Pakistan-Germany Trade: A Fruitful and Growing Partnership

Introduction

Pakistan and Germany have enjoyed a strong and friendly relationship since establishing diplomatic ties in 1951. Their relations are built on shared values of democracy, human rights, cultural diversity, and economic liberalism. Over the years, both countries have fostered close cooperation in various sectors, including trade and development. In this report, we will explore the dynamics of Pakistan-Germany trade, highlighting the historical background, current trade volumes, key sectors, and the role of organizations like GIZ in promoting bilateral development initiatives.

by Nadeem Mazhar, Managing Editor, Pakistan Textile Journal.

Historical background and diplomatic relations

Pakistan-Germany relations have consistently grown since their establishment. In 1959, the two nations signed the world's first bilateral investment treaty, signaling their commitment to fostering economic cooperation. West Germany, now the Federal Republic of Germany, became a member of the consortium providing development assistance to Pakistan in 1961. And later in 1962, the PakistanGerman Forum was established to facilitate dialogue and exchange between the two countries.

Today, Germany maintains a strong diplomatic presence in Pakistan with an embassy in Islamabad and consulates in Karachi, Lahore, Peshawar and Quetta. German investments and business presence in Pakistan

Germany is the eighth-largest investor in Pakistan, with several German multinationals operating in the country. Approximately 35 German companies have a presence in Pakistan, primarily in Karachi and Lahore.

The majority of these companies are engaged in industries such as machinery, chemicals, pharmaceuticals, automotive, and related equipment and services. Notably, around 55% of multinational companies in Pakistan are from the pharmaceutical and chemical sectors. The services sector comprises 15% of companies, followed by transportation and textile machinery sectors with 5% each. The German government has committed substantial financial support for development projects in Pakistan, with approximately 3.5 billion euros pledged, a significant portion of which has already been disbursed.

GIZ: German Cooperation with Pakistan

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, working on behalf of the German Federal Ministry of Economic Cooperation and Development (BMZ), plays a vital role in supporting Pakistan's development initiatives. GIZ focuses on priority areas such as sustainable economic development, good governance, crisis prevention and stabilization, and energy. The organization has been actively involved in technical and vocational education and training (TVET) reforms, promoting private sector-led and demand-driven training systems for improved employability prospects. GIZ also supports poverty alleviation efforts by improving access to needs-based social protection services.

Trade volume and sectoral analysis

Germany is Pakistan's largest trading partner within the European Union, accounting for a significant portion of Pakistan's exports to and imports from the EU. In the fiscal year 2019-20, bilateral trade between Pakistan and Germany amounted to US$ 2.25 billion, with Pakistan enjoying a trade surplus. Germany has been a significant market for Pakistani textile products, particularly readymade garments, bedwear, cotton fabrics, and knitwear. The export of textiles and other related products from Pakistan to Germany has been steadily increasing.

On the other hand, Pakistan imports various goods from Germany, including chemical products, textile machinery, electrical goods, motor vehicles, and iron goods. German imports of textile machinery have been crucial for Pakistan's value-added textile sector, enabling manufacturers to improve product quality and reduce business costs. Pakistan's major imports from Germany also include machinery, electrical machinery and equipment, vehicles, mineral fuels, pharmaceutical products, plastics, optical instruments, organic chemicals, iron, and steel.

Prospects and Challenges

The Pakistan-Germany trade relationship holds significant prospects for further growth and cooperation. Both countries can explore new avenues of collaboration and diversify their trade beyond the existing sectors. Germany's expertise in renewable energy, engineering, and high-tech industries can contribute greatly to Pakistan's goal of achieving sustainable development.