In 2011, Russia, China, and several Central Asian countries, including Kyrgyzstan, Kazakhstan, and Tajikistan, came together to establish an intergovernmental, international organization. Initially, it required some time to become the largest regional organization in the world, both in terms of population and geographical area. However, soon after, India and Pakistan joined as members, followed later by Iran.
As a result, this organization has no equal when considering its geographic and demographic significance. With the inclusion of Russia (the largest country by area) and China and India (the first and second most populous countries), the collective population of member states now accounts for approximately 42 percent of the global population. This means that out of every 100 individuals in the world, 42 can say they are citizens of a country that is part of the SCO. The importance of this organization is further underscored by the fact that it currently contributes around 20 percent to the world’s GDP.
Recognizing this critical importance, India’s participation in the upcoming SCO meeting, set to be held in Islamabad on October 15 and 16, 2024, is indicative of its awareness of the organization’s significance. Pakistan, particularly with the completion of the China-Pakistan Economic Corridor (CPEC), is increasingly becoming an important player within the SCO framework.
Trade Relationships with Neighboring Countries
Now, let us examine which countries have better mutual trade relations with Pakistan. Unsurprisingly, the first name that comes to mind is our neighbor and ally, China. The trade relationships between the Indian subcontinent and China date back thousands of years. Historically, the Silk Road was used for trade between China and the subcontinent, where Chinese merchants traveled to various regions for trade. After the establishment of the Abbasid Caliphate, these traders reached as far as Baghdad, passing through what is now Pakistani territory. Many globally recognized travelers also journeyed through our regions to reach China. In terms of exports, China ranks second for Pakistan.
Statistically, for the fiscal year 2023-24, Pakistan’s exports to China amount to approximately 727.9 billion rupees, making up 8.39 percent of total exports. However, despite the substantial volume of exports, this figure is not indicative of satisfactory or adequate performance. A glance at imports shows a stark contrast, as imports from China constitute about 27 percent of total imports. Therefore, it is crucial for us to focus on increasing the volume of our exports to China.
Relations with Iran
Next, let’s discuss Iran, which is not only a brotherly Islamic nation but also a neighboring country. The bond between Iran and our region has been established for thousands of years. However, our exports to Iran are not particularly significant; rather, we maintain large-scale imports from there. During the fiscal year 2023-24, our exports to the Islamic Republic of Iran were approximately 294.6 billion rupees, constituting 1.90 percent of total imports.
On April 22 of this year, Pakistan and Iran agreed to increase their trade volume to 10 billion dollars. Additionally, the two countries signed memoranda of understanding in eight different sectors. Our most pressing issue is related to gas. Iran has expressed its readiness to cooperate fully regarding gas supply, and it is vital for our government to prioritize resolving this issue.
Barter Trade with Russia
With respect to trade with Russia, there is an increasing emphasis on barter trade. Pakistan should also pursue this type of trade with other countries, as it can help reduce the backlog of containers at our ports due to foreign exchange shortages. Recently, an agreement was reached in Moscow whereby a Pakistani company will supply 20,000 tons of rice to a Russian company in exchange for 20,000 tons of chickpeas. This barter system can help us save on dollars.
Pakistan also imports oil from Russia, which incurs significant foreign exchange costs. Due to the ongoing war in Ukraine, Russia has shifted its focus towards barter trade, presenting an opportunity for Pakistan. There is a significant demand for textile products in Russia, which we can meet through trade.
As a cold country, Russia has a high demand for leather jackets and other leather products. Thus, by leveraging barter trade, Pakistan can save billions of dollars. Furthermore, we can enhance our trade with other nations, which is currently at a very low level.
Expanding Export Opportunities
To expand our export opportunities, it is imperative that we explore new markets and improve our existing relationships. In particular, we should enhance our ties with SCO member states.
1. Market Diversification: It is essential to diversify our export markets rather than relying solely on traditional partners. Engaging with SCO countries provides a unique opportunity to tap into new markets. Countries like Kazakhstan and Uzbekistan are emerging markets with increasing demand for various products, ranging from textiles to agricultural goods.
2. Joint Ventures: Establishing joint ventures with businesses in SCO member countries can facilitate knowledge transfer, technological exchange, and increased competitiveness in international markets. These collaborations can lead to the development of products that cater specifically to the needs of regional consumers.
3. Improving Trade Infrastructure: Efficient logistics and infrastructure are critical to enhancing trade. Investing in transportation networks, including roads, railways, and ports, can facilitate smoother trade routes to and from SCO countries. Improved connectivity will reduce shipping times and costs, making Pakistani goods more competitive.
4. Export Promotion Initiatives: The government should implement export promotion initiatives to encourage local businesses to explore international markets. This includes providing financial incentives, marketing support, and facilitating participation in international trade fairs.
5. Quality Standards and Certifications: To compete globally, Pakistani products must meet international quality standards. Establishing quality control measures and obtaining necessary certifications will enhance the credibility of our exports.
6. Sustainability Practices: With increasing global emphasis on sustainability, Pakistani exporters should adopt environmentally friendly practices. This includes sustainable sourcing, responsible manufacturing, and reducing carbon footprints. Meeting the growing demand for sustainable products can provide a competitive edge in international markets.
The Role of Technology in Trade
Technological advancements can play a significant role in enhancing trade efficiency. E-commerce platforms can provide a direct channel for Pakistani exporters to reach international customers. By leveraging digital tools, businesses can showcase their products, streamline order processes, and enhance customer interactions.
Furthermore, adopting blockchain technology can enhance transparency in trade transactions, reducing the risk of fraud and ensuring traceability. This is particularly important in the context of international trade, where trust is paramount.
Challenges to Overcome
While there are immense opportunities within the SCO framework, there are also several challenges that Pakistan must address to fully capitalize on these prospects:
1. Political Stability: Political instability can hinder trade relations. It is vital for the government to create a conducive environment for businesses to thrive, fostering confidence among investors.
2. Bureaucratic Hurdles: Complex bureaucratic processes can impede trade efficiency. Streamlining customs procedures and reducing red tape will facilitate smoother trade operations.
3. Security Concerns: Regional security issues can pose challenges to trade. Addressing security concerns through diplomacy and cooperation with neighboring countries is essential for creating a stable trade environment.
4. Capacity Building: Pakistani exporters may require training and capacity-building initiatives to enhance their competitiveness. This includes skills development, market research, and understanding international trade dynamics.
5. Cultural Sensitivity: When engaging with SCO member states, understanding cultural nuances and sensitivities is crucial. Building relationships based on mutual respect and understanding will foster trust and collaboration.
Conclusion
The Shanghai Cooperation Organization presents a significant opportunity for Pakistan to enhance its trade relations and exports. By leveraging its strategic location, Pakistan can act as a bridge between East and West, facilitating trade not only with SCO member countries but also with other nations.
It is imperative for Pakistan to prioritize its trade relationships, invest in infrastructure, adopt technological advancements, and create a favorable business environment. By addressing challenges and capitalizing on opportunities, Pakistan can enhance its economic prospects and ensure sustainable growth.
In summary, the future of Pakistan’s trade within the context of the SCO looks promising. With collective efforts, strategic planning, and a focus on building partnerships, Pakistan can navigate the complexities of international trade and emerge as a key player on the global stage.