EDITORIAL: The Pakistan-Iran five-year trade cooperation deal, with a $5 billion bilateral trade target, comes at a time when both countries could do with a boost to their economies.
They should be mindful, though, that they made a similar promise in late 2021, when they believed they’d be able to achieve the same target by this year. But with much of the toxic international politics that prevented Pakistan-Iran cooperation in the past out of the way now, there’s reason to be more optimistic this time.
Interestingly, beyond just trade talks, the two sides also discussed ways of conducting their commerce in the way Iran is trading with Russia and China. That means, of course, that they’d be inclined to follow the growing trend, especially in this bloc, of trading out of the dollar. And that, in turn, means that the country will be forced to upgrade and streamline its money markets and develop currency swap agreements, which is a long-run net positive.
At a time when moves to develop a sovereign wealth fund are gaining strong momentum, such diversification will only help arrest some of the volatility that Pakistan’s capital markets have become notorious for.
Besides, ignoring natural trade opportunities with a next door neighbour for so long is, very rightly, considered a cardinal sin in even the most basic-level economics. So, any effort to overcome obstacles, stimulate trade and develop currency arrangements is welcome, even if long overdue.
The most important thing to come out of the discussions was the joint desire to conclude the Iran-Pakistan (IP) pipeline that was perhaps the biggest victim of global politics of the time. This project can, and hopefully will, be a game changer for Pakistan. But the then/outgoing Foreign Minister, Bilawal Bhutto, would no doubt remember that this project finally took off on the last day of the government that his father presided over, and then fizzled out after the change of guard.
This time too, Islamabad and Tehran shook hands in the twilight of the government in this country, and it would be a shame if the past repeats itself yet again.
Let’s not forget that all the time Pakistan’s economy has been in a nosedive, Iran has been cultivating regional partnership to circumvent biting sanctions by the US and the EU. Pakistan must also look for markets closer to its shores.
In this building alliance, Pakistan is already very good friends with China, and is improving its relations with Russia. The relationship with Iran, though very warm and cordial, has been hurt by politics and never lived up to its true economic potential. But the world is changing. China is now a major global power. And Gulf countries, too, have buried the hatchet with Iran.
Pakistan should look to be ahead of the curve in this process. The breakthrough with Iran can turn into a major development, unlocking trade potential that both countries have ignored so far. It would also help cut smuggling and incidents of terrorism across the border. Hopefully, this process will be carried forward by the next government. This is both an economic and diplomatic necessity.
Copyright Business Recorder, 2023