Hummerless Tengzhong in expansion zone
By Syed Fazl-e-Haider
KARACHI - Suolang Duoji, the Chinese businessman whose efforts to buy the
Hummer brand from American motor giant General Motors collapsed last week, is
having no such problems as he expands his empire in another direction -
Pakistan.
Also known under the name of Li Yan, Suolang intends to set up a 40,500-hectare
economic zone in Punjab province to promote
industrial activities and improve the standard of local products with the help
of Chinese experience and technology.
His Sichuan Tengzhong Group has also proposed to separately set up a string of
other special zones, including a Pakistan-China Economic and Technological
Development Zone, a real-estate economic zone and a tourist economic zone, all
in the same province.
Last week, Suolang's Sichuan Tengzhong Heavy Industrial Machinery said a
consortium it led had failed to win approval from Chinese regulators for its
US$150 million bid for GM's Hummer, a gas-guzzling sports utility vehicle whose
popularity has collapsed amid rising fuel prices and the US economic downturn.
China's Assistant Commerce Minister Wang Chao on Wednesday said his ministry
had never received an application from Tengzhong for the purchase. The company,
however, said it had tried and failed to obtain approval.
This month, Suolang led a delegation of Chinese investors to meet Punjab chief
minister Muhammad Shahbaz Sharif and signed a memorandum of understanding (MoU)
with the Punjab government under which the Chinese will set up the proposed
economic zone. The deal, due to be finalized this month, is expected to promote
industrial activities and generate new job opportunities in the province.
Suolang aims to take advantage of a Pakistan-China free-trade agreement signed
in 2006, which has helped boost trade between the countries, with China set to
become Pakistan's fourth-biggest trade partner.
Even the global recession has failed to make much of a dent in the
strengthening relationship. The value of commerce between the two countries
declined only 2.9% last year to $6.8 billion, compared with a drop of 13.9% in
China's total foreign trade.
Pakistan's exports to China jumped more than 25% last year to $1.3 billion,
compared with a 7.7% fall in trade in the other direction to $5.5 billion as
China's overall exports slumped 16%.
Suolang's zone development plans follow on a MoU signed last December between
Hong Kong-listed Lumena Resources Corp, which he also heads as chairman and 20%
owner, and Pakistan's KASB Group to promote Chinese industrial zones in the
country. The MoU encompassed conducting market surveys, analysis and
establishing an industrial park in which Chinese companies could set up
business facilities to explore areas of mutual interest for joint ventures.
Tengzhong Group is following a path blazed by China's leading producer of white
goods, Haier Group, which in December 2006 agreed with Pakistan's Ruba Group to
establish the first Chinese overseas special economic zone. Haier, China's
largest home appliance-maker, entered Pakistan with a $35 million investment in
a joint venture with Ruba General Trading. The venture is expected to produce
900,000 pieces of household appliances per year, with plans to export to the
Middle East and Asia. The proposed zone, at Kala Shah Kako, near Lahore in
Punjab, is to be exclusively for Chinese investors and Pakistan-China joint
ventures.
After a ground-breaking ceremony three years ago in the presence of Chinese
President Hu Jintao and then-Pakistani prime minister Shaukat Aziz, land
acquisition and financing problems have delayed the project. Haier-Ruba refused
to buy the needed 1,700 hectares of land from its own pocket. It was not until
February last year that it was decided that National Industrial Parks, wholly
owned by the Pakistan government, would purchase the necessary land.
Chief minister Sharif said Punjab could benefit from China's experience to
improve various sectors, including livestock and energy generation from coal
and hydro power. Suolang gave assurances that Tengzhong would consider
investment and cooperation in Punjab in various sectors, according to Pakistan
press reports.
Both governments see special economic zones, industrial parks and the like,
where red tape is reduced and manufacturers can benefit from zero or low tax on
imports and exports, as useful projects to promote industry and trade. Often,
however, such parks are little more than assembly points of products made in
other countries, with little in the way of value-added work carried out. Some
importers also allegedly misuse rules-of-origin procedures in using such
facilities
Mobile-phone consignments, for instance, have been imported from Hong Kong
while documented as coming from mainland China, according to Business Recorder.
The Chinese interest is of particular importance in Pakistan at present, given
the dire state of the economy, with terrorism deterring many foreign investors.
The Chinese side also benefits from low wages there at a time when Beijing is
seeking to reduce the amount of low-end work in areas such as Guangdong and
upgrade factories to higher value-added with less pollution.
A Chinese delegation led by Sichuan provincial vice governor Huang Xiaoxiang
visited Islamabad on February 9 and held talks with the Islamabad Chamber of
Commerce and Industry on the possibilities of cooperation in agriculture,
manufacturing and energy.
Xiaoxiang invited Pakistani traders and investors to take part in the 11th
Western China International Economy and Trade Fair, to be held from October
16-20 in Chengdu, Sichuan province, and offered free space for a Sino-Pakistan
investment fair.
China has also shown interest in launching low-cost housing projects across
Pakistan under the prime minister’s housing scheme aimed at building affordable
houses for every citizen. Chinese firms reportedly interested in Pakistan's
housing sector include China State Engineering Corp, Beijing Construction Co,
Shanghai Construction Co and the International Contractors Association of
China.
Syed Fazl-e-Haider (www.syedfazlehaider.com) is a development
analyst in Pakistan. He is the author of many books, including The
Economic Development of Balochistan (2004). He can be contacted at
sfazlehaider05@yahoo.com.
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