Deputy Assistant Sec. Ervin Massinga delivers remarks to Federation of Pakistan Chambers of Commerce

As delivered.

Good afternoon. It is an honor to be speaking before the Federation of Pakistan Chambers of Commerce and Industry – a group of such distinguished business leaders.  You have found great success, in both good times and difficult times for Pakistan’s economy, and embody this country’s tremendous entrepreneurial spirit.

We in the United States have had the wonderful fortune of benefiting from that same entrepreneurial spirit, as Pakistanis have immigrated to our country and started very successful businesses.  For example, Tariq Farid, who was born in Pakistan, immigrated to the United States in 1981.  After first working in his family’s flower shop in Connecticut when he was 17, he went on to establish Edible Arrangements in Connecticut, becoming one of America’s most successful franchisors.

Another example is Michael Chowdry.  Born in Pakistan, Michael established Atlas Air in 1992.  Now, Atlas is one of the world’s largest cargo and charter air services, operating across 425 destinations in 119 countries.

Pakistan too, does and should harness that talent.  What is the difference between the very successful Pakistani community in the United States and Pakistanis here in Pakistan?  The simple answer is that the United States has spent many decades cultivating a pro-business environment that allows these talented men and women to fulfill their entrepreneurial potential.  Pakistan too, is starting to take steps to build a business climate that will harness the talent and potential of its population.

As business leaders, you understand the current reality, that Pakistan’s business environment often stifles that potential.  And so, more than anyone, you grasp the profound significance of Prime Minister Khan’s bold reform agenda, along with the challenges ahead.  As you work to overcome these challenges, the United States stands ready to partner with Pakistan through this reform process.

As Ambassador Wells said last month, we believe that the keys to a thriving private sector and sustained growth are good governance, long-term capacity building, and market-based polices.  And as she noted, that journey is most accurately characterized as a marathon, not a sprint.

Any country can achieve short-term spurts of growth with borrowed spending on large infrastructure projects; and indeed, there is no doubt that infrastructure investment is desperately needed, both in Pakistan and worldwide.  However, the long-term development that will provide true opportunities to Pakistan’s young people requires much more hard work and planning.  It needs to ensure that every project undertaken has commercial viability and affordable financing.  Development needs to be underpinned by effective regulatory frameworks, strong rule of law, fiscal health, and an enabling business climate.  We recognize that these things are hard, and don’t happen overnight.  True reform that produces lasting prosperity for Pakistan will take a sustained effort to put these reforms into place.

And the United States is right there to work with Pakistan towards shared prosperity.  The United States has always viewed a strong, prosperous, independent Pakistan as critical to U.S. interests.  That is why President Trump has been so keen to expand U.S.-Pakistan economic ties.  During Prime Minister Khan’s July visit, President Trump famously proclaimed that the United States and Pakistan “could do 10 and even 20 times” the amount of bilateral trade and investment that we’re doing right now.  That’s a pretty strong vote of confidence in Pakistan’s economic potential by the President of the United States.

Indeed, U.S.-Pakistan two-way trade reached the all-time high of $6.6 billion in 2018.  The United States was Pakistan’s top export market – we buy more Pakistani goods than any other country!  And we also believe there’s a lot more room for growth.  The United States is looking for practical, market-based ways to expand that trade and investment and wants to collaborate with Pakistan to do so.

To help grow this potential, the U.S. Department of Commerce is aiming to organize about 10 Pakistani buyer delegations to the United States and five regional trade shows in 2020.  These delegations of prominent Pakistani businesses and officials are led by U.S. Embassy and Consulate staff who make introductions between relevant U.S. and Pakistani firms to facilitate trade and investment relationships.  Delegations will participate in business-to-business matchmaking meetings, technical sessions, receptions, and other specialized programming to gain exposure to U.S. goods and services. These programs correspond to priority sectors where there is concrete, practical room to grow the U.S.-Pakistan trade relationship and address Pakistan’s domestic development priorities, including in the sectors of energy, infrastructure, agricultural equipment, healthcare, and digital economy. The priority trade shows that the U.S. Department of Commerce will be targeting next year include:

  • the International Production & Processing Expo in January in Georgia (January 28-30; Atlanta, GA),
  • the Offshore Technology Conference in May in Houston (May 4-7; Houston, TX),
  • the Solar Power International in September in California (September 14-17; Anaheim, CA), and
  • the Water Environment Federation Technical Exhibition & Conference in October in New Orleans (October 3-7; New Orleans, LA).

On one side of the trade relationship, the United States sees itself as a significant potential market for Pakistani goods.  The U.S. Generalized System of Preferences (GSP) program offers opportunities for Pakistani companies to export eligible items duty-free, including many manufactured items and agricultural products.  In the last five years, we have seen significant growth of exports in these areas, and we encourage Pakistan to take advantage of GSP.

Here are a few examples of these opportunities: Pakistan excels at producing leather goods and should consider focusing on exporting to the United States both handbags and luggage, both of which are often-overlooked products eligible for GSP trade benefits.  Certain carpets and rugs are eligible for these preferences – and Pakistan’s exports of these product grew 24 percent from 2015 to 2018 and are up 51 percent so far this year compared to last.  Hand-woven garments, a category that could include mass-produced textiles with hand-woven flourishes, are also eligible for these preferences – and can tie together the textile industry with more economic opportunities for women in Pakistan.  Pakistani exports of spices – including the prestigious Himalayan salt found in virtually every U.S. grocery store – have grown from around $8 million in 2010 to almost $20 million in 2018.  And it’s also a little-known fact that Pakistan can also take advantage of even better GSP benefits by working with Afghanistan to produce items for export to the United States.  If people are interested in those opportunities, I’m happy to put you in touch with those who can tell you more.

On the other hand, Pakistan has significant potential as an export market for U.S. soybeans, cotton, iron and steel, and machinery.  For example, U.S. soybean exports to Pakistan surged from zero in 2014 to over $600 million in 2018.  Similarly, U.S. cotton exports grew from over $86 million in 2014 to over $610 million in 2018.  Both products are adding fuel to the Pakistani economy – from soy additives to animal feed for both the domestic Pakistani and export markets, and cotton as a raw material for Pakistani’s textile exports.

To further dive into how these exports benefit Pakistan, let’s look at these soybean exports to Pakistan.  Incorporating U.S. soybeans into Pakistan’s poultry feed results in gains in production of more than 25 percent, increases Pakistani producers’ profit margins, and helps to feed Pakistan’s growing population.  Likewise, incorporating U.S. soybeans into cattle feed, has increased dairy output.

And our cooperation in building agricultural capacity in Pakistan through U.S. agricultural exports does not stop at soybeans.  Since 2017, the U.S. has exported more than 1,800 dairy cattle in collaboration with Pakistan’s University of Veterinary and Animal Sciences and funding from USAID.  While Pakistan is already among the world’s largest dairy producers, most production comes from small, traditional farms.  As modern, commercial dairies expand in Pakistan, and Pakistan adopts high-yield livestock management practices, U.S. exports of dairy cattle can augment this production and increase the value of Pakistani dairy exports.

With the right business climate and regional economic ties, Pakistan could someday serve as a regional center for agricultural processing, using inputs from U.S. commodities.  Pakistan could potentially develop into a hub for processing U.S. inputs, such soybeans, corn, and dairy cattle into livestock feed and other food and agricultural products for exports to third countries, like the Middle East and China.

Likewise, we see potential for growth in U.S. timber exports to Pakistan, which in recent years has increased to more than $50 million.  By importing more U.S. wood, Pakistan not only lowers the cost of construction in country but can also develop its furniture industry.

Top-notch U.S. machinery is also helping to increase Pakistan’s productivity, and could help even more, for instance to make Pakistan’s textile sector more competitive globally.  Many of Pakistan’s producers are using antiquated technology and procedures, in some cases dating from the 1950s.  With shifts in the international markets, these producers (many of them small and medium enterprises) are unable to meet changing demand because they are unable to accommodate new production methods or raw inputs such as synthetic fibers. These factors contribute to the decline in the industry’s international competitiveness. For producers that cannot afford to upgrade to the latest or most costly equipment, there is a growing opportunity to purchase used but still high-quality U.S. equipment, including spinning equipment and looms, that are being sunsetted in the United States.  In addition, the textile sector is highly dynamic these days, and U.S. companies are always looking for competitive sourcing, if Pakistani industry can be nimble and competitive enough to sell themselves to U.S. firms.

Just like the exports of U.S. goods to Pakistan can help fuel Pakistan’s own export market, U.S. services and technologies are poised to help Pakistan address its energy needs.  For these opportunities to come to fruition, we need transparent, open, and market-based processes that allow U.S. companies to help meet the demands of Pakistan’s energy market.

For example, here in Karachi, the U.S. firm Excelerate has partnered with Pakistan since 2015.  As much as 15 per cent of Pakistan’s daily natural gas requirement is provided by Excelerate’s floating LNG terminal in Port Qasim, at one of the world’s most competitive LNG regasification tolling tariffs. And back in Washington, Excelerate’s President has just taken on the chairmanship of the U.S.-Pakistan Business Council – demonstrating the company’s continuing commitment to Pakistan.

The United States Government is ready to have robust discussions with your government about how we can expand our energy cooperation, including support for measures to make Pakistan more appealing for foreign investors. And U.S. companies like General Electric are incorporating their top-notch technologies – including wind, solar and turbines for other fuels – into energy projects throughout the country.  These U.S. companies have competed to win over $3 billion of energy-related business in Pakistan, with General Electric generating over $1.9 billion of sales.  In line with that effort, through U.S. assistance more than 42 million Pakistanis – over 20 per cent of the population – have benefited from U.S. government and private sector grants since 2011 to add over 3,500 megawatts of electricity to the national grid, debt-free.  In 2018, ExxonMobil re-entered Pakistan after 27 years to begin oil and gas exploration and supply fuel, increasing market access for a U.S. company while supporting Pakistan’s energy needs. And the Power Information Technology Company in Punjab, in partnership with the Lahore University of Management Sciences, established a smart-grid lab that function on technology provided by U.S. firms like Oracle, Dell, Hewlett Packard, and Sun Microsystems.

U.S. businesses see tremendous investment opportunities for partnerships in Pakistan.  Cargill’s recent announcement of plans to invest an additional $200 million investment in Pakistan’s agricultural sector brings not only capital, but also processes and technologies.  With this added capital, Cargill seeks to expand its global expertise in the agricultural trading and supply chain, edible oil, dairy, meat and animal feed businesses – to the benefit of both Pakistan and the United States,

There are many more examples.  PepsiCo has invested $800 million to expand manufacturing and distribution infrastructure in Pakistan.  Coca-Cola invested $500 million in the last few years.  Uber Technologies entered the Pakistani market in 2016 and currently operates across nine cities, providing employment opportunities for thousands of Pakistanis.

Scores of additional opportunities for U.S. investment in Pakistan exist, especially in Pakistan’s growing digital economy.  A recent World Bank study cited the right environment for growth in Pakistani in this area seems to be present in the digital startup ecosystem:  a young, tech-savvy population, increase in internet and smartphone penetration, and a steady increase in entrepreneurial activity since 2012.  And Prime Minister Imran Khan has seen the potential in the digital economy when he launched the government’s “Digital Pakistan” initiative last week.  Here, U.S. companies stand ready to assist building access and connectivity for Pakistan and the country’s digital infrastructure.  At the same time, U.S. investors are ready to support innovation and entrepreneurship in the digital realm.  We were pleased to participate in Pakistan’s PakTech summit last October in Silicon Valley, which reached out to those interested in investing in Pakistan’s digital future.

However, major challenges remain for Pakistani startups, including the unfriendliness of the current policy and regulatory environment towards investors and entrepreneurs alike.

Fully realizing this potential of bilateral trade and investment also requires Pakistan to stay the course in its ambitious reform agenda.  Specifically, we urge Pakistan to improve its business environment to spur both foreign investment and domestic entrepreneurship.  That would benefit both the United States and Pakistan.

This also underlines a key point: The United States is not a planned economy.  U.S. companies make decisions based on profit calculations and market-based opportunities.  The United States President and his government are committed to expanding trade and investment with Pakistan, and we will remain actively engaged to encourage that, but at the end of the day U.S. companies will draw their own conclusions about whether Pakistan offers them opportunity, and whether they consider Pakistan’s business climate to be manageable.

Happily, Pakistan is already taking steps necessary to bring necessary changes to Pakistan’s economy, and Khan administration’s ambitious reform plan for Pakistan, made in partnership with the IMF, if fully implemented can establish the foundation for future economic growth and stability.  We are seeing greater indications of investor confidence in conversations with U.S. businesses, in recent FDI reports, and in Moody’s upgrading Pakistan’s rating outlook to stable on December 3.

And I know Pakistan is undertaking reforms to its business climate as well.  I was pleased to note that Pakistan’s recent World Bank Ease of Doing Business ranking rose an impressive 28 slots, from 136 to 108, this year and was highlighted by the World Bank as one of the top 10 reformer countries globally.    We encourage Pakistan to keep up the momentum on those reforms.

Beyond simply encouraging a better business environment, the U.S. Government is working with the Pakistani Government to help make it happen.  USAID programs have helped Pakistan make the payment of import taxes and trading across borders more transparent, predictable, and timely.  This work is continuing as we support the government’s Inland Revenue Service and Customs to establish a national single window, an electronic platform for trade that will automate customs, eliminate redundant documents, and diminish opportunities for corruption.  USAID is also supporting the Ministry of Commerce in setting up a Trade Dispute Resolution Commission to resolve small to medium value international trade disputes which hopes to improve the speed and cost of enforcement of contracts.

The Commercial Law Development Program (CLDP) of the U.S. Department of Commerce, in cooperation with USAID, also supports the Government’s efforts to implement reforms under the World Trade Organization Agreement on Trade Facilitation, which holds great potential for reducing transaction costs and expediting customs clearances.

USAID is also supporting future improvements in Pakistan’s ease of doing business score, particularly in enforcing contracts.  The World Bank’s metric on contracts considers the speed and cost of enforcement, and USAID is supporting the Ministry of Commerce in setting up a Trade Dispute Resolution Commission to resolve small to medium value international trade disputes.

All of this is part of a much broader assistance partnership in which over $7 billion has been allocated in the past 10 years for a wide range of projects and programs, including in health, education, development and integration of the former FATA into Khyber Pakhtunkhwa province, economic growth, and energy – to name a few.  All this U.S. assistance comes in the forms of grants.  Our bilateral relationship is now maturing to one more focused on trade than aid, and we are continuing to target investments in ways that help improve the overall business climate.

But let’s also acknowledge that there’s a long way to go.  I hear about the challenges and impediments to doing business in Pakistan regularly from U.S. businesses.  Working on those could unlock even greater potential.

For example, more formalized, predictable regulations on U.S. soybean imports would help to increase Pakistan’s agricultural productivity, creating opportunities to augment domestic living standards and increase exports.  Indeed, I know that a number of U.S. agricultural firms have expressed interest in investing “hundreds of millions of dollars” in Pakistan if the barriers to U.S. agricultural commodities were removed.

Pakistan should also encourage investment.  Venture capitalists I’ve met claim that there is about $150 million in the venture capital pool to invest in Pakistan – and Pakistani startups have raised over $25 million in 2019 – an increase from last year.  However, almost all of these venture capital companies domicile outside of the country due to tax and other complex regulations.  This complicates combining investment from venture capitalists with domestic financing – either through banks or Pakistan-based venture capital companies.  The net impact:  the volume of deals in the tech and other innovating segments of society is much lower than its potential.  To complicate matters more, outside investors complain that repatriation of capital is too difficult.  Pakistan should strive to create a modern, flexible capital market that encourages growth, and the United States can help foster these conversations.

Another area where we have cooperated closely is in intellectual property rights.  We encourage Pakistan to continue to make progress on intellectual property rights protection and enforcement by continuing to align its IP laws with international standards, developing deterrent penalties, and building capacity in its IP tribunals and enforcement agencies.  Our Commerce Department and other agencies have worked closely with yours as Pakistan develops its Intellectual Property Organization (IPO) and legal regime, and we look forward to continuing that cooperation.  We know that Pakistan has ambitions to develop itself into an information technology hub, perhaps one day even rivaling India.

To achieve that goal, Pakistani needs to develop the IP framework that would allow foreign investors to feel secure in bringing their technology to Pakistan and allow Pakistani tech entrepreneurs to develop their companies domestically.  The CLDP has provided advisory support as the IPO advances legislative updates to Pakistan’s IP laws.  CLDP also provides capacity building for Pakistan’s judiciary and the IP Special Tribunals, as judges adjudicate increasingly complex intellectual property rights cases.  CLDP also supports the development of Offices of Research, Innovation, and Commercialization at Pakistani universities.

In order to build the reforms necessary to strengthen our trade and investment relationship, we would like to initiate a dialogue with the Government of Pakistan on the importance of creating a data privacy regime that draws on global best practices and enables the free movement of data. CLDP supports Pakistan’s participation in the United Nations Internet Governance Forum and will foster further public-private sector dialogue to help inform Pakistan’s E-Commerce Strategy.

Much of our approach consists of enhancing transparency and rule of law, themes Ambassador Wells stresses in her Wilson Center speech last month. We believe rule of law and transparency are essential bedrock foundations for sustainable prosperity. In that vein, I would like to note that clear, evenhanded and impartial application of rule law encourages U.S. businesses and investors, while poor or confusing application of rule of law has the opposite effect.  This is a consistent theme that comes across in conversations with US firms interested in expanding investment or operations in Pakistan.  Consistency of policies, integrity of contracts, and a welcoming business climate are and will be essential elements of the prosperous future we both want for Pakistan

Our faith in transparency and effective rule of law underpins our stress on a healthy financial system free of manipulation by malign or terrorist actors intent on furthering their interests that are contrary to those of Pakistan’s people, Specifically, Pakistan’s economic progress hinges on sustainable and irreversible progress addressing its Financial Action Task Force (FATF) action plan.  We acknowledge Pakistan’s high-level political commitment to work with the Financial Action Task Force (FATF) to address the strategic deficiencies in its counterterrorism financing regime.  And I cannot underscore enough how important a public statement from FATF that Pakistan has strengthened the effectiveness of its counterterrorism financing regime would be for Pakistan’s image and business climate – a goal the U.S. shares with your government, Demonstrating success in this effort would show investors that Pakistan is committed to international norms and regulations, and be a positive signal to international e-commerce payment platform providers that Pakistan is fully open for business internationally.

Finally, let me reiterate: As a partner for Pakistan’s future, the United States stands ready to help assist Pakistan in its development.  Let me give you a few other examples.  The Department of Commerce’s Commercial Law Development Program, or CLDP, has provided key technical assistance to help Pakistan improve its business climate, from IPR protections to electronic systems for trade to reduced time for cross-border transit of goods.  Additionally, USAID and the Department of Commerce have supported the construction and operation of a “fast-track” LNG terminal at Port Qasim, Karachi, enhancing Pakistan’s LNG capacity.  And supporting the development of Pakistan’s future leaders and entrepreneurs, USAID has provided nearly 19,000 scholarships for students to obtain tertiary education since 2010.

Going forward, the U.S. International Development Finance Corporation will have more than double the investment cap than OPIC, increasing from $29 to $60 billion, and enabling projects that have high standards and are financially sustainable over the long haul.

Additionally, public private partnerships like the U.S.-Pakistan’s Women’s Council demonstrate the United States’ commitment to improving Pakistan’s economy by increasing women’s economic participation through entrepreneurship, employment and education.  Through the Council, companies such as Citigroup, General Electric, Engro and Proctor & Gamble, among many others, make commitments to empower women and strengthen Pakistan’s economy through hiring and supply chain diversity initiatives, internships and other activities.

In closing, let me underscore that the United States is committed to the future of Pakistan through our economic cooperation.  Through our joint efforts, we’ve increased exports and imports in critical areas that will provide mutual benefits to both Pakistanis and Americans for the future.  We are committed to developing further trade ties, investments in energy, in technology and the digital economy, and providing developmental assistance that will build the right conditions in Pakistan to support economic growth for the twenty-first century.   We are encouraged by Pakistan’s efforts to develop market-based policies and follow international norms to develop future trade and investment opportunities and urge Pakistan to remain resolute in these efforts.

As Ambassador Alice Wells stated in her remarks last month in Washington, for over 70 years, U.S. economic and commercial engagement and development initiatives have inspired openness and economic prosperity across South Asia, enabling countries like Pakistan to develop their own strengths.  We continue to look for opportunities to deepen our partnership with Pakistan for the mutual prosperity of Pakistan and the United States.  Our Consulate General here in Karachi and our Commercial Counselor Nathan Seifert can help connect you with interested businesses in the United States to deepen our relationship.

Thank you.