all aware,
competition is not only about winning market shares or promoting direct investment overseas.

It is also about implementing sound domestic policies to pave the way for foreign direct investment to pour into the country.

To this end, the italian Government is strongly committed in improving its business environment for potential foreign investors through a set of reforms falling under the umbrella of the so called "Doing Business" programme.

Simplifying administrative procedures, enhancing our training system, reducing requirements for new businesses to start up, are just a few examples.

Our labour legislation is now more flexible than ever before and better adjustable to economic cycle trends (Jobs Act); options for companies are there to sign specific agreements with fiscal bodies, as well as incentives for investment property, particularly when meant to redevelop specific urban areas.

At institutional level, the italian Government has summarized the whole set of procedures to attract foreign investment under the Law Decree n. 133 del 12 settembre 2014, which establishes the "Foreign Investment Committee", whose coordination belongs to the Ministry for Economic Development".

Before I touch upon the current state of our trade relations, let me please share a few figures over the italian economy. Despite
a sluggish economic growth over the past 15 years, Italy maintains a sizable share in international markets thanks to the quality of its brands and the favour they enjoy among consumers worldwide.

Italy is currently the world's eight export country - holding a 2.9% market share - after China, USA, Germany, Japan, Netherlands, France South Korea. We are among those economies that in the globalized world have managed to maintain major market shares at international level. After the rise of China and other brics in world markets, Italy maintained 75% of its export shares as compared
to 2000. A performance which is not comparable to Germany (94%), though better than Japan (51%), Canada (57%), France (60%), UK (63%).

Italy holds the second best industrial trade surplus within the European Union, after Germany, and is one of the world's top 5 markets with an industrial surplus exceeding 100 billion US dollars.

Our trade balance faces the so called "energy burden" (huge oil and gas imports), without which Italy would hold the world's 5th biggest trade surplus, after China, Germany, South Korea and Japan.

Strengthening bilateral relations is also about building bridges. This part of the job is already done, as a crucial pillar of the bridge between Italy and Pakistan is represented by the Pakistani community in Italy which amounts around 150,000 people and is currently the second largest in the European Union after the one in the UK.

The Pakistani community is socially and economically well-integrated. It speaks both languages and identifies itself with as many cultures. It contributes to economic growth in Italy and to the wellbeing of their native families in Pakistan through remittances.

This community – mostly composed of businessmen, entrepreneurs, factory workers or brilliant students – represents a value added for the relations between our countries.

Let me now dress an overview on the current status of bilateral trade and investment relations between Italy and Pakistan. Italy is the 9th exporting country to Pakistan and the 16th importer from Pakistan.

Overall, we are among the top ten commercial partners of Pakistan. Trade exchange amounted to $ 1.2 bn during fiscal year 2013-2014.

Italian exports to Pakistan are mainly related to metal products, machineries and equipments, especially those for the textile industry, which account for about 60% of Italian exports here. Most spinning mills of Pakistan use some Italian machineries. On the other side, Italy mostly imports from Pakistan textile and leather products.

As to investments, energy remains today the driving sector for Italian investment in this country, with ENI being the main investor in Pakistan and the largest foreign Oil and Gas explorer and extractor.

Pharmaceuticals maintain a strong position in our bilateral relations with Angelini and Chiesi that have been present in the Pakistani market since the 1980s. Also the automotive sector – broadly speaking - plays a significant role with large Italian companies operating in this country.

Fiat is mostly present in the agricultural sector with its 43% stake in AGTL and directly with its sister-company CNH; and Piaggio, through its joint venture with Ravi, for the production of two-wheelers in Pakistan.

As I said before, the economic and commercial relations between our two countries enjoy excellent health. Nevertheless, I am convinced that they still bestow a potential in terms of possible future cooperation. In fact, the economies of Italy and Pakistan complement each other in many ways. Italy has expertise and technologies in areas matching Pakistan’s interest. At the same time, Pakistani dynamic and growing market is of interest for a number of Italian companies.

For Italian companies to start looking more and more towards Pakistan as a destination for their investments, a paradigm shift is needed. My visit here comes as a signal of the Italian commitment to this paradigm shift.

A paradigm shift which require political and business leaders to look at Pakistan beyond the prism of security issues. As a forward looking article on Forbes wrote, we should stop looking at Pakistan as a problem to be solved and rather looking at it as a land of opportunity.

With a population of about 200 million people, a middle-class currently counting more than 40 million people (about the size of a medium European country), Pakistan is more and more an “inevitable market”.

In some ways, Italy and Pakistan share a similar geographical fate. Italy appears to be shaped as a bridge between North and
South, between Europe and Africa, between East and West, extending from the Middle East to the Balkans.

Pakistan shares a similar destiny, being positioned as the “zipper” of Pan-Asian integration, potentially connecting the massive
economies of Eurasian Union, SAARC countries, Iran, China and Russia. With regional connectivity interventions – including the China-Pakistan Economic Corridor, the electricity transmission project CASA 1000, the much expected TAPI gas pipeline, Pakistan is what has correctly been called “the gatekeeper” of South-Asia.