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Pakistan-Japan JV sought for naphtha cracking plant
Dec '11
Japan imported US$ 270 million worth of naphtha from Pakistan in 2010. However, this naphtha was not sent directly to Japan as Pakistan lacks naphtha processing or cracking facility.

Naphtha is a by-product of oil refining process and it needs to be further processed at naphtha cracking facilities to turn it into high-octane fuels and chemicals for use in man-made fibre (MMF) industry.

“The product has a lot of demand but unfortunately there is no processing unit in Pakistan. So, the Japanese import it from Pakistan via some other countries – South Korea and/or Singapore, where it is processed,” Dr. M Iqbal Thaheem, Commercial Counselor of Pakistan based in Japan, told fibre2fashion.

Explaining the rationale behind the need for a Pakistan-Japan joint venture, he says, “Under the customs rules, a product has to undergo at least two processes for a change in the name of the country of origin. Since Pakistani naphtha undergoes only one process in South Korea or Singapore, it lands up in Japan as a product of Pakistan. On the other hand, looking from Pakistan's customs point of view, the product goes to Korea or Singapore and not to Japan. So, we have been advising and asking Japanese people to enter into a JV with Pakistani entrepreneurs to set up a processing plant, i.e. cracking plant or cracker, so that the middle country can be removed from the supply chain, which will be beneficial to both Japan and Pakistan.”

Further, citing advantages of such a joint venture, he quips, “Japan will then get the products at a cheaper price and Pakistan will get a good price as well. It will also be a good opportunity to increase Pakistan's naphtha exports beyond US$ 270 million.”

From Pakistan perspective, Dr. Thaheem says, “Pakistan needs to have a naphtha cracking plant of its own to switch from exporting raw cotton and cotton yarn to exporting more of fabrics and garments, and thus make the product value-added.”

“In addition, the textile industry is going high-tech now. Japanese textile tycoons Toyobo and Teijin are developing new products for which most of the raw material comes out from the petroleum products. So, it is important that Pakistan's textile sector should be able to take advantage of the Japanese technology. However, the Board of Investment (BOI) has to actually analyze the feasibility and cost effectiveness of the plant,” he concludes.

Fibre2fashion News Desk - India

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