The border trade between the two countries may be given a legalized framework



Mar 15 - 21, 2004





After two days of successful deliberations of the joint Pakistan-Iran Ministerial Commission in Islamabad last week, the two countries signed seven agreements and memorandum of understanding for upgrading and stepping up of the existing process of economic cooperation and boost their trade and business relations. These include agreements on a joint investment company, avoidance of double taxation, preferential trade, gas pipeline, banking and anti-smuggling measure.

The Pakistani delegation was led by the Finance Minister Shaukat Aziz while Iranian Minister for Transport Ahmed Khurram headed his team. Prime Minister, Mir Zafarullah Khan Jamali and the visiting first Vice President of Iran Dr. Mohammad Raza Aref witnessed the signing ceremony.

Speaking on the occasion, Dr. Raza said that both the countries must explore more areas of cooperation and adopt holistic approach to realize economic prosperity for the people of Iran and Pakistan.

Prime Minister of Pakistan observed that there was tremendous potential of enhancing trade between the two countries and it volume could be raised to billion of dollars from present in millions. The two sides are also reported to have revised the improvement in road and rail links. During their two days discussion the two countries covered a wide range of economic and trade related subjects.

The joint investment company will be set up initially with a net paid up capital of $ 25 million. The gas pipe line project was approved for the bulk supply of gas from Iran to Pakistan specially in the border areas and subsequently expanding it to connect the Pakistan existing gas supply network. There are strong possibilities that this will be expanded to India which badly needs gas bulk supply.

The first Vice President of Iran, during his meeting with Finance Minister Shaukat Aziz, appreciated the joint efforts of both the sides in identifying areas of cooperation and institutionalizing them through signing of seven agreements, an official statement said. Aref said that these agreements would promote economic cooperation and help in improving trade. The Iranian Vice President hoped that achievement of substantial economic cooperation would generate a political will to promote stability, peace in the region. He said that Iran and Pakistan could also play a key role in promoting economic cooperation through OIC and ECO. He underlined the need for tapping economic potentials of the Islamic world to promote economic prosperity in the Muslim Ummah.

The Iranian Vice President said that stability, peace, security and economic prosperity of Afghanistan were in the interest of regional peace. He, therefore, urged that Iran and Pakistan should work together to accelerate economic reconstruction of Afghanistan to enable it to play its role in the economic development of the region. He also outlined the need for cooperation between Iran, Pakistan, Afghanistan and Turkey under ECO. He said that all the four countries of the region should work in tandem to promote economic cooperation at bilateral and regional levels.

Finance Minister Shaukat Aziz reciprocated the Iranian vice president's desire to enhance economic cooperation and said that with the cooperation of Ahmed Khurram, Iranian Minister for Transport and his team, the Joint Ministerial Commission meeting has proved to be a success as it translated many ideas into areas of cooperation. He complimented Ahmed Khurram for his contribution in finalizing agreements to establish Joint Investment Company (JIC), which would provide an institutional mechanism to promote economic cooperation and investment. The professional attitude of the two sides at the JMC has resulted in finalizing seven agreements, which would translate into substantial economic cooperation, he said adding that the desire on both sides to realize an early construction of gas pipeline by Iran would promote economic growth, as demand of gas in Pakistan would continue to rise with ever improving economic performance.



It was noted in the meeting that the existing level of bilateral trade between the two countries was in the region of only $350 million, as against which the potential to expand the trade flows was estimated at not less than $3 to $4 billion. In this context it was emphasized that a closer monitoring of the pace of implementation of the new agreements would have to be given due attention with a view to ensuring speedy progress towards the achievement of the desired goal of enhancing bilateral trade and economic cooperation in other fields. It is encouraging to note that Iran has indicated linking of the rail facilities from Kirman to Zahidan which would make it possible for Pakistan to connect the railway transport system up to Europe via the Syrian town of Latakia. At the same time Pakistan would modernize and upgrade its railway line from Quetta to Zahidan. The proposal to establish a joint investment company is expected to initiate investment activity on the basis of joint ventures between the private sectors of the two countries. It may be mentioned here that similar joint venture companies established with Libya, Kuwait and Oman are already operating in Pakistan and contributing significantly to industrial development. The proposal for adopting preferential tariff treatment of imports between the two countries is a good development. Both sides would prepare the list of items to be exchanged between the two countries, within 60 days of the signing of the agreement.

It would appear that this meeting of the Joint Ministerial Commission of Pakistan and Iran reflected a new bid to review the markedly slow pace of progress in the expansion of trade and economic cooperation between the two countries in spite of the fact that both are founder members of the Economic Cooperation Organization known as Regional Cooperation for Development (RCD) which was established in 1964 with Pakistan, Iran and Turkey as members. Thus in spite of the cherished objective of enhancing economic and trade cooperation over a period of four decades, the volume of trade between the two countries stands at only $350 million annually. It was reportedly projected by the participants at the Joint Ministerial Commission's meeting that the level of bilateral trade between the two countries should be increased to one billion dollars over the next couple of years. There is no reason why the relatively modest target cannot be achieved through sustained efforts in the form of institutionalized framework like the preferential tariff agreement.

The Joint Ministerial Commission with an elaborate agenda to achieve a closer cooperation in specific fields of economic activity undoubtedly witnessed a major move by the two neighbouring brotherly countries. The contiguity of Pakistan's borders with Iran to the west of Balochistan provides a natural outlet for the exchange of tradable goods. Recently even the petroleum products from Iran have been found to be available in the border areas of Balochistan in addition to other products. The border trade between the two sides is largely an informal affair, which may be described as a smuggling activity. As reportedly proposed by the Iranian delegation, the border trade between the two countries may be given a legalized framework on the pattern of Pakistan-Afghanistan border trade.