Baku, Islamabad on path to logistical breakthrough Review by Caliber.Az

In the last two-three years, Azerbaijan and Pakistan have noticeably intensified bilateral relations, for which, along with strengthening traditional political and defence ties, they have started to develop a legal framework for business cooperation. During a recent visit to Pakistan by a delegation from the Ministry of Digital Development and Transport of Azerbaijan (MDT), new joint initiatives in the transport and logistics sector were outlined, agreements were reached on the implementation of IT projects and the training of IT specialists, and a joint draft of a preferential trade agreement is scheduled for completion in August.

Following the liberation of Azerbaijani lands in the Karabakh region from Armenian occupation, allied relations between Baku and Islamabad have been further strengthened and the two countries have stepped up the expansion of trade and economic co-operation. Last year, there were more positive trends in mutual trade, and trade turnover reached $28.1 million, 1.4 times higher than in the previous year. Good growth dynamics were maintained in the current year as well. However, trade volumes and parameters of investment cooperation between Azerbaijan and Pakistan do not yet correspond to the high level of their interstate relations.

Therefore, Baku and Islamabad are making maximum efforts to overcome inertia and ensure a breakthrough in trade and transport logistics. In mid-June, during the official visit of Pakistani Prime Minister Muhammad Shahbaz Sharif to Azerbaijan, several important agreements were reached on expanding trade, organising supplies of Azerbaijani liquefied natural gas (LNG), outlining the contours of joint initiatives in the "green" energy and petrochemical industries. In parallel, a decision was taken to increase the number of flights, including with the involvement of Azerbaijan Airlines (AZAL), and to significantly expand cooperation in the field of education.

Last week's trip to Islamabad by a representative delegation of the Ministry of Digital Development and Transport of Azerbaijan, headed by Minister Rashad Nabiyev, was a major step towards multiplying bilateral business ties. A month ago, the countries signed a Memorandum of Understanding on cooperation in the field of trade, providing for appropriate measures to deepen trade ties, in particular, the sides have started compiling a list of goods to be included in the list of preferential trade.

In general, work on the fundamental documents of business cooperation is coming to an end. The other day, during a meeting with Pakistan's Federal Minister of Commerce Naveed Qamar, Azerbaijani Minister Nabiyev noted that in August, it is planned to prepare for signing a draft preferential trade agreement (PTA), as well as to conclude a transit trade agreement (TTA) between Baku and Islamabad by October this year.

"During the ministerial meeting in Islamabad, it was noted that the preferential trade agreement will be finalised in the first week of August, while the transit trade agreement is expected to be signed by the end of August or September," Pakistan's Business Recorder wrote. The TTA draft is currently under discussion in Azerbaijan's relevant agencies, and the Pakistani partners suggest setting up a joint high-level working group to prepare the document in time.

All of the above is extremely important, as after the entry into force of the preferential and transit trade agreements, a qualitative turnaround in Azerbaijani-Pakistani business ties can be expected. This is exemplified by the successful experience of the preferential trade agreement with Türkiye, thanks to which mutual trade has almost doubled over the past two years, and Baku and Ankara are confidently moving towards their goal of bringing the trade turnover to the milestone of $15 billion.

Similar trends may emerge in Azerbaijani-Pakistani business ties, especially as the two countries have significant untapped commercial potential. Pakistan's population has already reached 221 million, and there is considerable demand for food, fertilisers, polymers and other petrochemical products in this very capacious market. The first steps in this direction have already been made, in particular, agreements have been concluded on the supply of liquefied natural gas (LNG) from Azerbaijan. In the future, our country may export rolled products and other non-ferrous metallurgy products, instrumentation, energy equipment, optical and power cables, some types of construction materials and other products manufactured in Azerbaijani industrial clusters.

Pakistan is no less interested in establishing supplies of its textiles and food to Azerbaijan (in particular, an agreement on duty-free import of Pakistani rice has already been reached). Over time, our republic may even become an intermediate hub for the transit or re-export of some Pakistani goods (marble, silk, rice, textiles). This is more than a realistic prospect, taking into account customs and trade agreements with the CIS countries, as well as the Azerbaijani-Turkish preferential trade agreement. At the same time, this trend opens up prospects for the creation of joint Azerbaijani-Pakistani enterprises (JVs) in the field of light industry, in particular clothing and textile, as well as in pharmaceuticals, and the introduction of joint products to the markets of neighboring countries.

It is appropriate to note here that the pharmaceutical industry of Pakistan is one of the largest in the world. It consists of 800 companies that produce more than 30,000 names of medicines, and the annual volume of exports of medicines exceeds many hundreds of millions of dollars. The first steps in this direction have already been taken: in January 2023, representatives of the largest Pakistani pharmaceutical company IBL Group discussed in Baku the prospects of attracting investment and know-how to establish production in the Pirallali Industrial Park.

It is not surprising that along with the preferential trade agreement, Azerbaijan and Pakistan have accelerated work on a transit trade agreement. According to the Pakistani media, at a meeting held in Islamabad, the Federal Minister of Communications of Pakistan Maulan Asad Mahmud with Minister Nabiyev, an agreement was reached on the development of a legal framework for agreement on the road transportation of goods.

As the Pakistani Minister noted in this regard, his country is multiplying its land routes to nearby countries by laying an extensive network of important national highways in Balochistan. In this vein, Mahmoud noted the special importance of organizing land and road transit routes between Pakistan and Azerbaijan through Iran, which contributes to the development of trade, industry, tourism, etc. It is noteworthy that the first steps in this direction were taken in October 2021: as part of a pilot project, the Pakistani logistics company National Logistics Cell (NLC) organized a test delivery of goods to Baku by two heavy-duty trucks. It is expected that after the unification of the relevant regulatory framework and the conclusion of a transit agreement, such cargo flights can be put on stream, and this will become a key base for expanding trade turnover on both sides.

Another achievement of the recent talks in Islamabad was plans to strengthen cooperation in the field of high technologies. In particular, our country will promote a joint project with the Pakistan Commission on Science and Technology for Sustainable Development in the South (COMSATS), within the framework of which a training center for training IT specialists is planned to be created in Azerbaijan.