Scope of Pakistan's exports to SCO countries
The writer is a PhD in Economics from the University of Sussex, UK
The Shanghai Cooperation Organisation (SCO) Head of Government meeting is scheduled in Islamabad on 15-16 October, 2024. SCO was established in 2001 with main objectives to promote cooperation in political affairs, economics and trade, science and technology, cultural and educational spheres as well as in energy, transportation, tourism and environmental protection. The SCO member states include China, Russia, India, Pakistan, Iran, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.
SCO is the world's largest regional organisation, covering around 80% of the area of Eurasia, 32% of world's GDP and 20-25% of world trade. China is the largest trading nation in the SCO. Russia, especially with energy exports, contributes heavily to global trade in terms of raw materials. The other members, especially Central Asian Republics (CARs), contribute less but their natural resources, such as oil, gas, and minerals, add valuable weight to the trade dynamics.
And now the scope of Pakistan's exports to SCO member states. With China, Pakistan's overall trade volume stood at $16 billion in 2023-24. The imports remained at $13.5 billion and exports $2.7 billion, leaving a huge trade deficit of $10.8 billion. This may be because the free trade agreement between China and ASEAN countries lowered 93% of tariff lines to zero in 2010. Thus, Pakistani exporters do not enjoy relative preferences in Chinese markets leading to a decline in the growth of Pakistan's exports in key sectors, particularly textiles and clothing. Thus, there is a significant potential to increase exports to China if preferential tariffs for high-potential products from Pakistan are reduced.
Pakistan's exports to Russia declined to $78 million in 2023-24 from $144.5 million in 2019-20. Studies have shown that there exists an export potential of $2.8 billion regarding Russia mainly driven by textiles, agricultural products, surgical items, chemical & allied products, footwear and plastic products.
Similarly, Pakistan's trade with CARs - Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan - remained limited to $325 million in 2023-24. Imports were worth $41 million and exports $284 million, showing a trade surplus of $243 million in favour of Pakistan. This surplus can be increased further given an export potential of $6 billion per annum in case of CARs.
As for Pakistan exports to all SCO members, the figure stood at $3 billion in 2023-24 as against a potential of more than $15 billion per annum.
The SCO platform can be helpful in promotion of trade as CARs offer vast markets for Pakistani goods and services. Pakistan has a comparative advantage in many areas including agriculture, pharmaceuticals, sports products, cotton and cotton items, sugar, cement - which are direly needed in CARs. Pakistan, on the other hand, needs access to natural resources particularly oil and gas, petroleum products, metals, raw cotton - which are abundantly available in CARs.
Pakistan's energy security could be enhanced by regional connectivity with Central Asian energy resources. Pakistan can exploit initiatives like BRI, closely linked with the SCO for infrastructure development. As Pakistan's trade with CARs has been facing disturbances mainly due to insecurity in Afghanistan, CPEC can further connect Pakistan to regional supply chains of CARs via Tajikistan, boosting trade and logistics.
Since SCO focuses on regional connectivity, including road, rail and port infrastructure, this can help Pakistan become a regional hub for trade and transit, linking Central Asia with South Asia and the Middle East. By participating in SCO's connectivity projects, Pakistan can strengthen trade links with CARs, opening new markets for its goods and services.
To sum up, Pakistan can come out of its debt repayment crisis by realising its exports potential of $15 billion to SCO countries. For the purpose, there is need to reduce preferential tariffs for high-potential products from Pakistan to China. Also, Pakistan needs to facilitate transit trade with Uzbekistan, Kazakhstan and Tajikistan along with rationalisation of tariff to increase exports to CARs. Pakistan should also consider signing a broader free trade agreement with the Russian Federation and CARs.