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Pak-Iran ties set to touch new heights as trade infrastructure being upgraded

Pakistan to construct three border posts on the Iranian border on modern lines: Khurram Dastgir

Despite being brotherly and close neighbors Pakistan-Iran trade volume is not upto desired level hindering the growth and promotion of trade ties on regional level. Mutual trade volume between the two countries do not reflects the friendly relations and investment potential of the both the countries. Realizing the importance of Pak-Iran trade, the trade infrastructure on Pakistan-Iran border is being upgraded in a bid to boost bilateral trade ties.

Iran requires our textile products including T-shirts, jeans and home textiles. Demand for meat was equally high in Iran and we have to build capacity of our meat processing facilities to cater their requirements. Iranian power companies can provide 5000 megawatt electricity to Pakistan. It costs approximately US$1.5 billion to connect electricity and develop infrastructure.

Road and rail links between the two countries are also needed to be improved. Direct shipping between Iran and Pakistan is also required on urgent basis.

Desperate to take the much-awaited step towards reviving trade relations, Pakistan is mulling enforcing its five-year bilateral trade roadmap, already envisaged with an ambitious target of $5 billion, up from the present $270 million.

Pakistan relied mostly on fruit, rice and wheat exports but now seeks diversification ranging from textiles to IT services. On the other hand, we could import petroleum products, electricity, leather, chemicals, fruits and vegetables from Iran.

According to Minister for Commerce Khurram Dastgir Khan, progress in trade relations with Iran is going well after the lifting of international sanctions, and in this connection, a third trade border post with Iran has already been made functional which would help increase local trade activities.

He said the government had initiated a number of projects regarding regional trade, investment and regional coordination, which would change the fate of the country. “Pakistan is also negotiating with western countries to take advantage of the strategic geographic presence of Pakistan to enhance investment opportunities,” he added.

Mr. Khurram said Pakistan wants more predictability in tariffs from Iran on agricultural produces and their products. Iranian duties on agriculture fluctuate widely depending upon the time of harvest ranging from on-seasonal highs to off-seasonal lows. The two sides need to agree on Sanitary and Phyto- Sanitary standards as this proves an unwanted barrier in bilateral trade.

The conclusion of an FTA between Pakistan and Iran and inclusion of Iran back into the world trading system would bring more predictability and clarity and the seasonal shifts in duties and trading pattern would give way to surer trading regime.

Mr. Khurram Dastgir said that Pakistan has plan to construct the three border posts on the Iranian border on modern lines with twenty first century infrastructure in order to facilitate the land trade. These posts will be linked through a single road which would be further connected with the main arteries leading north.

Unlike the past, Pakistan now wants to move away from certain commodities and wants to expand and diversify its exports. The key potential trade areas Pakistan is eyeing are rice, horticulture, sports goods, surgical equipment, information technology, textile goods and construction material.

The textile industry, which constitutes more than 50% of the country’s exports, believes Pakistan can increase its exports to Iran but it will require close coordination between the private and public sector.

There is a ‘huge’ export potential in Iran,” Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) Central Chairman said.

On the other hand, Pakistani rice is one of the few traditional items that Iran imports. As far as rice exports to Iran are concerned, some are hopeful while others say the situation will take a long time to improve.

Pakistan needs to complete the 785-km of its own portion of the 2,775km Iran-Pakistan (IP) pipeline, said a spokesman of FPCCI, adding that it would help boost bilateral trade between the countries. Completion of the project would help boost bilateral trade volume, which is currently very low between the two capitals, he said. The pipeline was meant to provide Pakistan with the requisite natural gas, which, due to rising demand and shrinking reserves, was projected to be depleted in a few years.

Former president ICCI Atif Ikram Sheikh said the business community of Pakistan unconditionally support decision of the government to expedite import of gas from Iran and Turkmenistan to ensure energy security.

Atif Ikram Sheikh said that construction of dozens of power plants, decision to import of gas from Iran and Turkmenistan and other steps speaks of the priorities of the government to settle energy crisis, which will boost GDP by three percent. These initiatives of the Nawaz administration will improve production, boost exports and reduce unemployment, he added.

Atif Ikram Sheikh said that TAPI is supported by US, World Bank and ADB while IPI is still under sanctions but government continue to find a way to start import of gas. As soon as any opportunity is found, Pakistan will start construction of its part of gas pipe line stretched over 781 kilometres and complete it in thirty months.

The business leader noted that IPI deal was inked decades back and now the situation has changed therefore Iran should revise the Gas Sales Purchase Agreement to make it attractive to Pakistan. He said that both the pipelines will transport around four billion cubic metres of gas to Pakistan per day which will change the fate of the country therefore the projects should be finalized without any delay.

Other business leaders said the proposed Free Trade Agreement (FTA) between Iran and Pakistan would definitely help improve bilateral trade. With FTA that Pak-Iran trade would touch new heights.

According to them, enhanced connectivity and banking channels between Pakistan and Iran are imperative to fully exploit the business opportunities in Iran. Due to different reasons we could not fully exploit the economic potential.

Iran is facing food shortage while Pakistan can export rice and other eatable commodities to it. Non-availability of banking channels and said it is a major obstacle in the promotion of bilateral trade between the two countries. Being neighbor countries, we are always involved in cross border trade but it was through informal channels. Both the countries must focus on the promotion of formal trade. The government of Iran and Pakistan need to focus on promotion of trade to reap true potential of regional trade.

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