Is the SCO a missed opportunity for Pakistan?

Despite its strategic location, Pakistan risks isolation as regional trade hubs emerge around it

ISLAMABAD:

The meeting of the Shanghai Cooperation Organisation (SCO) economic and trade ministers in Islamabad on September 11, 2024, ahead of the 25th Council of Heads of State Summit in October 2024, marks an important moment in the organisation's evolution.

Founded in 2001 to promote cooperation and peace among member states, the SCO initially included China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan.

In 2017, Pakistan and India joined under the condition that bilateral conflicts remain outside the SCO framework.

With the recent inclusion of Iran and Belarus, the organisation's membership has grown to 10, along with two observer states and 14 dialogue partners, further expanding its scope and influence in regional connectivity and trade.

Being a relatively young organisation with internal disputes among its members, the SCO has not yet garnered the attention it deserves, even though it is the world's largest regional organisation in terms of both geography and population.

The SCO spans 80% of Eurasia's landmass and represents more than three billion people—about 40% of the global population. In 2023, its combined GDP stood at $24.2 trillion, or roughly one-quarter of the world's total GDP, with vast reserves of oil (20%) and gas (44%).

Originally focused on promoting regional security and combating terrorism, the SCO has broadened its scope to include fostering trade connectivity among its members.

One of the earliest initiatives is energy cooperation, as the organisation includes major energy producers such as Russia, Iran, Kazakhstan, and Uzbekistan, alongside major consumers like China, India, and Pakistan.

Building on China's Belt and Road Initiative (BRI), tremendous advancements have been made in building railway networks. So far, over 350 cities across several Asian and European countries, spanning more than 11,000 kilometres, have been connected through modern fast railways.

The most significant connectivity project would have been the 3,000 km long rail link between Kashgar in China and Gwadar in Pakistan.

Unfortunately, neither work on this nor the much-limited upgrading of the Karachi/Gwadar to Peshawar Main Line-1 (ML-1) railway has made much headway beyond feasibility studies.

Another notable connectivity link being operationalised after a long delay is the International North-South Transport Corridor (INSTC), a 7,200-kilometer-long multi-mode road, rail, and sea network connecting Russia with India via Iran.

This initiative has now expanded to include eleven new members, including the Central Asian countries but excluding Pakistan. Despite US sanctions, Iran is making every effort to become a connectivity hub. Recently, it also opened a new trade route linking Turkey and the United Arab Emirates, through which large quantities of goods are transported, facilitated by a single set of $30 transit documents issued by the International Road Transport Organisation.

Due to its strategic location, Pakistan could have been a key hub for these communication links. Positioned at the intersection of South Asia, Central Asia, and the Middle East, it shares borders with major SCO nations like China, India, and Iran.

Its three all-weather ports offer the shortest sea trade routes for SCO countries. However, inward-looking policies and persistent security concerns have kept Pakistan on the sidelines.

At the conclusion of the Ministerial Conference, the Commerce Ministers emphasised the need to counter protectionist trade measures, promote innovation and cooperation in digital technologies, and strengthen trade ties within the SCO region.

They also called for strengthening the WTO-based non-discriminatory multilateral trading system.

While it is clear that the reference to countering protectionism and strengthening the WTO was directed at the United States, which continues to levy additional tariffs on China without regard to WTO rules, some of the SCO members should also review their trade policies in light of this declaration. India and Pakistan, for instance, who are asking others to adhere to the principle of non-discrimination, are among the very few in the world who are not extending Most Favoured Nation (MFN) status to each other.

Pakistan must recognise how neighbouring countries are positioning themselves as hubs for transit trade and energy connectivity.

Despite its prime geographical location, Pakistan remains isolated by not offering East-West transit routes for goods or energy pipelines.

It is also failing to capitalise on the vast road networks built under the CPEC framework to improve North-South linkages. Pakistan needs to embrace regional integration and leverage its strategic advantages to unlock its true potential.

THE WRITER IS A SENIOR FELLOW AT THE PAKISTAN INSTITUTE FOR DEVELOPMENT ECONOMICS AND PREVIOUSLY SERVED AS PAKISTAN'S AMBASSADOR TO THE WTO AND FAO'S REPRESENTATIVE TO THE UN.