Pakistan and Azerbaijan Economic Ties

Ties between Islamabad and Baku accelerated & now demonstrate a rare example of solidarity: Ali Alizada


By Muhammad Asif Noor

In international politics, economic ties and trade relations between any two states are considered to be the litmus test for predicting and analyzing the nature and dynamics of engagement among the countries. In the case of Pakistan and Azerbaijan, both states, though shared common historical past and religious affinity with each other the bilateral trade is standing at US$ 7.3 million per year wherein both states have signed an agreement of cooperation to increase the figure to US$ 500 million over the next five years. Over the past several decades since the beginning of relations, there has remained a strong urge from both sides to improve the economic ties to the next best level. The successive government tried their best from the Pakistani side along with the Azerbaijani side, however, the momentum began to rise after the advent of the 21st century and rise of Azerbaijan as an oil and economic regional giant. In order to boost trade relations, a special working group has been established between the Ministry of Economy of Azerbaijan and the Ministry of Trade of Pakistan on the development of bilateral investment cooperation. Over the years the Pakistani business community has invested $4.2 million in the Azerbaijani economy. If we closely look at the Azerbaijani market, there is huge potential for Pakistani businessmen including joint ventures in various sectors including sports goods, leather industry, pharmaceutical, energy, production of lightweight agriculture equipment and value addition in agriculture products. It is very important to note here that the trade turn over during the January to June 2018 has remained at 5.82 million USD. The trade volume has increased by 25 percent in 2018 and there is an upward trend in the growth in 2019 as well.

Azerbaijan and Pakistan are two brotherly Muslim countries with unique commonalities of historical, religious and political nature. The relation goes back to the time when both nations were part of the Persian Empire. Pakistan recognized the independence of Azerbaijan in 1991 (the second country after Turkey) and the two countries established diplomatic relations in 1992. Pakistan was one of the first countries to open its Embassy in Baku, capital of Azerbaijan. After the establishment of the formal diplomatic relations, there was no look back and the ties grow at a steady pace. Both countries built deeper and closer brotherly bond which is strengthening and growing ever since till this time. Leadership and people of both countries feel closer to each other. Ever since the first visit of the then Prime Minister of Pakistan Nawaz Sharif who visited Azerbaijani capital, Baku in 1995 and a reciprocal visit of Azerbaijan’s late President Heydar Aliyev in April 1996 to Pakistan, both countries have covered lots of ground in political and economic spheres. Both countries have supported each other in every international forum. Pakistan and people of Pakistan can well understand and feel the pain of Azerbaijani people and sufferings of people of Nagorno-Karabakh because we are facing the bloodshed in Kashmir since the time of our inception in 1947. Azerbaijan supports Pakistan’s position on Kashmir issue and Pakistan supports Azerbaijan’s position on Nagorno-Karabakh issue. Pakistan is the only country in the world that has not yet recognized Armenia because of its aggression to the Azerbaijani people. This has also resulted in the successful development of relations between Pakistan and Azerbaijan. They have been established on the ground of friendly and fraternal principles.

Both the states started recorded trade in 1995 by inking an agreement under Economic Cooperation Organization. Joint Ministerial Commission is the only bilateral framework for trade which unfortunately could not exploit the full economic potential by either side. Keeping in view the economic potential of both states, the current trade volume is not promising and both partners sought help from the business community to further strengthen Business Corporation. Both sides can potentially increase the volume of bilateral trade by sharing business expertise and connecting markets. Oil is the major commodity of Azerbaijan while Pakistan is facing an acute shortage of energy resources thus Pakistan constitutes an interacting market in oil and gas sector investment for Azerbaijan. According to an estimate, there are 267 companies with Pakistani capital worth $4.2 million are operating in Azerbaijan while trade turns over between both states reaching $5.82 million in 2018 which is 36 % more than last year figures.

Agriculture exports are one sector which is necessary for Pakistani businessmen to explore in Azeri market and find partners there to continue supplies. Pakistan often exports potato, rice, onion, tomato and garments to Azerbaijan however surgical goods and sports goods are something which can be further explored. It is important to note here that Pakistan is an agriculture-based economy and most of the exports are the products or the services related to this sector. Pakistan is one of the largest producers of Rice in the region and the market share is rising while on the other hand, Pakistan’s Mango is famous across the globe for its taste. These two major crops along with the cotton and several other important agricultural products give strength to our economics. Since both Mangoes and Rice both are being exported to various other Central Asian countries and the other regions. However, few of the companies have started their supply for the goods but more can be done with the cooperation from the governments and Chamber of commerce and industry platforms. This will open up new values and additions apart from not only mangoes and rice. Pakistan can also export other items including potatoes, onions, rice, lentils, cotton, pharmaceuticals, surgical and related products, textiles and others.

Pakistan has a huge potential for sports manufacturing and goods where Azerbaijan is a huge market due to its strong sports consummation and presence of the highest number of games in the country. Azerbaijani people are health cautious and they are having a good track record of participating in all kinds of sports. Hence this is a huge potential for Pakistani sports goods of all kinds to get the market share. Along with this, surgical goods are also in high demand. Pakistani surgical products and goods are known across the world. Another important sector for collaboration and the joint venture is the energy sector. As we all know that Azerbaijan is one of the largest producers of oil and energy-related products while Pakistan one of the largest consumer market for these products. Both states signed an agreement of cooperation wherein Azerbaijan will support Pakistan related to its energy needs. There are also ongoing dialogues between Pakistan and Azerbaijan related to the import of LNG from Azerbaijan.

Another important sector that Pakistani businessmen can explore is the hospitality sector for establishing hotels and restaurants in different regions of Azerbaijan while the same may be done by Azeri businessmen. Since both states share deep-rooted historical and cultural ties with strong religious affinities and close relations, there is a huge room for developing this sector on both sides. The restaurants and hotels can offer the traditional pulao, kabab, tandoori bread, delicious other recipes of Pakistani food can be introduced in Azerbaijan. In Baku, there is famous Multan Karwan Sarai depicting that there is a deep-rooted history behind people who used to travel from as far as Multan to Baku to sell and purchase things. Azeri people love to eat traditional food. There is a large number of tourists in Azerbaijan every year from across the world. The Pakistani hotel industry may be one of the finest in the region and those who would like to invest in the hospitality sector may build various infrastructures in Azerbaijan with joint collaboration. Some of the leading companies that are in the hotel industries or might be interested in the construction of the joint projects are Tabani Group, Hashoo group and Tourism Promotions Services (TPS).

Here while sharing insight, we must not forget the phenomenal efforts that H.E Mr. Dashgin Shikarov, who was Ambassador of Azerbaijan to Pakistan has done as a service to building the relationship between Pakistan and Azerbaijan. As a result of his active interest and well-knitted engagement, there were huge milestones achieved during his presence in the country. Several key high-level visits were been made, parliamentary relations were improved along with the important milestones wherein Pakistan’s Senate passed and declared in 2012 the massacre in Nagorno-Karabakh by the Armenian forces as an act of genocide. It was also during his tenure that several high-level visits were made to highlight the Kashmir cause and issue. Building on that to the Foreign Relations Committee of the National Assembly passed a resolution in which the occupying Armenian forces were asked to leave Azerbaijan’s areas. During his presence in Islamabad, the direct flight was also initiated however due to some reasons that could not last long. There are few of the Pakistani companies having local and global operations that might also be interested in taking this project of initiating the flight or cargo expeditions. There is also currently a private airline from Pakistan expressed to start the direct flights to Baku. This way a huge boost to the tourism industry will be done. For the past two years, eight times more Pakistani tourists visited Azerbaijan.

The growing connectivity and B2B meetings better set the course of future bilateral trade. Pakistan can potentially replace other competitors in Azerbaijani markets. As stated earlier, oil and gas make a huge chunk of the economy of Azerbaijan which is cheap commodities worldwide and its prices are likely to stay stable. Thus, Azerbaijan can help Pakistan to find new areas of revenue generation to feed its economy where Pakistan can play its role. Pakistan is one of the major oil and gas-consuming countries in the world wherein it can call on investments in energy sectors in Pakistan. Due to the same reason, Azerbaijan launched an economic vision ‘Azerbaijan in 2020-Looking to the Future’ which resort to diversify its economic markets and trade avenues. As Azerbaijan seeks interest in agricultural and textile apparels widely produced in Pakistan, this can be a huge potential. While seeking investments in the energy sector by Azerbaijan, Pakistan can potentially invest above mentioned commercial sectors in Azerbaijan. Pakistan can successfully maintain supplies of the goods and services that may be required. This all will depend on how well the opportunities and the business ventures may be finalized in the coming future from both sides. GNP