Money Matters

Trade potential

Money Matters
By Engr. Hussain Ahmad Siddiqui
Mon, 12, 21

With the emergence of the Taliban government setup in Afghanistan, renewed avenues have opened for Pakistan for developing bilateral and multilateral relations with the countries in the region in diversified fields of economy, trade, and commerce. The first-ever cargo consignment carrying yarn from Uzbekistan reached Pakistan on November 3, having marked a new chapter in transit of goods via Torkham border. Earlier, in April, Pakistan had launched the first pilot shipment to Central Asia that reached Tashkent on May 6. The cargo, which was facilitated by the USAID (United States Agency for International Development), consisted of herbal medicines destined for Uzbekistan.

Trade potential

With the emergence of the Taliban government setup in Afghanistan, renewed avenues have opened for Pakistan for developing bilateral and multilateral relations with the countries in the region in diversified fields of economy, trade, and commerce. The first-ever cargo consignment carrying yarn from Uzbekistan reached Pakistan on November 3, having marked a new chapter in transit of goods via Torkham border. Earlier, in April, Pakistan had launched the first pilot shipment to Central Asia that reached Tashkent on May 6. The cargo, which was facilitated by the USAID (United States Agency for International Development), consisted of herbal medicines destined for Uzbekistan.

The Central Asian Republics (CARs), namely Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan, undoubtedly enjoy strategic importance in the region. All the states are members of the Economic Cooperation Organisation (ECO), whereas Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan are also members of the Shanghai Cooperation Organisation (SCO). On the other hand, Pakistan, another member of the ECO and the SCO, has a unique geo-strategic and geo-economic significance and offers facilities of its seaports, especially at Gwadar, to benefit the landlocked CARs’ international trade.

Since the independence of the Central Asian states in 1991, Pakistan has been eager to develop close economic relations with the Islamic brotherly and friendly states. It was in this backdrop that several agreements were signed by Pakistan separately with Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan during 1994-95, identifying diversified fields of mutual interest for bilateral co-operation. Sadly, there has been very slow progress on promoting trade with the states during these years, as Pakistan’s collective trade with the CARs has not reached the mark of a billion dollars in any year.

On the other hand, industrial co-operation with these neighbouring states could not make any breakthrough. Pakistan had offered in 1992 the state credits amounting to $10 million each to Kyrgyzstan, Tajikistan, and Turkmenistan for the supply of Pakistani engineering goods. The desired results could not be achieved, as credit agreements were never finalised by the Pakistan side, though exchange of various delegations took place to identify the Pakistani products regarding quality and competitiveness.

Likewise, Pakistan had offered $30 million credit to Uzbekistan in March 1993 for the supply of light engineering goods and equipment for existing sugar and cement plants. On a reciprocal basis, Uzbekistan was to supply power transformers, cutting tools and earthmoving machinery. The deal did not materialise. Thus, all the related cooperation agreements with the CARs remained almost dormant for long for a variety of reasons.

The only mentionable ongoing project is the Central Asia-South Asia (CASA)-1000 power project to export the surplus hydropower electricity from Kyrgyzstan and Tajikistan to Afghanistan and Pakistan. Construction of the 1,300-km high-voltage electricity transmission-lines system is in progress. The $1.2 billion scheme, which is supported by international donors and financial institutions, has suffered serious setbacks in the past.

The project, started in 2016, is now expected to be completed and operational by the year 2024. The gas pipeline project TAPI (Turkmenistan-Afghanistan-Pakistan-India) is in doldrums and its fate remains uncertain given the circumstances. On the other hand, the much-trumpeted Trans-Afghan Railroad project, connecting Termez (in Uzbekistan)-Mazar-i-Sharif-Kabul-Jalalabad-Peshawar has not yet taken-off. The proposed 573-km railroad will cost $4.8 billion.

It is only now that renewed efforts are being made by Pakistan to focus on promoting bilateral and multilateral relations with the CARs, which is said to be the 90-billion-dollar market having enormous potential to benefit from regional economic integration. Nonetheless, the recent events of exchange of consistent high-level visits are a testimony to the keen desire on both the sides to establish close economic relations, through identification of specific areas and projects. Prime Minister Imran Khan visited Uzbekistan, which is termed as gateway to other CARs, on July15 on two-day visit, where he underscored the need to develop trade and industrial relations, having invited investment in Pakistan's energy and infrastructure projects too.

The two countries also agreed to create strategic partnership strengthening cooperation in defence and security. On the occasion the Transit Trade Agreement (TTA) was concluded between the two countries. Currently, the bilateral trade is just of $37 million, with Pakistan’s exports to Uzbekistan amounting to $25 million. It is estimated that there exists potential of enhancing the two-way trade manifold in coming years. The identified areas are textile, leather, pharmaceuticals, agricultural products, electrical appliances, communications, and machinery & equipment, besides the services sector.

During September 16-17, Prime Minister Imran Khan was in Dushanbe, the capital of Tajikistan, when the two sides reiterated on further strengthening ties in all spheres of economy and investment with a particular focus on trade, tourism, industry, and transport. During this visit, Prime Minister Imran Khan also had a meeting with the President of Kazakhstan Kassym-Jomrat K.Tokayev on the side-lines of the SCO meeting in Dushanbe. The two leaders discussed, among other matters of mutual interest, the need to explore new opportunities for strengthening economic cooperation in the fields of trade, transport, science, technology, and culture. The level of trade between Pakistan and Kazakhstan is significant at $45 million though very low compared with the real potential. Pakistan's exports, which are limited to commodities like clothes, leather, and pharmaceuticals, whereas Pakistan can export besides consumer goods, a large number of capital goods and engineering products.

Earlier, Tajik President Emomali Rahmon had visited Pakistan in June. On the occasion various agreements and MOUs were signed aiming at further fostering the bilateral relations. Tajikistan had also shown interest in the purchase of Pakistani-manufactured weapons. Currently Pak-Tajik two-way trade is nominal; about $3 million, and consistently declining over past years---from over $10 million in 2016. Certainly, these figures do not commensurate with the existing potential of trade on either side. In 2020 Pakistan exported pharmaceuticals, dairy products, agricultural produces, and other items valuing $2.05 million, whereas imports from Tajikistan were of $0.84 million that included cotton, manmade staple fibres and other items.

During the meeting of Joint Working Group on Trade held on May 6, Pakistan and Turkmenistan agreed to enhance bilateral trade and economic cooperation, whereas signing of a Transit Trade Agreement is on cards. Pakistan exported in 2020 the pharmaceuticals, edible fruits, vegetables, explosives, chemicals, and other items valuing $2.32 million.

In 2015, Pakistan's exports to Turkmenistan were more than $800 million. Likewise, trade between Pakistan and Kyrgyzstan was $1.86 million last year. Pakistan imported dried vegetables and live animals etc. from Kyrgyzstan. During the visit of a high-level delegation of Kyrgyz republic to Islamabad in October, the two sides, besides discussing wide-ranging subjects, emphasized on increasing bilateral trade.

As reflected above, trade volume with each country of the CARs can easily be doubled within short span of time given the enabling environment on the two sides. But the most important aspect is of cooperation in the industrial sector that is nominal, if any, at present. These states import a large variety of machinery and equipment every year from various sources, which constitutes 40% to 50% of their total imports, with Pakistan's non-existent share. Similarly, there has been no significant investment in the industrial sector on either side. The economic feasibility of establishing joint ventures in engineering sector could also be explored.

Generally, the rich in natural and mineral resources CARs, have a rapidly growing economy and continues to offer promising prospects for export of Pakistani capital goods. Cement is the emerging industry in Kazakhstan, with significant annual growth. Today, it has an installed capacity of producing 11.85 million tons of cement annually. New cement plants are under construction to meet the growing domestic and export demands for which the Pakistani manufacturers could supply plant machinery. Likewise, Uzbekistan and Kyrgyzstan could be interested on joint manufacturing of cement machinery and sugar mills, based on beet technology for which technology could also be provided by Pakistan. Uzbekistan has an installed annual capacity to produce 7.6 million tons of cement. Similarly, Kyrgyzstan produces 3.16 million tons of cement yearly, but, still, the country imports cement in large quantities.

As Pakistan is now committed to realising the economic and industrial potential of regional co-operation optimally, it would serve the collective interests, resulting in ushering a new era of development and prosperity for the peoples of Pakistan and the CARs. Nonetheless, various practical and bold steps are required to be initiated primarily by Pakistan to achieve meaningful results. Nonetheless, the peace, security, and stability in Afghanistan is the key to success.


The writer is retired chairman of the State Engineering Corporation