Pakistan needs grants, not loans (Japanese envoy)


ISLAMABAD: While fully supporting the next auto policy, Japanese Ambassador Kuninori Matsuda said the port of Gwadar is expected to become fully operational in five years, while still being able to be used as a transit station in the short term.

He also said that Japan does not give soft loans to Pakistan and that there is a reason behind this because Tokyo does not want to increase its debt further.

“Pakistan needs megaprojects, but Japan has limited itself to just providing grants with the underlying reason in mind because we don’t want its debt increased. The Chinese could fund megaprojects, ”said Japanese Ambassador to Pakistan Kuninori Matsuda, speaking exclusively to a select group of journalists here at his residence in the diplomatic enclave this week.

Due to the deteriorating financial situation in Pakistan and the ongoing negotiations with the IMF, the Ambassador said Pakistan does not like receiving loans and understands Pakistan’s position very well. “If the financial situation improves, we are more than happy to consider the resumption of soft loans,” he said.

He said they understood that Prime Minister Imran Khan himself did not like receiving loans, instead he preferred to get investments and trade. We have tried to meet the demand of the host country, he said, adding that China is not a reason not to give loans to Pakistan.

He said Japan was focusing on five areas to provide subsidies, including water supply, education, health, disaster management and export-oriented industries.

Regarding the viability of the port of Gwadar, he said that this port has a great future, but it depends on how it will be developed.

Pakistan needs the port of Gwadar in the short term which can play an effective role as a transit or support port in Karachi, as Pakistan needs at least five years to make it an international standard port with a industrial complex, he said.

He said Pakistan needs more ports and it is wise for Pakistan to build a second port in Gwadar because Karachi has become congested. At the moment, he said, Gwadar does not have an industrial complex or commercial hinterland. He said he knew there were second and third stage projects under the CPEC.

“We are closely monitoring how quickly and to what extent the second and third stage projects will be prepared so that Gwadar can become a true trade hub,” he said.

“If the Gwadar port area is designated as an international duty-free storage area, you bring goods for storage in Gwadar and then send them to neighboring Gulf countries. Gwadar can be used to support the port of Karachi, ”he added.

He said if he was given authority from Gwadar port, the first thing to consider was how to build Gwadar as the second support port in Karachi which was to build a reliable road network and that could be a story totally different.

“I am a positive thinking person and will give him five years to make Gwadar an international standard port,” he said.

Focusing on the upcoming auto policy, he said they support the new auto policy as it will aim to increase productivity, increase competition, allow new entrants, bring technical transformation and expand pyramid manufacturing. where the focus would be shifted from assembly to manufacturing the whole unit.

“At present, the Pakistani auto industry is practically assembling units. Pakistan’s automotive market is mature enough to move from assembly to full-scale manufacturing, ”he added. He said Pakistan should focus on manufacturing raw materials like plastics, polymers and glasses.

The spare parts industry is also needed in Pakistan and it needs design capabilities, he said.

The new policy also supports the new technology of hybrid electric vehicles (EVs), as Pakistan needs to move away from traditional combustion engines that use gasoline as fuel.

Japanese manufacturers can set up factories if incentives are given in the form of reduced taxes and tariffs on importing necessary machinery, he added.

In light of local conditions, including power generation capacity, it is a bit difficult to switch from combustion to the EV stage. Pakistan needs to take a phased approach, he said.

He said Japanese automakers had done a lot for the location, but he knew there had been complaints about it. Localization can be achieved in two ways by helping to create strong local supplies.

There are areas where the quality of local supplies is not high. Some components have yet to be imported from Japanese suppliers.

“Localization also means new investments from Japanese suppliers and setting up factories in Pakistan. Japanese automakers are struggling to set up factories in Pakistan, he added. The Pakistani government could help us give tax incentives in addition to other benefits, ”he argued.

Regarding the Special Economic Zones (SEZs) under the CPEC, he said they know that the SEZs are open to investment from any country, but the Japanese automakers are based in Karachi and Lahore. and if they wanted to attract more investment, then the SEZs should be established near these two big cities.

He said that the Dhabaji SEZ, located in Sindh and the Faisalabad industrial zone in Punjab, are not near these two cities, therefore, it will be difficult for Japanese investors to set up factories in these cities. cities. Faisalabad would only be useful for investments related to textiles, he added.

“The government can offer special treatment to Japanese companies wishing to come and invest in the automotive sector,” he said.

SEZ is a magic word, but it can’t come out of nowhere and you have to build water, gas, electricity and waste management facilities. Sometimes we hear too much about the SEZ but not necessarily enough facilities are provided in these areas, he argued.

To build a successful SEZ, the key to success is land selection, it is usually successful if it is linked to export, which means that it must be located close to the trading port or the border area with business partners.

In the case of Pakistan, in the short term the SEZ should be built closer to the Karachi region and later it could be built in other parts of the coastal areas and in the long term the border area could be considered.

He said Japan had provided $ 12.34 billion in official development assistance since 1954, while grant aid stood at $ 3 billion since 1970. In 2020, the Japan provided $ 84 million in grants, while the aid amount stood at $ 26 million in 2019. “Pakistan needs grants, not loans at the moment,” he said. concluded.

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