Challenges abound in trade with Russia

Hurdles like lack of banking channels, high tariffs need to be removed

ISLAMABAD: Pakistan has always been dependent on the United States, European Union and Middle Eastern countries for trade.

Textile products have been major items of export to these countries. The current government of Pakistan Tehreek-e-Insaf (PTI) is trying to pick up stagnant exports and squeeze runaway imports to reduce the trade deficit.

Trade earnings have been a major source of boosting foreign exchange reserves of the country. Pakistan needs to diversify exports and explore new markets in a bid to step up export proceeds. Russia is a big market that Pakistan needs to explore.

Speaking at the Lahore Chamber of Commerce and Industry last week, Russian Trade Representative Yury Kozlov said bilateral trade between Pakistan and Russia was far less than the potential. He underlined the need for enhancing cooperation in an effort to increase two-way trade.

“There is a traditional trade culture between the two countries as trade in the same products is ongoing. There is a need to explore more sectors for trade,” he remarked.

Many factors are behind the low bilateral trade such as lack of banking and payment channels, high tariffs, a strict Russian business visa regime, no direct passenger and cargo flights, long shipment periods, etc. Despite these hurdles, trade between the two countries has edged up which is a good sign for both sides. Embassy of Pakistan in Moscow Trade Wing Minister (Trade) Nasir Hamid told The Express Tribune that Pakistan’s exports to Russia had been growing since 2017.

Statistics of the Russian Customs show Pakistan’s exports to Russia in calendar year 2017 stood at $280.69 million, up 3.2% from the previous year. In 2018, exports to Russia came in at $313.57 million, higher by 11.71% from the previous year.

Latest statistics for seven months of 2019 show Pakistan’s exports were $257 million, an increase of 20% when compared with the same period of 2018. Hence, exports to Russia are on the rise. Major export products of Pakistan include textile (all segments), fruits and vegetables (mandarins, rice and potatoes), sports goods, leather articles, etc.

Pakistan’s imports from Russia comprise iron and steel, vegetables (mainly peas and chickpeas), mineral fuels, paper and paperboard, organic and inorganic chemicals, pharmaceutical products, etc. A majority of these imports are industrial inputs and are not consumer goods.

Subsidy for registration

Russian importers are well aware of the quality of Pakistani dental and medical instruments. However, in order to export dental, surgical and veterinary instruments to the Russian Federation, relevant companies will have to get their instruments and products registered in Russia.

However, the registration of such instruments is a time and money-consuming process. “Subsidy for the registration cost through the Export Development Fund (EDF) can provide an incentive for the exporters,” suggested an official of the commerce ministry.

Banking and payment channels

Reputed banks may open their branches in Russia and at the same time Russian banks can set up their units in Pakistan. A proposal had been floated a few years ago for opening a branch of National Bank in Moscow and the idea may be looked into again.

Trade in services

The information technology sector in Pakistan has been developing and growing for the past few years and its exports have also gone up. So, Russia could be a good market for the IT companies to provide their services and make exports. Bilateral cooperation in this area can be beneficial for both countries.

Tourism

Pakistan has framed a policy to facilitate tourists. For deepening cooperation with the Russian Federation in tourism, a memorandum of understanding may be signed by the Federal Agency for Tourism of the Russian Ministry of Culture and the Pakistan Tourism Development Corporation.

It has also been proposed that well-known tour operators of the Russian Federation may be invited to visit tourist attractions in Pakistan, including the northern areas, and to connect with the local tour operators.

Warehousing facility

Most small and medium-sized Russian companies prefer to deal and buy products locally. If export associations of Pakistan set up their representative offices and warehouses for their members in Russia, with funding from the EDF, it will go a long way towards increasing Pakistan’s exports to the Russian market.

Trade Wing

The Trade Wing has always recommended early resolution and settlement of mutual financial claims and obligations between Pakistan and the Russian Federation. However, they have remained unresolved for many years.

The government of Pakistan has to pay $93.5 million to the Russian Federation. This settlement will give an indication that Pakistan is serious about strengthening its relations with Russia in all fields.

FTA with Eurasian Union

India and some other countries like Bangladesh and Vietnam are major competitors of Pakistan in the global market.

Vietnam and Singapore have already signed preferential trade agreements (PTAs) with the Russian Federation and China, Iran and India are engaged in negotiations for signing free trade deals with Russia.

Pakistan had been pursuing a preferential or free trade agreement with the Eurasian Union during the tenure of previous Pakistan Muslim League-Nawaz (PML-N) government. As different countries are making efforts to ink the free trade agreement (FTA) to capture the Russian market, Pakistan should also come forward to make a similar arrangement with Russia.

Separately, Pakistan is looking for striking some deals with Russia in the energy sector. Proposed large projects like the North-South Gas Pipeline and an offshore gas pipeline will deepen relations between the two sides and will help a lot in creating an environment conducive for trade.

The writer is a staff correspondent

 

Published in The Express Tribune, October 14^th, 2019.

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