The week in focus

Wave of growing regional cooperation and integration sweeping through the world has left a positive impact on Pakistan

The wave of growing regional cooperation and integration sweeping through the world has left its positive impact on Pakistan as well, with the country increasingly focusing on stepping up trade and economic relations with regional giants – India, Iran and China.

Over the past many years, countries around the world, spurred by prospects of economic prosperity and improvement in living standards of their people, have turned from cut-throat competition in their regions to cooperation and reduction in trade barriers, including taxes and duties, to take advantage of each other’s specialisation in specific fields.

Shining examples in this regard are the Asia Pacific Economic Cooperation (Apec) forum and the Association of Southeast Asian Nations (Asean). Of course, the European Union is also a major bloc, but it has been in turmoil in recent years in the wake of debt problems in Greece, Ireland, Portugal and Italy.

Encouraged by expected fruits of economic cooperation, India and Pakistan have set aside their political and historical differences and are working on deepening economic ties in an attempt to reduce the ranks of their poor. Recently, they held economic dialogue and another round is expected in November with focus on opening markets for unrestricted trade between the two sides.

In recent months, state-run Trade Development Authority has also talked much about boosting trade and economic relations with China, the fastest growing economy of the world. To implement the plan, agreements worth billions of dollars have been signed for investment in diverse fields in Pakistan, particularly the energy sector.

More surprisingly, Iran has bolstered efforts to strengthen its relations with the region and has offered its vast energy resources to fuel Pakistan’s faltering economy. Already, Pakistan and Iran have agreed on gas supply and Tehran has almost completed work on its part of the pipeline, which will bring 750 million cubic feet of gas per day to Pakistan.

In the latest offer, Iran has expressed interest in supplying 10,000 megawatts of electricity to energy-deficient Pakistan, which if implemented will solve most of Pakistan’s energy-related problems. Tehran has also floated a proposal for building an oil refinery.

“Iran is trying to improve relations with regional countries and is also among the first countries which offered assistance following floods in Sindh this summer,” said Khurram Schehzad, Head of Research InvestCap research house.

Tehran has provided $80 million for building houses for flood victims of Sindh. Last year too, it gave $100 million for rehabilitation activities after flood devastation.

However, Schehzad said the proposal of power supply would take time to materialise and could face hurdles because of strained relations between US and Iran as Washington tried to block every big economic deal Tehran pursued.

“We don’t need to go too far as economic and trade opportunities are available next door. If regional trade flourishes, our economy will also get a boost,” he said.

Iran is rich in oil and gas resources which can eliminate Pakistan’s energy deficit while India and China are big emerging economies where a huge chunk of investment from the troubled developed economies is coming. “World investment is flowing into India and China, then why not Pakistan which offers lucrative opportunities,” he asked rhetorically.

According to Schehzad, Pakistan should shift its focus from aid and assistance to strengthening economic ties with regional countries by addressing weaknesses in its system.

On the other side, talks are ongoing on building a Turkmenistan, Afghanistan, Pakistan and India (TAPI) gas pipeline. Going a step forward, Pakistan and Turkmenistan have agreed on the price of gas at 74 per cent of the crude price.

(the writer is incharge Business desk for the Express tribune and can be contacted at [e-mail])

Published in The Express Tribune, October 31^st,  2011.