Trading with Central Asia

THE five Central Asian Republics —Kazakhstan, Kyrgyzstan, Turkmenistan, Tajikistan and Uzbekistan — with a combined gross domestic product of $207 billion and a population of 66 million offer a sizeable market for Pakistan's goods, services and investment. However, much of the potential for the economic cooperation with the region has remained untapped, with Afghanistan's war acting as a major barrier. But things appear to be changing. The recent amendments in the Pakistan-Afghan transit trade agreement envisage measures to facilitate Pakistan's access to the CARs market and to address the issue of illegal tax collected by Taliban and warlords in Afghanistan. Traditionally, Pakistan has been routing its exports to CARs through Afghanistan, occasionally using air transport. The official efforts to forge closer trade and economic ties with the CARs are likely to be stepped up because of a possible fallout of current political turmoil in the Middle East and fragile recovery in the US and Europe. The long-term export potential to these markets remain unclear at the moment. The trade potential of the CARS is being enhanced because these countries are geographically close to China as is Pakistan and increasing Chinese presence there is accelerating intra-region trade. And Pakistan is trying to seize the opportunity. Last month, president of the Tajikistan Emomali Rahkhmanov paid an official visit to Pakistan and Prime Minister Yousuf Raza Gilani went to Kyrgyzstan and Uzbekistan. During these high level contacts, several agreements were signed to promote trade and investment between Pakistan and Tajikistan, Kyrgyzstan and Uzbekistan. 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. "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," according to Mr Amjad Rafi, a former president of Karachi Chamber of Commerce and Industry. Pakistan can get into Central Asian markets from three sides. Businessmen say we can take Afghanistan, Iran and China routes to reach out to these markets and they stress that we should focus on all the three options at a time to get results. "Member states of ECO are drawing roadmaps to reach new levels of economic relationships. We can boost trade with CARs if our plans fit into them," Mr Rafi told Dawn. 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 Taliban or influential warlords operating in those areas. Normally, the rates range between 5-15 per cent of the value of the cargo. Pakistan's bilateral trade with CARs plus Azerbaijan was next to nothing till mid-2000s. But from then onwards it began to ramp up and touched $100 million mark in FY08 before the advent of Great Recession. "This was perhaps the peak performance in the last decade," remarked an official of the Trade Development Authority of Pakistan (TDAP). He said bilateral trade with CARs plus Azerbaijan plunged to around $45 million in FY09 when the world was under recession. "But in the last fiscal year it is believed to have shot up again though we still do not have final statistics with us." Businessmen say, Pakistan's bilateral trade with CARs would rise immediately if Chinese start using Gwadar Port for trading with Central Asian states and we use our 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 reach 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, this too would 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 early 1990s, Pakistan has done little to promote trade with them except for signing some agreements. "We can export a large number of items to Central Asian countries," says Mr Amjad Rashid, a leading exporter catering to 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 told Dawn. "And we can import from them wheat, cotton, fuel oil and oil products, natural gas and electricity, chemicals, iron ores, iron and steel, rare earth materials and food processing plants etc." Pakistan has already been exporting cereals, frozen fish, fruits and vegetables, medicines, medical/dental/surgical instruments, leather and leather products, carpets, textile fabrics, knitted garments, ceramics/kitchen wear and bathroom fittings, furniture and confectionary, to Central Asian states. And it has been importing cotton and agricultural machinery from there. In 2010 CARs combined imports stood above $50 million. "Even if we manage to get one per cent of this business, our export earnings will increase by half a billion dollars," said an official at TDAP adding that Pakistan needs to hold frequent single-country exhibitions in Central Asian states to familiarise their population about our export products. Businessmen say, we are already late in tapping trade potential of the Central Asian countries. China is fast becoming the largest trading partner of these states and India and Iran are increasing their shares. As of 2009, China became the largest trading partner of Kazakhstan and the second largest trading partner of Tajikistan leaving Russia behind in both the cases. It also became the single largest source of Kyrgyzstan's and Tajikistan's imports and the second largest supplier of goods and services to Uzbekistan. Government officials say, given the growing influence of China in Asian economies, Pakistan can deepen its trade relations with CARs by playing a pro-active role in regional forums like the Shanghai Cooperation Organisation, and the Central Asia Regional Economic Cooperation. They also say that moves to expand trade volumes with Central Asian states must be supplemented by more frequent people-to-people contacts.