The leading association of Pakistani businessmen has formulated a highly optimistic target for bilateral trade between the two countries, which would entail a more than four-fold increase in the present level of trade, along with the required changes in structure. Federation of Pakistan Chambers of Commerce and Industry has declared that Pakistani-Iranian bilateral trade of $10 billion a year is feasible within the next three to five years from the present $2.8 billion, if the problems regarding banking, transport, and procedures are solved in both countries.
The President of FPCCI Atif Ikram Sheikh made the declaration after holding talks with the Iranian businessmen from the Arak Province, which is considered one of the industrially important provinces of Iran. The Iranian businessmen included President Naser Beigi of the Arak Chamber of Commerce, Industries, Mines and Agriculture.
Present State of Trade – and the Deficit
A $10 billion figure in relation to Pakistan-Iran trade is indeed ambitious but hardly unrealistic for two nations that share a common border stretching 900 kilometers, have rich cultural and religious links, and have compatible economic systems. It is quite clear from the $2.8 billion present state of affairs that a lot more could have been accomplished.
What Arak Province Contributes
The contribution of the Arak Province delegation to FPCCI carries weight because Arak Province is one of the top heavy industry regions in Iran – supplying precisely the kind of industrial components needed by Pakistani industries and construction companies.
The information provided by Naser Beigi shows that Arak Province has:
- Heavy machinery and engineering tools
- Automotive components
- Agricultural equipment
- Mining solutions
The classification is directly relevant to Pakistan’s changing requirements for industries and manufacturing sectors, especially in light of the fact that Pakistani manufacturers aim to cut down their dependence on costlier alternatives from China, Europe, or Turkey. The geographical closeness of Iran ensures reduced transportation costs and time.
The Commercial Attaché Murad Nemati emphasized the potential for cooperation through joint ventures in a much wider range of sectors including agriculture, food processing, petrochemical industry, mining, engineering, white goods manufacturing, and renewable energy. The Pakistan-Iran trade target of $10 billion is based on diversification of the business activities.
Three Obstacles that Need to be Overcome
According to FPCCI Senior Vice President Saquib Fayyaz Magoon, the three hurdles that need to be overcome in order for the Pakistan-Iran trade worth $10 billion to be realized include:
“Pakistan and Iran share strong historic, political, cultural, and religious connections, but economic collaboration between us is hugely untapped. In order to make our politico-economic goodwill bear fruit in terms of economic collaboration, the authorities need to focus on making it easier for traders to conduct transactions, setting up formal banking channels, and improving logistics.”
Saquib Fayyaz Magoon, SVP, FPCCI
- Channel through banks: due to lack of official, authorized channel of banking system between banking institutes of Pakistan and Iran, both countries are forced to trade through informal channels of payments, which results in increased cost, risk and inefficiencies in all transactions. Creation of official channel is the only way forward to achieve Pakistan-Iran trade growth of $10 billion.
- Simplification of trade procedures: there is already regulatory friction on both sides of the border that increases the time and cost associated with trade. Streamlining the process of customs clearance and certification will decrease the transaction cost involved in conducting business across the Pakistani-Iranian border.
Pakistan-Iran border passage lacks logistics and transportation linkages in relation to the level of trading activities it can accommodate. It is imperative to make investments in the road transport infrastructure and improve border crossings as well as the transport links between industrial hubs of both countries
FPCCI Commits Wholehearted Support
Atif Ikram Sheikh, President of FPCCI, pledged wholehearted support of his organisation to the businessmen from Pakistan and Iran who wish to establish themselves as business partners in a legal manner.
The Geopolitical Complexities – Real But Not Intractable
While there is the Pakistan-Iran trade target of $10 billion, it takes place in a geopolitical reality which one must consider. Sanctions imposed by the United States against Iran make it difficult for Pakistani companies to work with their Iranian peers – especially with transactions done in dollars and participation of international financial institutions.
The journey to $10 billion must happen by working within these parameters through valid means like local currency trading, third party settlements, and compliance management systems, as opposed to ignoring the environment of sanctions altogether. The admission of FPCCI to the challenge of banking channel implicitly acknowledges this and presents it as a challenge to be overcome.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
