Chapter 7 Pakistan and the Philippines
Pakistan
7.1
The High Commissioner for Pakistan in giving evidence to the
Sub-Committee noted that the government and people of Pakistan were grateful
for the assistance that Australia has offered in helping to overcome its
economic problems. He referred particularly to assistance in coping with the
recent world financial crisis and in dealing with the effects of the October
2005 earthquake.[1]
Trade and Investment
7.2
The submission from the Pakistan High Commission commented that:
“Despite a 1990 Bilateral Trade Agreement between Pakistan and Australia, the
level of trade between the two countries remains low”. In evidence the High
Commissioner estimated that total trade was about US$700 million and that the
ratio was 80 per cent to Australia and 20 per cent to Pakistan.[2]
7.3
The High Commissioner said that Australia’s exports to Pakistan had
increased from US$ 226 million in 2001 to US$ 523 million in 2007-08. In the
same period, Pakistan’s exports to Australia increased from US$ 113 million to
US$ 138 million.[3]
7.4
He said that Pakistan is Australia’s 28th largest market for
merchandise exports. The main products are: wheat, animal oils and fats,
cotton, coal, iron ore, fertiliser, machinery and parts, chemicals and chemical
products. For Pakistan, the main exports to Australia are: clothing, carpets
and rugs, textiles and made up textile products, petroleum, rice, sports goods,
furniture, medical and surgical instruments, hosiery, and spices.[4]
7.5
Statistics from the Department of Foreign Affairs and Trade showed that
two-way trade had increased to A$ 691 million by 2009; up from
A$ 578 million in 2007. Australian exports to Pakistan totalled
A$ 528 million and imports A$ 163 million. The product mix was substantially
the same as in 2007-08.[5]
7.6
The High Commissioner for Pakistan emphasised the potential for progress
and cooperation between Australia and Pakistan
Pakistan has immense potential for multiple corridors of
interaction and cooperation involving energy, trade, communication and tourism.
Due to the strategic location of Pakistan, it is also becoming the trade,
energy and transport corridor for countries of the region.
We are a nation of 165 million people, with a growing middle
class. As we speak today our per capita income is US$1,085. There are 20
million to 30 million Pakistanis who constitute the middle class, earning
something between $10,000 to $15,000 ..., and they constitute a large and solid
market for the purchase of goods and services. Apart from the strategic
location of Pakistan, it has a trained a workforce of English speaking
manpower. We have a large pool of doctors, engineers, accountants, managers and
IT professionals.
For the last five consecutive years, despite all the problems
that we face on account of terrorism and the deteriorating security situation
in Afghanistan, we were able to achieve a growth rate of 7.5 per cent.[6]
7.7
The High Commissioner also noted that many Australian companies ware
already active in Pakistan, with an encouraging amount of investment in place
and extensive interaction in education services:
More than a dozen Australian companies are based in Pakistan.
The major one is BHP. ANZ Lend Lease has one of the largest banking operations
in Pakistan. BHP operates the second largest gas fields in Pakistan. It has
also discovered oil in areas that has been allocated to it in the last couple
of years.
Tethyan is another Australian company that is involved in
gold and copper mining in the province of Baluchistan. They are in partnership
with a Chilean firm and also a consortium of Chilean, Australian and Canadian
firms who are working on that mine in Pakistan.
In addition to the major Australian companies which are
actually based in Pakistan, 127 other Australian business entities are
regularly doing business with Pakistan ... importing or exporting various
items. These 127 businesses include the universities in Australia, because they
are also luring a large number of very bright students from Pakistan to study
in Australian universities.[7]
Strengthening Trade and Investment
Requests by Pakistan
7.8
The High Commissioner made a number of requests to the Sub-committee
seeking assistance in overcoming the difficulties his country has been facing
in recent years. He emphasised that Pakistan’s wish is to overcome its
difficulties “with trade, not aid”:
... I would like to make some recommendations that I would
submit before you for your consideration, with the request that these ... be
included in the final report that your committee comes up with. Again, I would
like to reiterate that we would like to overcome and meet our economic
problems. We want to meet our challenges through trade, not with aid. That is
the first point.
As I mentioned earlier, the balance of trade has always
remained in Australia’s favour. We need some help in that area. In order to help
Pakistan economically we need to expand our exports. More exports will attract
more investment in industry and will provide more jobs for the people,
including in the tribal areas of Pakistan. We request market access to
Australia, which we feel is of paramount importance for the growth of exports
from Pakistan.
The textile and garment sectors constitute about 50 per cent
of Pakistan’s global exports. This is a labour intensive sector and can create
more jobs with every dollar invested. Presently no tariff concession is
available to Pakistan under Australia’s GSP scheme. Due to the specific
conditions in Pakistan, the economic losses that we are suffering on account of
terrorism and the deteriorating security situation in Afghanistan, we urge you
to allow us tariff concessions and a generalised system of preferences which
are available to LDCs.
You may argue that Pakistan is not an LDC country. I would
agree with you, but then there are countries, apart from LDCs, which receive
concessions due to special circumstances. At the moment we are facing those
special circumstances. The European Union has such a clause and we really do
not see why this same clause cannot be inserted in your regulations.
Secondly, our request would be that Australia could agree to
our proposals mooted during the Cairns group meeting in 2006. During that
meeting Australia and Pakistan had agreed to establish a joint study group on
trade. In that joint study group we made certain proposals, including the
extension of the GSP concessions to Pakistan and also a proposal to initiate
FTA negotiations with Pakistan.
We were told to give specific proposals in this regard. We
also submitted these specific proposals to the Department of Foreign Affairs
and Trade. A push forward from your side will certainly help us in getting
those proposals to materialise earlier. We are a part of the Cairns group and
we have played a significantly important role in the proceedings of the group.
... I mentioned the FTA negotiations. ... The honourable
members of this committee would know better than anyone that FTA does help both
ways; all the countries benefit. We have signed an FTA with China and most of
the Asia-Pacific countries, including Malaysia and Singapore. Negotiations are
at an advanced stage with Indonesia. We have initiated negotiations with Korea.
It is of paramount importance, given the importance that the people of Pakistan
attach to Australia. We also need to begin those negotiations at an early
stage.
An MOU between the investment promotion entities of Australia
and Pakistan is also of great importance. We need to have this kind of MOU ...
to promote investments in the two countries.[8]
7.9
The High commissioner also sought an increase in the funding for the Agricultural
Linkages Program:
We are grateful to Australia for the establishment of the
Agriculture Linkages Program, which was established two years ago with an
allocation of about A$6.5 million and has achieved great results. It has
certainly helped our agriculturalists learn the best practices from Australia.
It has increased productivity. It has done some wonderful things.
This program is likely to come to an end by June next year.
Our request would be that the Agriculture Linkages Program should continue with
more allocation towards this program. Rather than $6.5 million which was
earlier allocated to this program, the amount could be increased to $10 million
for the simple reason that we have recently learnt that the Pakistan
development assistance from Australia is going to be increased from the current
level of $35 million to $50 million. That should justify the increase in the
Agriculture Linkages Program that we are talking about.[9]
7.10
As with a number of the countries giving evidence to the inquiry,
Pakistan has concerns over the length of time it takes to get quarantine
clearance for agricultural products:
We could also establish cooperation on phytosanitary
standards. That is something that is an area that we would be interested in.
For the last two years negotiations have been going on
between the trade officials of the two countries for the import of mangoes and
citrus from Pakistan. I can assure you that we produce the best mangoes
anywhere in the world.
We have 150 varieties of mangoes. We export mangoes to
everywhere in the world except Australia because of the very tough standards
that are applied to the import of mangoes and citrus. Again, we claim that we
produce the best citrus fruit. It has the best aroma and taste, and it sells at
a premium in the European, American and Japanese markets.
Negotiations are going on. There were certain requirements
that the Australian government wanted us to fulfil before the import of mangoes
and citrus was allowed into Australia. Many of those steps have already been
taken regarding quarantine requirement, the quality of the fruit and the other
standards that they asked us to meet. We would request that process should also
be fast tracked.[10]
7.11
Another issue raised by several countries during the inquiry concerned
the delays and difficulties involved in obtaining visas:
One very serious problem that our businessmen face is getting
visas. I receive queries from our business delegations desiring to come to
Australia because the visa process takes quite a while. This is affecting us in
many ways.
Every year before every education term I receive telephone
calls from concerned parents and students who cannot get visas to start the
semester because the visa clearance is something that takes ages. This problem
is also being faced by members of the business community.
To give you one example, last year the delegation of the
Federation of Pakistan Chambers of Commerce and Industry visited Australia.
They arrived and I was not informed about it. When I spoke to them I said, ‘You
could have told me and I could have made some better arrangements for your
meetings.’ They said, ‘At the last minute we didn’t know whether we would be
able to visit Australia or not.’ They were coming here on the invitation of the
Australian chambers because of the Asia-Pacific countries chambers meeting that
were taking place in Perth and they were to attend that meeting. They said that
it took them at least four weeks to get clearance, after making regular calls
to the High Commissioner, Ms Zorica McCarthy. Ms McCarthy is a wonderful person
and extremely popular High Commission representative of Australia in Pakistan
doing wonderful things to expand the relations between the two countries, but
even she was helpless because every case has to come here for clearance and the
high commission perhaps does not enjoy the flexibility to issue visas on its
own.[11]
7.12
The High Commissioner raised a number of other issues that, he said,
would be of great assistance to Pakistan:
We also need to sign an agreement on the avoidance of double
taxation. This is something of paramount importance for the business
communities of the two countries. It would certainly send positive signals to
the business communities of the two countries.
Establishment of an Australia-Pakistan business council is
extremely important. Given the size of our trade and Australia’s investments in
Pakistan, the establishment of an Australia-Pakistan business council would be
a step in the right direction.
Exchange of business delegations is another issue. While I am
cognisant of the fact that it is the business community itself which has to
take the initiative in visiting each other in order to establish contacts and
that government can only act as a facilitator, but we can certainly do some
things. We can encourage the chambers, the business community, Austrade and
Australian investment to establish these linkages which are of great
importance.[12]
7.13
Finally, the High Commissioner highlighted the opportunities for
Australian companies in investments in Pakistan:
We have a bilateral agreement on promotion and protection of
investments. We feel that there are tremendous opportunities for Australian
companies to invest in Pakistan in the oil and gas, mining, coal, manganite,
marble, gold, copper, uranium and power generation. We have the largest coal
reserves. We can become a good competitor in the world.
We need hydrothermal coal, solar, wind and biogas energy in
Pakistan. Australian companies can invest in Pakistan. Agriculture, dairy
development, IT and telecom, shipping, fisheries and the auto sector are some
of the sectors that are open.
We have a liberal investment policy whereby we treat foreign
investors and local investors on a par. All economic sectors are open to
foreign direct investment. Foreign equity up to 100 per cent is allowed. There
is no government permission required.
We have a network of export processing zones and industrial
zones with repatriation of 100 per cent capital. We have an attractive
incentive package with zero to five per cent duty on imported machinery and no
sales tax or withholding tax on imported machinery. We have also introduced a
number of reforms and because of these reforms the World Bank has termed
Pakistan as a model country which has introduced some of the best economic reforms
in the financial, trade and taxation sectors.[13]
The Philippines
7.14
The main change in trade relations between the Philippines and Australia
in recent times has been the signing of the ASEAN-Australia-New Zealand Trade
Agreement – discussed at length in Chapter 6.
Trade and Investment
7.15
In evidence to the Sub-Committee, the Ambassador for the Philippines
noted the leading role played by mining in the trade and investment relations
between the two countries. He said that mining activities accounted for 65 per
cent of all Australian investment in the Philippines. [14]
7.16
The Ambassador said that there is scope for these activities to grow and
commented on the success of two firms in particular, CGA and Indophil. He
added, however, that he had hopes also for strong growth in other areas, for
example: in supply linkages with the automotive, transport and electronic
sectors. The best prospects he said were in the services industries,
particularly: IT services, education, financial services, health care and
tourism.[15]
7.17
Total bilateral merchandise trade reached US$1.372 billion in 2008; an
increase of 10 per cent over 2007. The Ambassador indicated that the
Philippines regards that as only a starting point and he said:
We are certainly keen to work with the Australian Government
in any initiative to enhance economic relations between our two countries,
which clearly have much room for growth.[16]
7.18
Bilateral relations are assisted by the operation of the
Philippines-Australia Ministerial Meeting (PAMM), which first met in 2005 and
met again in October 2008. The Ambassador commented that:
The PAMM has become more than just an opportunity to
dialogue. It has become an important venue to identify and work on specific
courses of action that will encourage greater trade, investment and economic
cooperation between the Philippines and Australia.[17]
7.19
The Ambassador made similar comments about the ASEAN-Australia-New
Zealand Free Trade Agreement (AANZFTA). He said the Agreement:
...provides a new avenue by which to approach our economic
relationship with Australia. Being a comprehensive single-undertaking
agreement, the AANZFTA provides a good framework for complementation and
collaboration in specific industries, which have traditionally been of mutual
importance to our respective economies, such as mining, agribusiness and food
processing.
These initiatives give us much to look forward to in our
efforts to expand our trade and investment relations.[18]
Strengthening Trade and Investment
7.20
Like a number of the other countries giving evidence, the Philippines is
placing a high priority on quarantine issues. However, in the case of the
Philippines there is very active cooperation between AQIS and the authorities
and exporters in the Philippines with the aim of “bringing our agricultural
output up to international standards”. This was happening, the Ambassador said
with specific funding from Australia.[19]
7.21
However, one issue is still far from resolution. The Special Trade
Representative for the Philippines said:
The only sticky issue right now is with Philippines bananas.
We have been wanting Australians to try Philippines bananas for 20 years. You
may be aware that the IRA was issued in November and the final policy
determination was issued on 3 March, so I guess Australia is now waiting for
the Philippines to respond to that.
The operation is to start working on a work program. Our
Department of Agriculture is consulting the stakeholders. There have been some
areas of the IRA that the Philippines is not entirely in agreement with.[20]
7.22
Other quarantine issues for the Philippines have involved problems
arising from past outbreaks of foot and mouth disease:
We have also been having difficulty with our ice cream
products, anything related to meat products and dairy also. We have been trying
to export ice cream to Australia and the problem there is with the lifting of
the foot and mouth disease classification of the Philippines, which has to be
done with the OIE in Paris.
That is something we are working on now. Hopefully we will
get off the list this year, which would solve some of our dairy and meat
related problems also.[21]
7.23
The Philippines is very interested in expanding services trade with
Australia. It has particular interest in supplying Australia with trained
nurses and other healthcare professionals, tradespeople and other skilled
workers. The Special Trade Representative noted that these ideas had been
discussed in the context of the AANZFTA negotiations.[22]
7.24
She also commented that there was considerable scope for cooperation
with Australian Universities on this training:
There has also been a lot of interest from Australian
universities—nursing schools, for instance—to work with universities in the
Philippines.
A lot of registered nurses who come to Australia from the
Philippines have to go through bridging courses for both English proficiency
and clinical work. We are trying to get Australian universities to link up with
their Philippine counterparts so that our nurses get a higher standard of
training, which hopefully would be acceptable here.[23]
7.25
The Ambassador added:
Even at the state level, what we are looking at is for the
activity to be more economical. Rather than taking the Philippine nurses, say,
to Melbourne to do bridging courses, maybe we can get the technology from
Melbourne to the Philippines and just get one or two heads to give out the
standards and make sure that they are able to take the bridging courses right
there at less of an economic cost for everybody.
From what we understand, it is really difficult for our
nationals to be able to hurdle that 457 visa because of the standards required.
But if they are your standards then they are your standards.
That is why we are looking for ways for, say, nurses on 457
visas to hurdle the requirements in a way that is less expensive for them. We
are looking at specific trades capability.
I think even your VETASSESS and TAFE are looking at our own
TESDA in the Philippines to crank in the technology right there in the country,
rather than letting the guys come here and spend a lot of money to qualify. We
are looking at some technical approaches on that at the state level.[24]
7.26
The Sub-Committee asked whether any Philippine workers had experienced
difficulties in having 457 visas renewed. The Ambassador responded:
Yes, what is happening in very particular cases is that some
employers stop employing because of economic difficulties. That is the reason
we have our labour attaché in Australia trying to bridge the activities of
these 457 visa holders to be able to move onto another job.
Since earlier this year, there have been a few instances
where some Filipinos on 457 visas were terminated by their employers. We are
becoming aware of the need to bridge them for the next 28 days so they are
still supported by their employers until they are able to find other
employment.
There are also cases where a few have had to go back to the
Philippines because they were not able to find any other subsequent employment.[25]
7.27
The Special Trade Representative also discussed the possibility of
increasing exchanges of business missions and participation in trade fairs. She
said that several missions had been arranged recently and noted particularly
the participation of the Philippines in the CeBIT fair in Australia:
That is another sector that we are constantly promoting from
the Philippines. This included participating in the CeBIT fair, which is the
largest technology event in Australia. It was the first time that the
Philippines participated in that fair and the response from the participants—the
business delegation—was very good. We are looking at doing that on a yearly
basis.[26]
7.28
The Special Trade Representative added:
In the past we have also done missions with food exporters
from the Philippines to look at Australia as a market. One of the areas we
would like to work on now is a reciprocal mission.
We had exporters of automotive parts and components from the
Motor Vehicles Parts Manufacturers Association of the Philippines visit
Australia last year, Melbourne in particular. They had a dialogue with their
counterpart, the Federation of Automotive Parts Manufacturers, and we are now
looking at inviting FAPM for a reciprocal mission to the Philippines.
It is really focussed on specific areas where we want to show
that there are opportunities for more trade between Australia and the
Philippines.[27]