Germany concerned about worsening economic situation of Pakistan

LAHORE: German government has voiced concern about the worst-ever economic crisis in Pakistan since its creation as at least one German company has currently stopped its production in Pakistan, another downsized and others consider leaving Pakistan due to the prevailing economic and foreign exchange crises.

“This is worrisome for the German government too. But we believe that the German companies are strong enough to sustain in the prevailing situation and will come out of the crisis along with Pakistan”, said Mr Christian Böttcher, First Secretary Economic and Political Section Germany Embassy in Islamabad in a sideline discussion with The News during Pak–German Business Gathering at Siemens Healthineers here Lahore. The gathering was arranged by the Pakistan Desk of German Industry and Commerce (AHK) in cooperation with the Diplomatic Missions of the Federal Republic of Germany in Pakistan.

Talking about the current economic crisis of Pakistan and the IMF Program, Böttcher said that the IMF did not dictate Pakistan rather it’s a mutual agreement between IMF and Pakistan government. So, the Pakistan government has to apply and implement all the reforms and measures it agreed on earlier with the IMF. In the given economic crisis, it is important that all the political parties of Pakistan join hands and finally make an effort to protect Pakistan from the situation of default. All the political parties should sit together and implement the reforms needed with full force.

About the L/Cs issue faced by the businesses, he mentioned that the German companies working in Pakistan were also facing a similar situation and the supplies are affected due to this measure. However, he believed that the restriction from the government of Pakistan on imports and the State Bank of Pakistan were not German companies specific while the businesses of the German companies are also affected similarly. “Further, German companies were also unable to repatriate the profit to their headquarters which is a serious issue. Furthermore, we approached the finance ministry and SBP to resolve the issue but it did not work.

To a question on GSP+ status, Böttcher said the current GSP+ scheme will end in December 2023, while in Brussels, European Union is finalizing the next scheme modalities. “Once the new scheme is finalized, Pakistan needs to apply for the new scheme. But obviously, Pakistan will need to implement some convention during the transitional period of the scheme”, he said, adding that Pakistan has a good history of implementing the EU Convention for the GSP+ scheme and Germany always supports Pakistan to get GSP+ scheme.

However, Böttcher stressed the need for diversification of Pakistan’s exports to avoid any external shocks on exports. Currently, Pakistan exports 70 per cent of textile goods to German which needs to be brought down to 30 to 40 per cent and increase the other goods exports. “Pakistan is strong in the textile but it is focusing too much on it which needs to be changed”, he suggested. Diversification will lead to the most healthy and sustainable trade relations with Pakistan, he added.

Dr Rüdiger Lotz, Consul General of the Federal Republic of Germany to Pakistan in Karachi, said they were not successful to push the SBP in opening of L/Cs and other issues faced by the German businesses in Pakistan despite talks with the ministry of finance. However, he believed that they will all go through the crisis with the government of Pakistan to resolve the crisis.

Speaking at the event, Mr Khurram Jameel, CEO & Managing Director Siemens Healthineers Pakistan highlighted the importance of regular business exchanges to promote bilateral ties between the two countries. Pakistan and Germany hold a very strong bond and Siemens Healthineers has always played a key role in providing breakthroughs in healthcare.

He mentioned that with the launch of the Dubai-based AHK Pakistan Desk last year in UAE, the German-Pakistan business relations have been gaining momentum. The interest of German companies in the Pakistani market has increased noticeably in the last few years. AHK and the German Diplomatic missions in Pakistan are keen on playing their part and acknowledging the economic developments in this difficult but promising market, through various initiatives, and most recently by organizing a successful AHK-led business delegation of German entrepreneurs and business leaders to Islamabad and Karachi last September.

Supported by the German Embassy in Islamabad and the German Consulate General in Karachi, the AHK plans to organize business networking events in Pakistan for 2023 as well. The AHK Networking Series will provide an opportunity to network with the German and Pakistani business community and the high-level guests and speakers, Jameel added.

Virtually addressing the guests from Dubai, Mr Oliver Oehms, CEO of the German Emirati Joint Council for Industry and & Commerce (AHK) believed that the negative outlook of Pakistan is for the short term. In long term, Pakistan’s outlook is positive and it is a good opportunity for Pakistan to correct the issues forever, said Oliver.