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Economic Cooperation


Economic Cooperation
The European Union constitutes the main outlet market for Pakistani products, absorbing, according to ICE data, 28.7% of Islamabad's exports. Effect of the entry into regime of the GSP plus (Generalized Scheme of Preferences), on January 1, 2014, which guaranteed almost complete tariff exemptions for Islamabad on three quarters of its products destined for Europe, in exchange for the ratification and implementation of the 27 main international conventions on workers' rights, environmental protection and governance.

After 2014, Pakistani exports to the EU had jumped by 65% in five years (from 4.5 billion euros in 2013 to 7.5 billion in 2019), according to sources from the European Commission. Italian exports have experienced a steady increase from 2014 to 2017 (421 million euros in 2014, 440.5 the following year, to exceed 620 in 2016 and 756 in 2017), with a balance that has become in our favor due to starting from 2016 (for almost 160 million). Italy thus ranks among the top ten exporting countries to Pakistan (after the USA, UK, China, Afghanistan, Germany, Spain, UAE and Holland), fifth in Europe. This trend experienced a slowdown in 2018, where there was a contraction in the growth of our exports, which despite reaching its peak in absolute terms (over 800 million euros, almost double compared to 2014, and an exchange unprecedented € 1.455 billion) saw its lowest growth, 5.9%, compared to 41% in 2016 and 21.8% in 2017. Despite this, the exchange remains at high levels also in the 2019, albeit with a drop in Italian exports compared to the previous year, for a value of 685.1 million euro compared to 801.3 in 2018. It is indeed relevant to note that the contraction did not concern the exchange as a whole, which stood at 1.423 billion euros in 2019 compared to 1.455 billion in 2018, therefore with a modest decrease of 3.8%. The contraction in Italian exports (down 14.5%) was in fact compensated by the increase in Pakistani exports to our country (which grew by 13%, reaching 738.65 million euros against 653.9 million in the 2018). Significantly, after three years of favorable balances for Italy, in 2019 the balance returned to Pakistan, for 53.5 million euros. It is however important to underline how, in order to fuel this growth in exports, Pakistan needs Italian technology and machinery, which have not been affected by the aforementioned drop in exports. These values are also positively affected by the adoption by the EU of the preferential tariff regime "GSP Plus" starting from 1 January 2014.

Furthermore, this limited contraction is largely attributable to exogenous factors, such as the economic recovery policies carried out by the Government of Imran Khan. Not surprisingly, the high levels of trade and the strong growth of the same in recent years testify to the country's constant interest in Italian products. Despite these positive elements, the contraction of the global economy due to the effect of the Pandemic COVID-19 is expected to have a negative effect also in Pakistan, confirming the negative trend of our exports also in 2020.

In terms of the categories of goods subject to exchange, the main products exported to Italy from this country are processed textiles, clothing and food items, mainly products with Italian technology and know-how imported here.

The main item of Italian exports to Pakistan is that of machinery used in the textile, agricultural, clothing or marble processing sectors.

With regard to the Italian entrepreneurial presence, our country is present in Pakistan in the energy sector with ENI, active in the country since 2000 through the acquisition of British Borneo and subsequently of Lasmo. The defense and aeronautics sector is at the forefront, with the opening in April 2019 of a Leonardo office in Islamabad, with Italian staff. In the infrastructure sector, Salini Impregilo has historically been present in the country since the 1970s with the construction of the Tarbela dam. It is also important to mention the presence of Landi Renzo, a leading company in the production of gas systems for motor vehicles, which has been operating in Pakistan since July 2006 through a local subsidiary. Since 2016 there are also Mapei, a leader in the sale of construction chemicals, through a distribution agreement with a local company, and Danieli who signed a five million dollar contract in 2016 with the local Agha Steel for the enhancement of the latter's production capacity.

The growing importance of Pakistan for our mechanics is reflected in the activism of the trade associations ACIMIT (mechano-textile) and ASSOMAC (leather / footwear), which are engaged in recurrent training of cadres and skilled labor of Pakistan in their respective fields productive. Important, in this regard, is the collaboration agreed on the creation of three technology centers in Pakistan aimed at training the switchboards and local skilled labor for the use of Italian machinery in the aforementioned sectors. The construction of the centers in question was entrusted to our three relevant trade associations by sector in the respective sectors (ACIMIT for the mechanics for textiles, ASSOMAC for leather / footwear, Marmomacchine for marble processing). On this point, in December 2018 a Memorandum of Understanding was signed between the ICE and the Pakistani counterpart TDAP (Trade Development Authority of Pakistan), aimed at promoting the development of the aforementioned technological centers.

Pakistan can certainly offer greater investment opportunities for Italian companies, especially in light of the progressive improvement of security conditions. The country offers the advantages of a geo-strategic location at the crossroads between the "Greater Middle East", Central Asia and Southeast Asia, and is positioned along the oil and gas routes directed from Central Asia to the Indian Ocean. The Chinese investment of 46 billion dollars for the construction of the China Pakistan Economic Corridor is an indication of the interest in this country which by its geographical vocation lends itself to be a hinge for pan-Eurasian integration.

Furthermore, with around 200 million people, over 60% of whom are under 27 years of age, and a population growth rate that suggests population doubling between now and 2050, Pakistan offers the potential of an emerging middle class -high demand for high quality products, a segment in which the Italian production sector certainly has ample opportunities for insertion.

The prospects of the Pakistani economy, and its complementarity with the Italian one, were also addressed during the Italy - Pakistan Mixed Economic Commission on November 26, 2019, co-chaired by the Hon. Sub-Secretary Manlio Di Stefano on the Italian side, and by the Federal Minister for Economic Affairs Muhammad Hammad Azhar, on the Pakistani side, with particular reference to the development of foreign investments through the SEZ (Special Economic Zones) in sectors that the Government tries to modernize, such as the 'agro-industry.
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