Industrial cooperation with Russia

In a major shift of policy, Pakistan is now looking towards the Russian Federation for industrial and technological co-operation. President Asif Zardari is leaving today for Moscow on the invitation of President Dmitry Medvedev that was extended during last August. The first official visit of a Pakistani President after decades, this would be the second visit of President Zardari to Moscow during the last nine months.
This visit is of great significance as it would give fresh impetus to the growing political, economic and trade relations between the two countries that remained low-key for long. The strengthening of Pak-Russia relations would thus provide vast opportunities for opening a new era of co-operation in diverse fields. In this background, the agenda for bilateral industrial co-operation is expected to cover the upgrading and capacity-expansion of the Pakistan Steel Mills, energy projects and hydrocarbon development, for which the Russian side has already shown interest to participate.
Though steel remains the key industry, Russia, the world leader in natural gas production, has a comprehensive range of mining and extraction industries, such as coal, oil, gas, chemicals and metal industries. Russian technology of aerospace, electronics, robotics, optics and new materials is among the most advanced in the world. It has developed large manufacturing capabilities in capital goods. On the other hand, its industrial base is now outmoded and inefficient, and is therefore currently being restructured and consolidated, whereas industrial expansion is mainly in consumer goods.
On Pakistan's side, there are limitations of improving bilateral trade that has been almost static for many years. There is not much scope for increasing exports of Pakistani goods to Russia as demonstrated in recent trade statistics. In 2009, the total volume of trade was $706 million, which was heavily in favour of Russia, as Pakistan's exports were to the level of $106 million. Even in 2007, Russian imports from Pakistan amounted to $100 million, in relation to its exports of $260 million to Pakistan. The situation has not improved yet.
Nonetheless, there is enormous potential for promoting industrial and technological co-operation between the two countries for mutual benefit. Pakistan plans to develop domestic mineral resource-based industries in a big way. Geological potential for metallic and non-metallic deposits is of the size of 600,000 square kilometer outcrop area. Currently, 52 minerals are under exploration as Pakistan has large reserves of marble, onyx, granite, limestone, dolomite, magnesite and chromites etc.
Exploration, mining and quarrying and utilization of these resources are slow primarily on account of non-availability of technology and related machinery locally. Likewise, coal deposits of 184,697 million tons are to be developed optimally in near future, mainly for power generation. Another most important deposit, which could be developed profitably, is 58 million tons of lead zinc in Balochistan. Pakistan can acquire Russian technology, processes and services for commercial and industrial applications in mining and mineral-related sector.
The indigenous engineering industry, which is led by the Heavy Mechanical Complex at Taxila, has capacity, capability and past experience of manufacturing and marketing similar products. A large number of equipment and steel structure for Saindak Gold and Copper Mining project has been manufactured and supplied locally. There is a need to achieve maximum indigenization in undertaking the BMRE of the Pakistan Steel Mills, fully utilising the existing design, engineering and manufacturing potential of Pakistan's engineering industry.
Industrial co-operation in manufacturing capital goods will help Pakistan in developing technological capabilities most suited to local conditions and at much lower costs comparative to the Western sources that also remain reluctant to transfer technology to developing countries. Also, a variety of required machinery and equipment can be jointly produced in Pakistan on the principles of co-manufacturing and co-financing. Pakistan may finance its own portion of machinery to be supplied in Pak rupees, whereas Russia could provide design and engineering for the manufacturing of the identified items.
The long list of mining and quarrying equipment may include self-propelled drilling rigs, crawler mounted drilling machines, mine self-propelled cars, machines for transportation of miners for working both in the gaseous/dusty as well as non-gaseous/non-dusty conditions, crushing and screening equipment, grinders, conveyers, feeders and allied equipment. Another area of joint interest could be earthmoving machinery, like hydraulic excavators, wheel dozers, crawler dozers and pipeline repair machines. At a later stage, an oil-drilling rig can be developed indigenously, in collaboration with the Russians.
The proposed co-operation could be a very feasible proposition from the Russian perspective too, in the wake of the sharp decline in export of Russian machinery in recent years. Exports of Russian machinery declined from 39% of its total exports in 1997 to little over 3% share in total exports of $300 billion in 2007. A few Russian companies have already shown keenness to invest in mining projects in Pakistan and, as a first step, a Memorandum of Understanding (MoU) to this effect is said to be concluded soon between Moscow Stock Exchange and the Karachi Stock Exchange.
(The writer is a retired Chairman of State Engineering Corporation and currently a member of Board of Directors of Heavy Mechanical Complex)