Azerbaijan, Pakistan strengthen economic ties with preferential trade Exploring new investment opportunities

Building on years of political cooperation and defence ties, the partnership between Baku and Islamabad has gained significant momentum in recent years, especially in trade and economic relations. Noteworthy progress has been made in energy and tourism, and in July of this year, Azerbaijan and the Islamic Republic of Pakistan (IRP) signed agreements on preferential trade and transit corridors. With this solid foundation, the two sister nations aim to strengthen their investment cooperation and promote joint projects in the non-oil sector.

According to recent reports, Pakistan’s Special Investment Facilitation Council (SIFC) will appoint a coordinator to advance joint business initiatives with Azerbaijan and strengthen their trade partnership.

"We need to convert our mutual relations into business and bilateral trade for which positive progress is being made from both sides," said Pakistan's Minister of Privatization, Investments, and Communications, Abdul Aleem Khan, during a meeting with the Azerbaijani Ambassador to Pakistan, Khazar Farhadov.

The minister invited companies from Azerbaijan to invest in Pakistan and launch business ventures, highlighting that, under current circumstances, foreign investments could be structured through government-to-government (G2G) and business-to-business (B2B) arrangements.

According to the minister, detailed discussions took place regarding investment opportunities in Pakistan's infrastructure sector, including the construction of the M6 and M9 highways connecting Karachi to Sukkur and Sukkur to Hyderabad. He emphasized that Pakistan has enormous potential across various sectors, making it highly attractive to foreign investors.

To further enhance the investment component of Azerbaijan-Pakistan business ties, a coordinator will be appointed by the Special Investment Facilitation Council (SIFC) to promote joint projects with Azerbaijan and strengthen trade relations. In turn, Ambassador Khazar Farhadov noted that Azerbaijan supports this initiative and is ready to expand bilateral cooperation in investment opportunities and the implementation of joint projects.

Efforts in this area were significantly accelerated during the state visit of Azerbaijan’s President Ilham Aliyev to Pakistan in July 2024. To boost trade and cargo transportation between Azerbaijan and Pakistan, intergovernmental agreements on preferential trade (PTA) and transit trade (TTA) were signed. During the visit, various interdepartmental and intergovernmental memoranda of cooperation were also established, covering areas such as the privatization of state assets, mineral resources and geology, information and communication technologies, tourism, air transport, and the development of small and medium-sized businesses. As part of these memoranda, preliminary agreements were made to invest $2 billion in the first phase of mutually beneficial Azerbaijan-Pakistan projects.

Moreover, the prospects for expanding Azerbaijan-Pakistan business cooperation were recently discussed during the events of the COP29 conference in Baku, under the UN Framework Convention on Climate Change. On November 13, Azerbaijan’s President Ilham Aliyev met with Pakistan’s Prime Minister Muhammad Shehbaz Sharif, who had arrived in Azerbaijan to participate in COP29. During the meeting, the importance of the agreements signed during President Aliyev’s July visit to Pakistan was highlighted. The discussion also covered cooperation between the two countries in investment, trade and economics, infrastructure, and other areas. Additionally, the significance of the trilateral Azerbaijan-Türkiye-Pakistan cooperation for advancing the business agenda was emphasized.

A detailed discussion on the prospects of expanding the investment component and establishing joint ventures (JVs) between the two countries will take place during the upcoming meeting of the Azerbaijan-Pakistan Intergovernmental Commission (IPC), scheduled for December 24–25 in Islamabad. A wide range of business agenda items accumulated over the past three years, since the last IPC meeting held on December 2, 2021, in Baku, will be addressed.

According to Pakistani media, business circles in Pakistan aim to strengthen cooperation with Azerbaijan and Central Asian countries through coordinated efforts in privatization, investment, and communications. Azerbaijani corporate entities have shown interest in investing in projects based on the G2G model and participating in the privatization of Pakistan’s state-owned enterprises.

This year, as part of various events and business forums, Azerbaijan’s Ministry of Economy and other relevant agencies have provided Pakistani entrepreneurs with detailed information about fiscal incentives and other favourable opportunities available in the liberated territories and industrial parks of Azerbaijan. Pakistani businesses have been invited to invest in agriculture, light industry, and tourism.

Currently, approximately 3,700 Pakistani companies are registered in Azerbaijan, operating in industries such as manufacturing, agriculture, construction, trade, transport, and services. Several Pakistani contracting companies have already submitted applications to participate in reconstruction and restoration efforts in the Karabakh region. Furthermore, the investment portfolios of several Pakistani companies include projects aimed at localizing light industry enterprises in Azerbaijan, particularly in textiles and apparel, as well as pharmaceuticals, with plans to bring jointly produced goods to the markets of neighbouring countries.

The two friendly nations also plan to promote cooperation in the field of high technology. In particular, since last year, Azerbaijan has been advancing a joint project with Pakistan’s Commission on Science and Technology for Sustainable Development in the South (COMSATS), aimed at establishing a training centre in Azerbaijan to prepare professional IT specialists.

Finally, with the new opportunities in the commercial sector provided by the signing of the preferential trade agreement, Pakistani businesses are expanding their supplies to Azerbaijan, including cotton fabrics and clothing, synthetic dyes, polyvinyl chloride (PVC), tyres, pharmaceuticals, tropical fruits, rice, and more. Azerbaijani manufacturers and suppliers are equally interested in the opportunities offered by the PTA agreement. According to preliminary estimates, there is a demand in the sizable Pakistani market for food products, nitrogen fertilizers, polymers, methanol, and other petrochemical products from Azerbaijan.

In the future, Azerbaijan plans to establish exports of rolled products and other non-ferrous metallurgy goods, measuring instruments, energy equipment, optical and power cables, certain construction materials, and other products manufactured in Azerbaijan's industrial clusters.