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GCC states, Pakistan’s next door trade neighbors

Ties between Pakistan and Gulf Corporation Council (GCC) have been strong for decades. Much of Pakistan’s interaction with these GCC counties revolves around its multidimensional ties with the GCC’s core state, Saudi Arabia. Pakistan-Saudi ties have a much deeper basis, people-to-people ties are strong and there are numerous Pakistani expatriates – around 2 million — working in Saudi Arabia. They send remittances back to Pakistan to support their families. And for many Pakistanis, whether poor or rich, a common last wish is to perform Hajj in the kingdom after retirement. Saudi Arabia hosts the two holiest cities of Islam, and performing Hajj – the pilgrimage to Makkah — at least once in a lifetime is a major obligation for Muslims.

Bilateral trade between the countries of GCC and Pakistan (India sub-continent) has a long history dated back to the Silk Road. In the modern context, the prominent trade relationship between these two regions arise due to the vital position of GCC as the leading oil-based energy exporter and due to the ever-increasing demand for energy from the regional countries. Apart from this trade linkage, another potential avenue for inter-regional trade between GCC and Pakistan is available due to the dependence of GCC countries on food and agricultural imports. The inherent climatic conditions of the GCC countries restrain the agricultural production in the region leading to the reliance on food and agricultural imports.

The GCC is a political and economic union of Arab states namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the Unites Arab Emirates. The GCC was formed in 1981 in order to strengthen the members’ economic, social and political ties by harmonizing regulations in various fields including economy, finance, trade, and customs. This region accounts for over 50 million population and extends through 2410.7 thousand square kilometers.

The gap between the agricultural production of GCC countries and the consumption has gone up substantially in recent years. The GCC nations are shifting their agricultural policies away from the nationalistic goal of food self-sufficiency towards more flexible and broad based efforts including the reliance on imports to ensure food security. The relative positions of the two states i.e. GCC as a net food importer and Pakistan as an agricultural and food producer open an avenue for vibrant trade relationship. Furthermore, having a large portion of the population depends on agriculture based livelihoods; Pakistan can achieve encouraging welfare gains through enhanced foreign exchange earnings while GCC can achieve benefits due to stabilization of food supplies.

Being the largest countries that have the highest population in GCC, Saudi Arabia and UAE are the major importers of agricultural products accounting for about 80 percent of the total agricultural imports of the region. All the other five nations account for about 20 percent of the total food and agricultural imports by GCC indicating the obvious dominance of Saudi Arabia and UAE in food and agricultural imports by GCC.

 

Pakistan and Saudi Arabia have maintained religious, economic, social, and security ties for the last seventy years. The two Islamic states established diplomatic relations shortly after Pakistan emerged as an independent state and have remained friendly since then. Strategic and economic cooperation between the GCC and Pakistan deepened as human capital requirements of GCC and Pakistan’s need for economic assistance brought the two closer.

Pakistan is presently working on a free trade agreement with the GCC states and removal of restrictions on Pakistan. Prime Minister Imran Khan has opened a new chapter in Pakistan’s long history of using its strategic position to win the foreign support, this time turning to Arab Gulf nations to help keep the economy afloat. Saudi Arabia and its ally the United Arab Emirates have offered Pakistan over USD 30 billion in loans and investments. The package will allow Pakistan to delay the politically painful prospect of borrowing from the International Monetary Fund. The plan includes a USD 10 billion Saudi investment to build an oil refinery and petrochemicals complex. Also in the mix is Qatar, which is looking to build on its liquefied natural gas sales to Pakistan and also make investments. Pakistan had long relied on its alliance with the US to help keep its economy afloat but recently Pakistan has turned to China and now to GCC states. The Saudi complex would be built at Gwadar, putting a refinery at Gwadar would be a significant boost for the port. The Saudi plans would also make Pakistan less dependent on Chinese investment. Greater domestic refining capacity also would help cut imports of fuel, a major cause of the country’s trade deficit.

There are a number of areas of common interest between Pakistan and GCC which have never been explored properly. That includes agriculture, construction, and human resource deployment. Pakistan can provide skilled labor to GCC. Most of the skilled labors from Pakistan are considered as semi-skilled or unskilled labor because of lack of their understanding of the English language. If these labors learn the English language then their monthly salary can be doubled. This is just a simple thing yet we have never realized the significance and value addition of such minor things. Moreover, Pakistan is strategically a very important country in which GCC countries can get an advantage by becoming part of the China-Pakistan Economic Corridor (CPEC). Pakistan has so far not even properly market CPEC and the main reason is political. We unfortunately never come out of such petty issues, rather than acknowledging political opponent’s contribution in the national matters, not taking good initiatives forward, and prefer to develop own footprints which are a highly ineffective and inefficient way of running a country. Consequences are in front of all of us. There are no doubts that bilateral relations between Pakistan and GCC will continue. In spite of all this, Pakistan needs more efforts to enhance the existing bilateral relations with GCC states.

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