Pakistan’s strategic location at the crossroads of South Asia, Central Asia, and the Middle East undoubtedly makes it well positioned to facilitate connectivity and trade flow, offering potential as a hub of strategic importance for Pakistan and the region.
Added to it is the China Pakistan Economic Corridor (CPEC) as a vital part of China’s Belt and Road Initiative, enhancing infrastructure and connectivity that can boost trade with Central Asia.
On the face value all of this promises great value for Pakistan and the region.
And rightly so, Pakistan has been building on this narrative to attract investments into the country. How far the investors have bought this narrative is a question that needs a plausible answer. The low foreign investment in the country is an indication that this narrative has few buyers.
Building a narrative in isolation, devoid of projecting the ground realities, is meaningless. Providing an enabling environment convincing to the investors is the way forward. The ground realities throw some light as to why there are only a few buyers.
Since few years, there has been a surge in visits, investment talks and other economic activities between Pakistan and the Central Asia states to leverage Pakistan’s strategic position as a key trade and transit hub to connect the landlocked Central Asian republics to the global market. There have been multiple talks on trade, energy and defence ties as part of an economic diplomacy push by Pakistan to enhance investment.
However, the volume of bilateral trade between Pakistan and Uzbekistan is a mere dollar 400 million with an ambitious target to reach dollar 2 billion in the near future. Pakistan’s bilateral trade volume with other Central Asian states is also in a few millions.
Pakistan-Kyrgyzstan bilateral trade volume in 2022-23 stood at USD 139.33 million, with balance of trade in Pakistan’s favour. Exports to Kazakhstan were of USD 132.73 million, and imports were of USD 5.58 million.
With Tajikistan it stands at USD 24.68 million with Pakistan’s exports of USD 23.63 million to Tajikistan while Pakistan’s imports of USD 1.3million. Bilateral trade with Turkmenistan stood at USD 8.41 million with Pakistan’s exports of USD 2.234 million and imports of USD 6.17 million.
These low trade volumes are understandable as the countries in Central Asia are not industrial or technology-based economies. The significant value-addition the Central Asian states carry is their abundant energy and mineral resources and which energy starved Pakistan can benefit from.
Pakistan is a signatory to multiple cooperation agreements signed with these states. But, for years they are lying dormant on account of political expediency.
Uzbekistan is the largest consumer market and second biggest economy in Central Asia and is the first Central Asian country with which Pakistan has signed bilateral Transit Trade Agreement (UPTTA) and bilateral Preferential Trade Agreement (PTA) on 17 items.
Pakistan, China, Kyrgyz Republic, and Kazakhstan signed the Quadrilateral Traffic and Transit Agreement (QTTA) on 9 March 1995. It is a transit trade deal between China, Pakistan, Kyrgyzstan, and Kazakhstan for facilitating transit traffic and trade. It provides an effective connectivity network between Central Asia and Gwadar port of Pakistan in the Arabian Sea. China capitalized well on it and its trade with the region stands at about USD 100 billion.
Then there is Turkmenistan-Afghanistan- Pakistan- India (TAPI) gas pipeline project.
TAPI project aims to bring natural gas from the Galkynysh gas field in Turkmenistan into Pakistan and India through Afghanistan. TAPI project is a part of the energy security plan of the government of Pakistan.
Not much different is Pakistan’s position with its neighbours Afghanistan and Iran. While the West, China and India are eying massive mineral resources of Afghanistan Pakistan’s outreach is limited to commodities’ trade of a few million dollars. With Iran, the much-needed Pakistan-Iran gas pipeline is in a limbo since decades.
Pakistan’s outreach to the South Asian states is no better. With the demise of SAARC for all practical purposes, whatever little it was has died out. The opening up of Pakistan-Bangladesh relations provides a significant opportunity for Pakistan to establish itself in the southern region.
Pakistan has not been able to capitalize on its strategic location on account of internal and external challenges. On both sides of its borders it is venerable to tensions and security challenges.
Regional tension between India and Pakistan has stifled bilateral trade and Pakistan’s cross-broader economic cooperation and outreach in South Asia. India considers South Asia as its home market and blocks Pakistan’s footprint in the region.
Years of political instability and security concerns in Afghanistan have disrupted trade routes and outreach to Central Asian states. The recent tensions between Pakistan and Afghanistan add to these challenges.
Years of US sanctions on Iran have undermined any meaningful economic relationship of Pakistan with Iran.
Added to all of these challenges is the security concern in Pakistan, which is undermining its economic and diplomatic outreach.
For the same reasons Pakistan is not being able to cash in on excellent opportunities offered by CPEC and the new Gwadar airport. The usage of both these assets is minimal.
No doubt Pakistan’s strategic location in the region is idle as an economic hub, but this narrative alone is not saleable. For that, the political irritants across the borders of Pakistan on the north and the south have to be removed for a better cause for Pakistan and for the whole of the region’s prosperity and security
Copyright Business Recorder, 2025
The writer is a former President of Overseas Investors Chamber of Commerce and Industry (OICCI)
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