Azerbaijan, Pakistan boost ties in various sectors – OPINION

Editor's note: Mehmood Ul Hassan Khan, an Executive director of the Center for South Asia and International Studies in Islamabad, Pakistan.

Economic ties between Pakistan and Azerbaijan have been growing, marked by a trend towards deeper socioeconomic integration. Azerbaijan, positioned at the juncture of Asia and Europe, possesses significant natural reserves, which contribute to its role in regional trade and transportation networks. The strategic importance and resource wealth of Azerbaijan provide substantial opportunities for Pakistani business ventures, especially in the Karabakh region post-liberation.

The central goal for both countries is to diversify product lines and collaborative ventures to enhance bilateral trade. Economic integration efforts are designed to be robust and sustainable, with leadership from both nations playing essential roles in this strategic partnership. These efforts focus on fostering an environment conducive to industrial modernization, digital transformation, and the adoption of green technologies.

The collaborative framework encompasses economic diplomacy and development, aimed at boosting governmental, business, and interpersonal relationships. This is expected to diversify economic engagement across a variety of sectors such as investment, business, regional connectivity, and ICT, which, in turn, could amplify bilateral trade volumes and integration.

High-level bilateral discussions have supported extended cooperation in various sectors, including trade, defence, energy, tourism, and technology. Defence collaboration is particularly set to expand, encompassing joint military exercises, production endeavours, and advanced weaponry development.

Both countries have also pledged to jointly tackle global climate challenges, an initiative timed with the holding of COP29 in Baku. This cooperation extends to promoting sustainable practices and technologies such as solar and wind energy, lithium battery production, and electric vehicle initiatives.

Azerbaijan's ambassador to Pakistan has emphasized the collaborative potential of COP29 in driving significant environmental outcomes, supported by contributions from various international stakeholders. Improved air connectivity, facilitated by direct flights launched by AZAL and PIA, is expected to boost economic and cultural exchanges, evidenced by significant travel between the two countries and the increasing number of Pakistani students in Azerbaijan.

Economic strategies may benefit from adopting aspects of the Azerbaijan-Turkey economic model, focusing on market exploration and reciprocal investment. Preferential and transit trade agreements, along with a focus on tourism, may enhance mutual benefits.

The last two years have seen a substantial increase in the trade turnover, aided by initiatives like SOCAR Trading’s engagement and the temporary removal of customs duties on Pakistani rice imports, highlighting the potential for further economic growth.

The recent intergovernmental agreement on energy cooperation between SOCAR Trading and Pakistani entities marks a continuation of this dynamic and evolving economic relationship.

On July 24, 2023, SOCAR Trading from Azerbaijan and Pakistan LNG Limited signed the "Framework Agreement on the Purchase and Sale of LNG Cargoes" in Lahore, which has systematized and strengthened energy cooperation between the two countries.

Following the agreement, two LNG shipments were delivered to Karachi's sea port in December 2023 and February 2024. These deliveries, valued at over $100 million, represent a significant increase in trade, with a more than threefold increase from the previous year and a ninefold increase over the past two years.

This partnership has facilitated new cooperation opportunities and emphasized the importance of maintaining reliable and sustainable LNG supplies.

On November 24, 2023, Pakistan's Economic Coordination Committee approved the import of 220,000 tons of urea from Azerbaijan, valued at $85 million, on a government-to-government basis. This decision has addressed some agricultural concerns in Pakistan.

Azerbaijan offers a conducive investment climate, demonstrated by incentives in its 6 industrial parks, 5 industrial districts, and 51 agricultural parks. These include VAT, customs duties, and land tax exemptions for the import of machinery and technology, with additional tax incentives for holders of investment promotion documents.

For future growth, it is vital for Pakistan's private sector to broaden its investment into Azerbaijan’s diverse economic sectors such as infrastructure, renewable energy, digitalization, e-commerce, and advanced technologies, including AI and quantum computing. There are also opportunities in marble and cement production, pharmaceuticals, horticulture, fishing, public health, and financial sectors.

The Azerbaijan-Pakistan Technology Forum in Baku has reinforced ties between IT companies from both countries. The event, which featured 35 Pakistani companies specializing in AI, blockchains, and cloud technology, indicates strong potential for future technological collaboration.

There is considerable opportunity for Pakistani IT companies to invest in Azerbaijan's liberated territories, which are primed for the development of smart cities and villages.

Enhancing bilateral tourism is also critical. Cooperation between tourism bodies, cultural ministries, and other related organizations from both countries is essential. The corporate sectors of major Pakistani cities, along with educational and cultural institutions, are encouraged to engage actively. The introduction of the Nomad visa is expected to boost tourism exchanges between the two nations.

Over the past three years, the trade turnover between the two countries has more than doubled. It is essential to further enhance this area to unlock the full potential of their cooperation. According to data from the State Customs Committee of Azerbaijan, the trade turnover between Azerbaijan and Pakistan in 2021 reached $11.73 million. In 2020, this figure was $13.28 million, in 2019 it was $14.79 million, and in 2018 it amounted to $11.17 million.

In conclusion, the existing trade and economic relationships between Azerbaijan and Pakistan hold great potential for expansion and deepening. Both countries stand to gain from enhancing cooperation, executing joint projects, and tapping into the considerable untapped potential available to them. A strategic partnership, bolstered by strengthened economic links, can yield mutual benefits and foster the sustainable development of both nations' economies.


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