Remarks of Franklin L. Lavin
Under Secretary of Commerce
for International Trade
Meeting with American Business Council
May 5, 2006
It is terrific to be here with the American Business Council (ABC) today; I want to especially thank those of you who traveled to join me.
During his March visit, President Bush, together with President Musharraf, reaffirmed the long-term, broad-based strategic partnership between the United States and Pakistan. President Bush’s visit emphasized the commitment of the United States to an economically successful Pakistan in which the Pakistani people can realize their hope for jobs and a better future for their children. We seek an enduring, multi-faceted relationship.
That spirit brings me here today. I’m delighted to have the opportunity to come to Islamabad for discussions that can further strengthen our bilateral economic and commercial relationship. This is my first visit to Pakistan, and I am still learning about the country; much of what already I know comes from what I picked up from my former boss at Citibank – a bright guy named Shaukat Aziz.
By way of illustration about the nature of our bilateral relationship, the American people responded to Pakistan’s needs after the earthquake in October. The United States pledged more than a half a billion dollars for relief and reconstruction, including $120 million from private American citizens. The American business community played its part as well. I salute the members of the American Business Council for the $64 million you raised for disaster relief. Not only did the ABC rise to the moment, but Pfizer, UPS, Citigroup, GE and Xerox launched the South Asia Earthquake Relief Fund to collect more than $18 million in cash and pledges. The Business Roundtable’s Partnership for Disaster Relief, donated over $48 million in cash and products to relief efforts.
Today, let me offer some general thoughts on the U.S. - Pakistan relations. As you know, we have two main pillars in our relationship – the strategic and economic, which I’ll focus on more in a bit. But first, I would like to convey the strong regard and feelings of friendship that America holds for Pakistan. We are particularly grateful to President Musharraf and the people of Pakistan for their support and partnership in the war on terror. We are friends, allies and partners.
In addition to the $3 billion in aid initiated by President Bush in 2003 to create educational and economic opportunities, we are working towards expanding and strengthening our commercial ties. Aid is terrific, and we need to provide that, but a strong economy is the fundamental requirement for success over the long term, and a good commercial relationship between our two countries is vital to that.
Let me turn to the good news in the economic relationship. Pakistan’s economic reform program has brought impressive results in a short period of time, and the Government of Pakistan deserves great credit for its GDP growth rate. In fact, in 2005, Pakistan had the second fastest growing economy in Asia.
The good news in Pakistan’s economy is reflected in the good news in the commercial relationship with the United States. Trade between our countries has increased by 60% in the last five years, equaling $4.5 billion in 2005. The United States is Pakistan’s largest partner for both trade and investment.
U.S. companies invest more than $1 billion per year in Pakistan in diverse industries such as financial services, consumer goods, food and beverages and agribusiness. I know that the U.S. – Pakistan Business Council brought a delegation to Pakistan recently, and I’m encouraged by reports from many U.S. companies that they will continue to invest in Pakistan and expand their operations here.
With their investment in Pakistan, American companies recognize that a commitment to the health, safety and well-being of the Pakistani people is in all of our interests. American companies are global leaders in the practice of corporate social responsibility, and I know that the Pakistani people will benefit broadly from their involvement here.
With all the good news, we should nonetheless take note that we still have some challenges. Our trade and investment figures do not yet reflect the potential that our bilateral commercial relations hold.
Although trade between our two countries grew strongly to $4.5 billion in 2005, consider that U.S. trade with Malaysia measured $44 billion in 2005. With the Philippines, it stood at $16 billion. Clearly, there is room for growth.
On the investment side, in 2005, foreign direct investment increased 25% in the first eight months of Pakistan’s fiscal year to more than $1.5 billion. U.S. investment accounts for 22% of that total. Again, for comparison purposes, U.S. investment alone in Malaysia amounted to $8.7 billion in 2004. In the Philippines it came to $6.3 billion. Think of the possibilities for Pakistan.
Countries compete hard to attract foreign investment. Those countries that successfully meet this challenge are those that create a hospitable environment. Successful markets are open, transparent, and protect the interests and property of foreign companies. They create a degree of certainty that investors find comforting.
The Pakistani government has been working to improve the business climate and make Pakistan more attractive to foreign investors. President Musharraf has made good governance an important practice in the upper levels of government. Efforts to combat intellectual property violations have had meaningful results. Also, government procurements are pursued fairly and transparently.
By maintaining these practices, building a vibrant IPR regime, and removing market access barriers that impede competition, Pakistan will improve its investment climate and serve notice that it is a secure and smart location to invest.
The United States applauds Pakistan for combating intellectual property rights violations, and we are grateful for the actions taken by the Federal Investigative Agency and Customs officials to curb the production and export of pirated optical disks. We look forward to similar progress in protecting pharmaceutical data. We know, for example, that the government is working to improve its data exclusivity regime. This will be beneficial both for business confidence but also will go a long way in protecting the health and safety of the Pakistani people.
In this regard, the U.S. Government’s announcement last week of its Special 301 decision on Pakistan’s intellectual property rights shows some good progress (from Priority Watch List to the Watch List). But there is room for improvement.
As the business environment improves, we are currently working to finalize negotiations for a high-standard Bilateral Investment Treaty, or BIT, which will increase investment opportunities in both of our countries.
The United States Senate will have to evaluate Pakistan’s business climate and investment policies and practices to determine whether to approve the treaty. Members of Congress will take into consideration private sector comments about the need for continuity in Pakistan’s economic policy, the need to respect the rule of law, inconsistent legal protection for foreign investment, and the lack of a clear and consistent policy of upholding the sanctity of contracts. They will be looking to see the same standards that are included in all our other BITs, which are the same as the investment chapters in our free trade agreements.
In regard to trade, President Musharraf and his government have been working to boost Pakistan’s exports in engineering and technology sectors as well as textiles. We agree with his comments that significantly raising exports “will be a short cut for poverty alleviation and improving the standard of living as well as the economic revival of the country.”
Following on President Bush’s recent visit, the Commerce Department is seeking to help Pakistan strengthen its private sector’s competitiveness and expand Pakistan’s integration with regional and global markets. We hope to assist companies on understanding and complying with international standards and minimizing the barriers to trade and commerce.
In addition to our working with Pakistan to intensify our bilateral commercial relations, we also are working to expand trade and investment within the region including with Afghanistan and Central Asia. We applaud President Musharraf’s leadership towards improving Pakistan’s relationships with other countries in South Asia and congratulate Pakistan on its free trade agreement with Sri Lanka. With its recent economic growth and efforts to improve the business climate, Pakistan has the potential to offer international business a great strategic advantage with its geographic location and proximity to new emerging markets.
Let me offer a final thought about trade and commerce. We should always remember that prosperity is a means as well as an end. Our nations all seek a better material life for our peoples, and we also know that a stronger economy and vital commercial trade flows will give us the means to tackle the other problems we face. In essence, trade is about creating opportunities, building better societies, and eliminating poverty.
When talking about increasing Pakistan’s international trade, President Musharraf recently said: “I see a bright future.” I know that the U.S. also sees a bright future in the growing commercial relationship between our two countries. The United States and Pakistan have a great relationship and good economic news to celebrate. We have some commercial issues to address but the future bodes well for continued success.
I look forward to working with the Government of Pakistan to build upon our success and to quickly realize the fruits of that bright future.