The Cen­tral Asian states of­fer great pos­si­bil­i­ties of trade with Pak­istan. All that is needed is a con­sis­tent and proac­tive ap­proach.

Southasia - - Cover story - By Mo­hi­ud­din Aazim

Pak­istan needs to build stronger trade ties with its neigh­bors.

The killing of Osama Bin Laden in a Pak­istani city and a dip in the Pak-U.S. re­la­tion­ship af­ter­wards with its spill-over con­se­quences has brought to the fore the need for Pak­istan to deepen its trade ties within the re­gion. China is al­ready on course to be­com­ing Pak­istan’s big­gest trade part­ner and ef­forts are also be­ing made to ex­plore full trade po­ten­tial with In­dia.

In­creas­ing bi­lat­eral trade with other coun­tries of the SAARC re­gion and ex­plor­ing the po­ten­tial of Cen­tral Asian mar­kets can be pur­sued quite eas­ily. Spread over more than four mil­lion square kilo­me­ters, all five Cen­tral Asian Re­publics (CARs) — Kaza­khstan, Kyr­gyzs­tan, Ta­jik­istan, Turk­menistan and Uzbek­istan — are nat­u­ral re­source-rich coun­tries that have ac­quired re­newed im­por­tance in the emerg­ing world eco­nomic or­der. Tak­ing ad­van­tage of its ge­o­graph­i­cal lo­ca­tion Pak­istan can deepen its trade and in­vest­ment re­la­tions with CARs and be­come an im­por­tant stake­holder of the re­gional eco­nomic power play.

Pol­i­cy­mak­ers in Islamabad seem to have re­alised this and are tak­ing some prac­ti­cal steps to im­ple­ment this vi­sion. Both Pres­i­dent Zar­dari and Prime Min­is­ter Gi­lani have vis­ited these states and have re­ceived top dig­ni­taries from there in Islamabad with open hearts and minds.

Some trade and in­vest­ment trea- ties have been signed and im­ple­men­ta­tion on old agree­ments has been ac­cel­er­ated. But it looks as if Pak­istan has been do­ing all this in piece meal. The pri­vate sec­tor has not been con- sulted in for­mu­lat­ing the strat­egy to look to­wards Cen­tral Asia. And no roadmap is in place to pro­mote peo­ple-to-peo­ple con­tacts be­tween ma­jor cities of Pak­istan and those of the Cen­tral Asian states.

Al­though these states are pre­dom­i­nantly Mus­lim, as is Pak­istan, peo­ple in Cen­tral Asia gen­er­ally have a notso-pos­i­tive im­age of the South Asia coun­try. Most of them see Pak­istan as a coun­try where an ex­trem­ist ver­sion of Is­lam has been in prac­tice and mod­er­ates do not have much of a say in the col­lec­tive life. This is only part of the truth, from Pak­istan’s per­spec­tive.

But for a large num­ber of Cen­tral Asian peo­ple, this is the whole truth.

Un­less we change this per­cep­tion, trade and in­vest­ment re­la­tions can­not pros­per. The killing of Bin Laden in­side Pak­istan has fur­ther ne­ces­si­tated such an ex­er­cise. The first step in build­ing last­ing eco­nomic re­la­tion­ships with CARs should be to pro­mote peo­ple-to-

peo­ple con­tacts in a way that re­moves all neg­a­tive im­ages of Pak­istan from the col­lec­tive mind­set of the peo­ple of Cen­tral Asia. The coun­try’s mod­er­ate Ulema can also play a sig­nif­i­cant role in this ex­er­cise.

Pak­istan al­ready en­joys a min­i­mum level of trad­ing re­la­tions with CARs. This is the time to tap their true po­ten­tial which is many times more than what we have ex­ploited so far. Politico-eco­nomic fall­outs of the killing of Bin Laden in Pak­istan, po­lit­i­cal tur­moil in the Mid­dle East and North Africa, slug­gish eco­nomic growth in the U.S. and Europe, down­turn in the Ja­panese econ­omy af­ter the re­cent Tsunami and the loss of some of the buoy­ancy in com­mod­ity mar­kets would soon start threat­en­ing Pak­istan’s cur­rent growth in ex­ports.

Dur­ing re­cent high level con­tacts be­tween top po­lit­i­cal lead­er­ships of Pak­istan and Ta­jik­istan, Kyr­gyzs­tan and Uzbek­istan, sev­eral agree­ments were signed to pro­mote in­tra-re­gional and bi­lat­eral trade and in­vest­ment re­la­tion­ships.

But busi­ness­men say the strat­egy that can re­ally work to boost trade with CARs has to be made in the con­text of the Eco­nomic Co­op­er­a­tion Or­gan­i­sa­tion. The ECO mem­bers in­clude Afghanistan, Azer­bai­jan, Iran, Pak­istan, Tur­key and CARs.

CARs are home to about 62 mil­lion peo­ple with a com­bined GDP of $207 bil­lion as of 2010. “This is re­ally a big mar­ket. But we need a clear strat­egy, a roadmap and im­me­di­ate con­crete steps to build and ex­pand trade ties with CARs,” says Am­jad Rafi, a for­mer pres­i­dent of the Karachi Cham­ber of Com­merce & In­dus­try.

Pak­istan can en­ter Cen­tral Asian mar­kets from three sides. Busi­ness­men say they can use Afghanistan, Iran and China to reach out to these mar­kets and em­pha­size that the fo­cus should be on all three op­tions at the same time to get re­sults.

“Mem­ber states of ECO are draw­ing roadmaps to reach new heights of eco­nomic re­la­tion­ships. We can boost trade with CARs if our plans fit into them,” Rafi told SouthAsia.

Tra­di­tion­ally Pak­istan has been us­ing Afghanistan to route its ex­ports to CARs but oc­ca­sion­ally it has also chan­nel­ized its trade with them through air­lines.

Be­yond Kabul, trade con­sign­ments ei­ther do not move or when they do, traders have to pay a so-called safe pas­sage kind of tax to the Tal­iban or in­flu­en­tial war­lords op­er­at­ing in those ar­eas. Nor­mally the rates range be­tween five and fif­teen per cent of the value of the cargo.

Pak­istan’s bi­lat­eral trade with CARs plus Azer­bai­jan was next to noth­ing un­til the mid-2000s. From then on­wards it be­gan to in­crease and touched $100 mil­lion in FY08 be­fore the ad­vent of the global re­ces­sion. “This was per­haps the peak per­for­mance in the last decade,” re­marked an of­fi­cial of the Trade De­vel­op­ment Au­thor­ity of Pak­istan (TDAP).

Busi­ness­men say vol­umes of Pak­istan’s bi­lat­eral trade with CARs would rise im­me­di­ately if Chinese starts us­ing the Gwadar Port for trad­ing with Cen­tral Asian states and Pak­istan uses its road links with China to reach out to these coun­tries. They say that Pak­istan can also use the Ira­nian free trade zone of Chaba­har to pen­e­trate fur­ther into Cen­tral Asia while fa­cil­i­tat­ing Iran-Cen­tral Asian busi­ness through Gwadar.

Some busi­ness­men think once the ECO freight train, cur­rently op­er­at­ing once a month, from Islamabad to Tehran to Is­tan­bul, be­comes a reg­u­lar ser­vice, it would also help Pak­istan pen­e­trate deeper into Cen­tral Asia us­ing both Iran and Tur­key.

Ever since CARs emerged as in­de­pen­dent states af­ter break­ing away from the then USSR in the early 1990s, Pak­istan has done lit­tle to pro­mote trade with them ex­cept for sign­ing a few agree­ments. “We can ex­port a large num­ber of items to Cen­tral Asian coun­tries,” says Am­jad Rashid, a lead­ing ex­porter who has been cater­ing to the Afghan mar­kets for a long time.

“From ce­ment to light en­gi­neer­ing goods to jew­ellery, sta­tion­ary, food items, cos­met­ics and hand­i­crafts, we can ex­port any­thing and ev­ery­thing to Cen­tral Asian states once we re­solve lo­gis­tic is­sues,” he in­formed SouthAsia.

“And we can im­port from them wheat, cot­ton, fuel oil and oil prod­ucts, nat­u­ral gas and elec­tric­ity, chem­i­cals, iron ore, iron and steel, rare earth ma­te­ri­als and food pro­cess­ing plants, etc.”

Pak­istan has al­ready been ex­port­ing food items, medicines, leather prod­ucts, car­pets, tex­tile fab­rics, knit­ted gar­ments, ce­ram­ics/kitchen wear and fur­ni­ture, etc. to the Cen­tral Asian states. It has been im­port­ing cot­ton and agri­cul­tural ma­chin­ery from there. In 2010, CARs’ com­bined im­ports from across the world stood at above $50 bil­lion. If Pak­istan man­ages to get even one per cent of this busi­ness, its ex­port earn­ings would in­crease by half a bil­lion dol­lars.

Pak­istan has al­ready been late in tap­ping the trade po­ten­tial of Cen­tral Asia. China is fast be­com­ing the largest trad­ing part­ner of these states and In­dia and Iran are also in­creas­ing their mar­ket shares.

As China’s in­flu­ence in Asian economies grows, Pak­istan can deepen its trade re­la­tions with CARs as well by play­ing a proac­tive role in re­gional fo­rums like the Shang­hai Co­op­er­a­tion Or­gan­i­sa­tion, and the Cen­tral Asia Re­gional Eco­nomic Co­op­er­a­tion. The writer is a Karachi-based po­lit­i­cal and eco­nomic an­a­lyst who writes for na­tional and re­gional pub­li­ca­tions.

Pak­istan needs to look be­yond its borders and across the re­gion to

strengthen its econ­omy.

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