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Looking towards Iran

To be able to take their mutual trade to $5 billion in five years, Iran and Pakistan should be able to realise the huge trade potential that exists between the two countries

Looking towards Iran

The lifting of international economic sanctions on Iran is no ordinary development for the country. Many countries in the region that could be natural trading partners of Iran were unable to benefit from mutual trade while the sanctions were in place. In case they even tried, they would face the challenge of how to make payments or open letters of credit through banks. There were certain ways to circumvent these sanctions but such measures were temporary and not sustainable.

The situation has changed after the lifting of sanctions. Iran, that remained isolated for long, is now looking forward to doing trade with the rest of the world. Rich in natural resources, such as crude oil and natural gas, it has a lot to offer to its trading partners that can, in return, fulfil its import needs.

Pakistan that shares a long border and historical and cultural ties with Iran is among countries that can increase their trade volume with this country manifold. Though both countries have signed a preferential trade agreement, their mutual trade volume has remained far below expectations, mainly due to sanctions, non-tariff barriers, and smuggling through a porous border.

The recent visit of the Iranian President Hassan Rouhani to Pakistan has led to realisation of the fact that both the countries can take their mutual trade to $5 billion in five years. Analysts believe this target is quite realistic, keeping in view the size of Iranian economy and its proximity to Pakistan.

At the moment, Iran is the second largest economy in the Middle East and North Africa (MENA) region after Saudi Arabia. Though lower than in previous years, the country has a per capita income of $5,315, and its economy has seen a positive growth of 1.46 per cent in 2014. It is expected that the real GDP of Iran could rise by as much as 5.8 per cent and 6.7 per cent in 2016 and 2017, respectively, as oil production reaches the expected target between 3.6 and 4.2 million barrels per day.

According to figures released by Iran, Pakistan is currently 21st in the list of its import partners, with imports from the country amounting to $261 million in 2014. At the same time, with exports of $837 million, Pakistan is the 9th highest export partner of Iran, holding a 1.1 per cent share in Iran’s exports to the world. The figures shared by Pakistan are quite different, which say that in 2014, the overall trade between Pakistan and Iran was $217 million, out of which $53 million were exports from Pakistan.

An important point to note is that substantial discrepancy in official trade figures is seen when comparing Pakistan and Iran’s reported trade figures. This is compounded by the erratic reporting trade figures by Iran, with a number of years in the last ten years, when Iran has not reported its trade figures. Regardless of which figures are correct, there is a general agreement that the existing potential of mutual trade is far from exploited.

The situation has changed after the lifting of sanctions on Iran. The country, that has remained isolated for quite long, is now back into the arena and looking forward to doing trade with the rest of the world. Rich in natural resources, it has a lot to offer to its trading partners.

Historically, major items imported by Pakistan from Iran have been minerals, oils, distillation products, iron and steel, raw hides and skins (other than fur skins) and leather, electrical, electronic equipment, salt, sulphur, plaster, lime and cement, edible fruit, nuts, peel of citrus fruit, melons, plastics and articles thereof and coffee, tea mate and spices.

On the other hand, the items exported from Pakistan have included paper and paperboard, articles of pulp, cereals, meat and edible meat offal, rice, plastics and articles, medical and surgical apparatus, sugars and sugar confectionery, ships, boats and other floating structures, cotton, vegetables, fruit, food preparations, etc.

Mian Arshad, President, Lahore Chamber of Commerce and Industry (LCCI) tells TNS that their delegation recently visited Iran to explore avenues of mutual trade in the post-sanctions scenario. “Immense potential exists in the fields of food, crude oil, textiles, bakery products and even construction.” Representatives of three Pakistani banks accompanied them to explore the potential of opening their branches there and facilitating transactions between trading partners. Meezan Bank is most likely to start operations this month which will be a great breakthrough.

Amir Allahwala, former chairman, Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) tells TNS that a huge potential exists for export of automotive parts from Pakistan to Iran which is the biggest car producer in the Middle East. “Before the economic sanctions were imposed, Iran was the 11th biggest car producer in the world. Pakistani automotive parts manufacturers have excelled over time and there is no reason that they cannot penetrate into the Iranian market.”

The issue of Non-Tariff Barriers (NTBs) is also a matter of concern which some exporters believe can be used to support one exporting country against the other. Muhammad Shafique, Chairman, Rice Exporters Association of Pakistan (REAP) says that Pakistani rice exports are not picking up as exporters are waiting for Good Manufacturing Practices (GMP) certification from Iran.

Shafique says they have requested the ministry of commerce to take up the issue with the Iranian health ministry and get the issue of GMP certification as early as possible. “Once this happens, there are hopes that export volume will fast increase.”

Anis ul Haq, Secretary, All Pakistan Textile Mills Association (APTMA), Punjab, tells TNS that they are eyeing the Iranian market and plan to export cotton products and textile made-ups like bed wear. He says the traditional clothing varieties like linen, lawn, etc, will be welcomed there.

“The proximity of Iran to Pakistan gives a competitive edge to businessmen from both the countries to explore trade potential. Persian, Pashto and English are commonly used and understood languages there,” he adds.

Haq says Iranian foreign officials have ensured them that Pakistani businessmen will get Iranian visas within a week and they would go to any extent to facilitate them. “The establishment of safe land and train routes between the two neighbouring countries is a key to enhanced trade. If efforts can be made to make CPEC route safe, the same can be done in this case,” he adds.

Iranian Consul General in Lahore, Mohammad Hossain Bani Asadi, says they are determined to help out Pakistani businessmen willing to do trade with Iran. “Ours is the only country that has consulates in all the four provinces in Pakistan — something that hints at our commitment to promote healthy mutual relations.”

Asadi clarifies that Iran does not give preferential treatment to India, saying, “the Chahbahar free industrial zone is open for all who want to invest here. Indian investors have come here only for business. Pakistani investors can also establish their presence here and they would welcome them from the core of their heart.”

He says Pakistani rice is of good quality and its volume in the Iranian market can increase considerably if Pakistani exporters focus on this area. “We facilitated a trip of Pakistani businessmen, including rice exporters to Iran. It is quite likely that there is a breakthrough.”

Shahzada Irfan Ahmed

shahzada irfan
The author is a staff reporter and can be reached at [email protected]

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