China-Pakistan Economic Corridor: Men of steel up against Chinese imports

Published: May 10, 2015
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Steel industry officials say that Pakistan has seen a rise in imports over the past 12 months – by at least 600,000 tons – mainly due to subsidised and dumped Chinese products. PHOTO: REUTERS

Steel industry officials say that Pakistan has seen a rise in imports over the past 12 months – by at least 600,000 tons – mainly due to subsidised and dumped Chinese products. PHOTO: REUTERS

KARACHI: 

The China-Pakistan Economic Corridor (CPEC) has been the centre of attention for several reasons. It is an effort aimed at ending the persistent power crisis in the country. The country will see an investment of $46 billion over the years and is another milestone in the feather for bilateral relations between China and Pakistan.

But, as always, while there would be advocates for, there would be many raising eyebrows at the subject.

The same goes for the country’s steel industry.

As the country looks to swiftly complete major infrastructure projects, the industry fears losing ground to the cheaper Chinese steel, especially if it is imported tax-free under the CPEC.

“We want to compete, but any tax-free import will create an unfair competitive environment,” a top official of a leading steel industry told The Express Tribune.

Everyone would want a share of the slice if the project is as big as the CPEC. The steel industry is no different. It wants to take advantage of the huge Chinese investments but, if one goes by facts, the situation is indeed tricky and fears of local industry are not entirely baseless.

The Chinese are mostly involved in major infrastructure development projects and this is where a lot of steel demand stems from. Pakistan would need at least a few million tons of steel bars to complete its infrastructure projects and this amount might be imported from China.

China, and by far, is the biggest steel producer of the world. It has an excess capacity of around 300 million tons of steel because of the economic slowdown in the country.

Pakistan’s annual steel demand is just around 6.5 million tons, literally a fraction of the 800 million tons of Chinese production. Pakistan imports around 1.5 million tons and almost 70% of it is now comes from China mainly because of its cheap prices.

“Since Pakistani government is in dire need of Chinese investments, we fear it may allow tax-free Chinese steel imports for the projects. If this happens, the government will take away a huge business opportunity from the local industry,” he said.

An important by-product of infrastructure development in any country is growth of local industries that in turn creates a multiplier effect on the economy and has a positive trickledown effect at the grassroot level. “This will not be achieved in Pakistan if tax-free steel imports are allowed,” he added.

Steel industry officials say that Pakistan has seen a rise in imports over the past 12 months – by at least 600,000 tons – mainly due to subsidised and dumped Chinese products. Because of this, the local steel industry wants the government to slap 40% import duty on steel in the upcoming budget.  This follows the government’s decision to already impose 15% regulatory duty on the import of steel, which significantly reduce Chinese steel imports in the last three months.

However, the steel industry wants more.

“It is not just us; a lot of countries have increased import duties on Chinese steel. Perturbed with Chinese steel imports, renowned Indian companies are also demanding their government to slap duty on steel imports in the next budget,” an official of a private steel industry commented while defending the demand of additional 40% duty on steel imports.

The local industry argues that since China provides billions of dollars in subsidies to its steel industry, no country can compete with its industry especially when it has to export its excess steel. They say the only other option that any other country has is to provide a level playing field to its local industry so that it can grow and compete with the imports at the same time.

THE WRITER IS A STAFF CORRESPONDENT

Published in The Express Tribune, May 11th,  2015.

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Reader Comments (16)

  • Arif Khan
    May 11, 2015 - 3:25AM

    Wow Wow Wow…. hold on a minute and answer a quick question !!! Is Pakistan more important or is the steel industry profits more important. For me it is Pakistan which is way more important than the useless steel industry profits. Pakistan should allow and encourage with open arms any Chinese investment , no matter it effects the local steel industry. The local steel industry till now has given Pakistan what ?? Nothing a crippling economy , load shedding and poverty is rife in Pakistan. Let Chinese investment be our main goal and Pakistan will rise up itself … don’t worry about meaningless issues of Private companies profits (which are only their to fill the pockets of a few).Recommend

  • Arnold Layne
    May 11, 2015 - 6:30AM

    The numbers given here do not make sense. Steel production in Pakistan has been hovering under 1 million tons per annum (1 MTPA) for the last couple of years. If Pakistan’s requirement is 6.5 MTPA then it has to import over 5 millions tons every year to make up the shortfall.

    It is hard to accuse the Chinese of dumping their steel in Pakistan given that there is not enough steel made in Pakistan to fund Chinese driven projects. China is not going to agree to buy cheap steel from elsewhere because no one makes steel cheaper than China. They have over-capacity and they will use their own steel for executing projects in Pakistan. Recommend

  • Harish
    May 11, 2015 - 9:13AM

    First in the series of a reality checks on the way to economic slavery.!Recommend

  • May 11, 2015 - 10:20AM

    My dear this is the truth of 46 bn dollar investment.Does Pakistani establishment have guts to refuse China? Everyone knows the answer.This big investment will ask for a very big price from Pakistan.But do you have any other option? Good luck to Pak industries! Recommend

  • Aschraful Makhlooq
    May 11, 2015 - 11:05AM

    China already importing cheap and low-priced products to Pakistan and now after getting tax-free status Pakistani expensive products than China will face more suffer,problems and difficulties and for the rehabilitation of Pakistani expensive products and Pakistani industries Pakistan has to reduce electricity prices and tax ratio so that Pakistani goods could compete Chinese products in Pakistan other wise Pakistan products will reach upto lowest level because when Chinese low-priced products will be easily available in Pakistan then expensive Pakistani products’ demand shall be automatically badly effected and sale shall be reduced….Recommend

  • Fahim
    May 11, 2015 - 12:11PM

    Pakistan industries can’t black mail and continue to monopolize in the name of giving jobs (packet of peanuts) to people. They paying cheapest salaries in the world but highest profits. Recommend

  • ishrat salim
    May 11, 2015 - 2:32PM

    @Arif Khan:

    Pakistan comes first, fine, but not at the cost of labor & to protect its own industries, this poicy each & every country makes. By your own argument, if CHINA brings in its own labor ( all those people who are criminals / prisoners, because their own labor cost has increased ) to execute projects,will not our own labor go un-employed. Who will feed them ? Hence, your logic has no ground to stand.

    The fruit of this project will be known only after few years, when PML N govt is out. Sri Lanka under previous President Rajapaska didi similar contract, most of those projects have either been abandoned by the Chines half way or not yet started, but SL as per contract will be paying interest on the money not utilized. Same type of contract we have entered, which is why the govt is not spilling the details yet for public consumption nor it is discussed in the Parliament.Recommend

  • Inner
    May 11, 2015 - 5:48PM

    @ishrat salim:

    Imagine if there was no such project in Pakistan? What do you think our labour would be doing then? Not working on this project. What if China brings on its own labour to work on this project, what do you think our labour what be doing? Not working on this project.

    In either case, the result is the same, and it does not take a Chinese protect to make our labour starve to death.

    Your concern is not based on logic, and thus baseless.

    If you are so concerned about people starving to death, maybe you can donate some money to a charity.Recommend

  • Ishrat Salim
    May 11, 2015 - 7:10PM

    @Inner:

    I do not have to expose my charity business with anyone except Allah swt as only Allah swt knows best. Your only concern is that only CHINESE should do business at the cost of our labor & industries. All countries tries to protect their interest & their own industries. Even America & EU & India have imposed anti-dumping measures on Chinese export, only to protect their country`s interest & industries. They seem to be more patriotic than many like you.

    What is the use of the Parliament, when such controversial project was never discussed in order to reveal the actual details & the actual agreed corridor, why the govt has avoided to discuss such an important project in the Parliament. This project will be more beneficial to the Chinese, than to Pakistan. Pakistan will be their dumping ground & our industries will close down & further create un-employment, even though there are projects for energy in this agreement. Can we then compete with the Chinese products being produced in Pakistan as the Chinese will be employing their jailed criminals & prisoners to do the job of labors whom they pay peanuts.Recommend

  • Hella
    May 11, 2015 - 7:51PM

    It is clear from the comments that Pakistanis are indeed China’s ‘iron brothers’, as they seem to be ready to destroy Pakistan’s economy to increase Chinese profits. Truly ‘sweeter then honey, taller then mountains and deeper then valleys’.Recommend

  • Woz Ahmed
    May 11, 2015 - 11:59PM

    @Inner:

    China is our ally and only puts us first.

    Steel in an input, for industry, infrastructure, engineering, defence if we are getting it heavily subsidised then we should use it to our advantage and make products for ourselves and the world.

    Assume 10% transport costs from China , probably more, plus 15% duty and our steel industry still can’t compete. On top of this we are subsidising PSM by billions a month, shut it down, Stop this nonsense and allow our true industrialists like the surgical instrument makes of Soalkot, seize the world market, along with our defence industry.

    Imagine with our technical know how, we can produce the worlds cheapest products, cars, ships, submarines.

    Let us stop putting up barriers to China, and embrace free trade.Recommend

  • shahid khan
    May 13, 2015 - 2:39PM

    I thought some PTI fan will come and say PMLN will never do it nawaz sharif’s steel mills will get a big hit. But they are doing it is this not amazing ,,, IMRAN KHAN Sahab i am asking youRecommend

  • J Y
    May 13, 2015 - 9:17PM

    @ishrat salim:
    You comments are complete false. The The Karakoram Highway was build with both Chinese and Pakistan highway. Over 200 Chinese engineers lost their lives building it inside Pakistan.

    This new project will employ 1000s Pakistanis if mot more.

    As for Sri Lanka situation, the project are stopped by the new government. Not China. You are spreading lies here. What are you trying to accomplish?

    Here are two articles regarding Sri Lanka: Sri Lanka’s folly: Foreign policy of the Sirisena/Wickremasinghe regime
    “Currently, Sri Lanka is languishing with all if not most of the massive projects commenced by the previous regime at a standstill with hundreds and thousands of people left without employment. Sri Lanka’s economic engine is running on fuel pumped by the previous regime with no new fuel pumped in after the 8th of January 2015.”
    http://www.asiantribune.com/node/86828

    Maitripala- Ranil combination is a destructive force pushing Sri Lanka into an abyss of no-return. “In January, 2015 Sri Lanka was a peaceful progressive sovereign state which had won the respect of the progressive nations of the world. It was showing a remarkable financial growth, there was development projects that was taking the country forward to make it a developed Nation amoung Nations. Its towns were being beautified. It was attaining a high standard in education with IT laboratories taken to every corner of the country under Mahindodaya. It kept away the destructive forces of America and the West and the people were looking forward for a higher standard of living, peace, security, and happiness.

    But all that was snapped away on the 9th January, 2015….”
    http://www.lankaweb.com/news/items/2015/05/11/maitripala-ranil-combination-is-a-destructive-force-pushing-sri-lanka-into-an-abyss-of-no-return/Recommend

  • Inner
    May 30, 2015 - 2:21PM

    @Woz Ahmed:

    “Let us stop putting up barriers to China, and embrace free trade.”

    ” I would prefer capitalism, but commission khore vultures would not like this. They want their chacha, mama, taya, to leech off of foreign investment. Recommend

  • saads
    Jun 1, 2015 - 11:51AM

    national interest should be above any personal interest. hope level playing field will be provided and wish for the very best for PAKISTAN.this is also a fact that industrialists will always get the biggest chunk of profit and dont give laborers and workers their share so useless to talk about if industries get benefit then poor ppl as well. they will fill their pockets. so stop it and let the investment come in.Recommend

  • saads
    Jun 1, 2015 - 11:53AM

    indians should stop being jealous like their PM whos vocal now and should mind their own business. and think about their own ppl and country.stop poking nose in other country’s matter.Recommend

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