VZCZCXRO9253
RR RUEHLH RUEHPW
DE RUEHIL #1520/01 1881012
ZNR UUUUU ZZH
R 071012Z JUL 09
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 3684
INFO RUEHBUL/AMEMBASSY KABUL 0615
RUEHLO/AMEMBASSY LONDON 0860
RUEHNE/AMEMBASSY NEW DELHI 5217
RUEHLH/AMCONSUL LAHORE 7571
RUEHPW/AMCONSUL PESHAWAR 6523
RUEHKP/AMCONSUL KARACHI 1966
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC

UNCLAS SECTION 01 OF 02 ISLAMABAD 001520 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD PREL PK
SUBJ: COMMERCE AND INVESTMENT MINISTRIES REQUEST UNDERSTANDING AND 
ACCESS TO U.S. MARKETS 
 
¶1. (SBU) Summary: In separate meetings June 29 and 30 with NSC 
Senior Director for International Economic Affairs David Lipton, 
Treasury Deputy Assistant Secretary Robert Dohner, and SRAP Senior 
Economic Advisor Mary Beth Goodman, GOP Secretary Commerce Suleiman 
Ghani and Secretary Investment Tariq Puri pushed for increased 
market access to U.S. and EU markets in order to offset 
disadvantages imposed by the threat of terrorism in Pakistan.  Puri 
said the GOP would prepare a letter outlining Pakistan's desire to 
re-start discussions of a bilateral investment treaty (BIT) soon, 
while Ghani suggested discussing Pakistan's wish to be re-classified 
as a less-developed country (LDC) at the Joint Study Group proposed 
at the Trade and Investment Framework Agreement talks (TIFA) in May. 
 Ghani also committed to speedy GOP review of an Afghan request to 
expedite the transit of Afghan fruit.  End Summary. 
 
¶2. (SBU) Secretary Commerce Suleiman Ghani told NSC Senior Director 
for International Economic Affairs David Lipton, Treasury Deputy 
Assistant Secretary Robert Dohner, and SRAP Senior Economic Advisor 
Mary Beth Goodman, that Pakistan needed not only to diversify its 
trade - which focuses largely on low- to-middle end markets - but 
must also recalibrate its direction: only 5-6 percent of Pakistan's 
trade is within the region (including China); the remainder is 
destined for the U.S. and European markets.  The three-year trade 
policy currently under preparation will focus on increasing regional 
trade and making industry more competitive, in particular focusing 
on more value-added exports.  The GOP will focus on technology 
upgrades rather than cash incentives for business.  Rationalizing 
Pakistan's protectionist tariff regimes and emphasizing 
institutional capacity building are also priorities. 
 
¶3. (SBU) Ghani lamented the fact that Pakistan was the only country 
in the region not currently benefiting from either less developed 
country (LDC) preferences or a free trade agreement (FTA) with the 
U.S.  He suggested the U.S. and Europe should help Pakistan "level 
the playing field" in trade to offset the disadvantage terrorism 
imposed on Pakistan's economy.  Ghani said that the Joint Study 
Group Pakistan agreed to establish at the Trade and Investment 
Framework Agreement (TIFA) talks in May might be a venue to discuss 
re-categorizing Pakistan as a less developed country (LDC) as a 
first step. 
 
¶4. (SBU) Secretary Investment Tariq Puri on June 30 called energy 
and security the two biggest challenges facing foreign and domestic 
investors alike.  Echoing Ghani's earlier comments, Puri said 
Pakistan needs help - in particular increased market access - from 
its main trade partners, the U.S. and the EU.  A change in EU access 
regulations in 2005 made Pakistan the only country in the region 
without preferential access to EU markets.  Puri said that 
assistance money is necessary in the short term, but increased trade 
will spur production and increase employment - and more jobs means 
less militancy.  Puri also lamented the current war in the NWFP is 
deterring investment, particularly in the textile sector. 
 
¶5. (SBU) Lipton responded that market access in and of itself is not 
the answer: Pakistan also has an obligation to undertake necessary 
reforms that would encourage investment and development at home. 
While he agreed that energy is a particularly acute challenge, 
Lipton said the GOP could not realistically get more power out of 
the system without raising tariffs. 
 
¶6. (SBU) Puri said that the GOP is ready to discuss a bilateral 
investment treaty (BIT) "at any time."  He promised to send a 
letter, coordinated across the GOP, expressing Pakistan's 
willingness to resume discussions and indicated the GOP is looking 
at ways to address arbitration even outside of a BIT framework. 
Legislation to establish special economic zones (SEZ) is also being 
prepared with the goal of providing a one-window operation for 
foreign investors and connecting them as required to necessary 
infrastructure and utilities. 
 
¶7. (SBU) Comment: Ghani seems inclined to nudge the GOP into 
complying with the Afghan request to expedite transshipment of 
Afghan fruit in a timely manner; whether he can get the sluggish 
bureaucracy in train in time is another matter, but Post is 
following up with the GOP to maintain the pressure.  GOP "interest" 
in re-starting talks on a BIT is not new, and the truth of the 
Ministry's intentions will be in whether Puri can produce the 
coordinated GOP position necessary to get any talks back on track. 
 
ISLAMABAD 00001520  002 OF 002 
 
 
The joint USAID-GOP Competiveness Support Fund (CSF) is working 
closely with the Investment Ministry in developing both the 
arbitration and SEZ legislation, which we hope will bear fruit in 
coming months.  End Comment.