Tuesday, 20th April 2021

Azerbaijan and Pakistan trade and business potential

Pakistan, Oct. 18 — In international politics, economic ties and trade relations between any two states are considered to be the litmus test for predicting and analyzing the nature and dynamics of engagement among the countries. In case of Pakistan and Azerbaijan, both states, though shared common historical past and religious affinity with each other but the bilateral trade is merely US$ 7.3 million per year wherein both states have signed agreement of cooperation to increase the figure to US$ 500 million over the next five years.

Over the past several decades since the beginning of relations, there has remained strong urge from both sides to improve the economic ties to next best level. Successive government tried their best from Pakistani side along with the Azerbaijani side however the momentum began to rise after the advent of the 21st century and rise of Azerbaijan as an oil and economic regional giant. In order to boost trade relations a special working group has been established between the Ministry of Economy of Azerbaijan and the Ministry of Trade of Pakistan on the development of bilateral investment cooperation. Over the years Pakistani business community has invested $4.2 million in Azerbaijani economy.

If we closely look at the Azerbaijani market, there is huge potential for Pakistani businessmen including joint ventures in various sectors including sports goods, leather industry, pharmaceutical, energy, production of lightweight agriculture equipment and value addition in agriculture products. It is very important to note here that the trade turnover during the January to June 2018 has remained at the 5.82 million USD.

Azerbaijan and Pakistan are two brotherly Muslim countries with unique commonalities of historical, religious and political nature. The relation goes back to the time when both nations were part of the Persian Empire. Pakistan recognized the independence of Azerbaijan in 1991, (the second country after Turkey) and the two countries established diplomatic relations in 1992.

Pakistan was one of the first countries to open its Embassy in Baku, capital of Azerbaijan. After the establishment of the formal diplomatic relations, there was no look back and the ties grow on steady pace. Both countries built deeper and closer brotherly bond which is strengthening and growing ever since till this time. Leadership and people of both countries feel closer to each other. Ever since the first visit of the then prime minister of Pakistan Nawaz Sharif who visited Azerbaijan’s capital, Baku in 1995, and a reciprocal visit of Azerbaijan’s late President Heydar Aliyev in April 1996 to Pakistan, both countries have covered lots of ground in political and economic spheres. Both countries have supported each other in every international forum.

Both the states started recorded trade in 1995, by inking an agreement under the Economic Cooperation Organisation. Joint Ministerial Commission is the only bilateral framework for trade which unfortunately could not exploit the full economic potential by either side. Keeping in view the economic potential of both states, the current trade volume is not promising and both partners sought help from business community to further strengthen Business Corporation. Both sides can potentially increase the volume of bilateral trade by sharing business expertise and connecting markets.

Oil is a major commodity of Azerbaijan while Pakistan is facing an acute shortage of energy resources, thus Pakistan constitutes an interacting market in oil and gas sector investment for Azerbaijan. According to an estimate, there are 267 companies with Pakistani capital worth $4.2 million are operating in Azerbaijan while trade turnover between both states reaching $5.82 million in 2018, which is 36 percent more than last year figures.

Agriculture exports is one sector which is necessary for Pakistani businessmen to explore in Azeri market and find partners there to continue supplies. Pakistan often exports potato, rice, onion, tomato and garments to Azerbaijan, however, surgical goods and sports goods are something which can be further explored as well. It is important to note here that Pakistan is an agriculture based economy and the most of its exports are products or services related to this sector. Pakistan is one of the largest producers of rice in the region and its market share is rising. While on the other hand, Pakistan’s Mango is also famous across the globe for its taste.

These two major crops along with cotton and several other important agricultural products, give strength to our economy. Since mangoes and rice, are being exported to various other Central Asian countries and the other regions. However, few of the companies have started their supply of the goods but more can be done with cooperation from the government and the chamber of commerce and industry platforms. This will open up new value additions apart from mangoes and rice. Pakistan can also export other items including potatoes, onions, rice, lentils, cotton, pharmaceuticals, surgical and related products, textiles and others.

Pakistan also has a potential for manufacturing sports goods and Azerbaijan has a huge market due to the presence of the high number of games played in the country. Another important sector for collaboration and joint venture is energy sector. As we all know, that Azerbaijan is one of the largest producers of oil and energy related products while Pakistan one of the largest consumer market for these products. Both states signed an agreement of cooperation wherein Azerbaijan will support Pakistan’s energy needs. There are also ongoing dialogues between Pakistan and Azerbaijan related to the import of LNG from Azerbaijan.

The growing connectivity and B2B meetings better set the course of future bilateral trade. Pakistan can potentially replace other competitors in Azerbaijani markets. As stated earlier, oil and gas makes huge chunk of economy of Azerbaijan which are cheap commodities worldwide and its prices are likely to stay stable. Thus, Azerbaijan can help Pakistan to find new areas of revenue generation to feed its economy where Pakistan can play its role. Pakistan is one of the major oil and gas consuming countries in the world, wherein it can call on investments in energy sectors in Pakistan. Due to the same reason, Azerbaijan launched an economic vision ‘Azerbaijan in 2020-Looking to the Future’ which resorts to diversify its economic markets and trade avenues.

As Azerbaijan seeks interest in agricultural and textile apparels widely produced in Pakistan, this can be a huge potential. While seeking investments in energy sector by Azerbaijan, Pakistan can potentially invest in the above mentioned commercial sectors in Azerbaijan. It can also successfully maintain the supplies of goods and services that might be required. This all will depend on how well the opportunities and the business ventures may be finalized in the coming future from both sides.

The writer is Director, Institute of Peace and Diplomatic Studies

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