Germany ratifies bilateral investment treaty with Pakistan

Prospects of German investment in the auto, power, textile and agriculture sectors have brightened as German Parliament on Friday ratified the new Bilateral Investment Treaty (BIT)
with Pakistan.
The last version of BIT was signed on December 1, 2009 in Berlin during the visit of Prime Minister Syed Yousaf Raza Gilani to Germany. Pakistan has already ratified the new treaty in 2010.
After ratification by Germany, the new BIT replaces the old agreement for protection of investment, which the two countries had signed in 1959. It was the world’s first ever investment treaty and the first which Germany signed with any country after the Second World War.
It is important to mention Germany is a strong supporter within European Union
for Pakistan to obtain greater market access in Europe.
It is also supporting the granting of GSP-Plus status to Pakistan.
According to officials, the new BIT would boost economic cooperation with Germany and guarantees favorable conditions for German companies to invest in Pakistan. It will strengthen cooperation between corporate sectors of both the countries. The two most potential sectors for German investments are renewable energy and value addition in agriculture.
Under the bilateral treaty, the German government would provide insurance guarantees to investments by its companies in Pakistan and cover their political and security risks.
The new treaty will facilitate more German businesses, particularly small and medium sized companies, to benefit from the opportunities which Pakistan’s economy offers particularly in the power sector, renewable energy, environmental technologies, infrastructure, housing, healthcare, and information technology.
Germany is Pakistan’s largest trading partner in Europe. Many German companies are doing business in Pakistan. Bilateral trade is growing, particularly in the form of exports from Pakistan to Germany during the past three years. Pakistan’s exports which were around $880 million in 2007, first time ever crossed the $1 billion mark in 2008. In year 2009, despite impact of global economic recession, our exports were over $922 million and have shown a strong recovery in 2010 to achieve the highest ever figure in a calendar year reaching over $1.13 billion. Total bilateral trade volume during 2010 was over $ 2.16 billion with trade balance shifting in favour of Pakistan after several years.
German investment in Pakistan has been rising steadily in recent years. Germany has become one of the major sources of foreign direct investment (FDI) in Pakistan. For year 2009-2010, Germany was fifth largest source of FDI, moving up from its ranking of seventh biggest source of FDI in the country a year before.