Pakistan And Turkey: From Friendship To Significant Trade And Investment Partners – OpEd
After having common historical ties, cultural affinity as well as geopolitical alignment between Pakistan and Turkey, the two states have developed a vibrant economic partnership. Since 1947, when diplomatic relationships were established between the countries, they have moved beyond symbolic shows of unity to create a strategic alliance involving increasing trade, defense cooperation and investment between the two sides. Their relationship is at a critical point today, when bilateral trade comes to around 1.3 billion and their plans include rising that figure to 5 billion. Their historical camaraderie is reflected in this trajectory, but they also know pragmatically that there is a certain synergy in terms of infrastructure, technology and regional connectivity.
Although Pakistan and Turkey have modest trade volumes as compared to their respective sizes of economies, there has been slow but definite progress. Textiles, rice, leather goods, and surgical instruments are Pakistan’s exports to Turkey, the latter’s manufacturing and consumption sector; Turkish machinery, chemicals, and defense equipment are in the export category on the other side for Pakistan’s industrial and security needs. It was a watershed in the sense that, in 2022, a Preferential Trade Agreement (PTA) was signed, cutting tariffs on 261 Pakistani and 130 Turkish products. Nevertheless, the reform is indispensable for the bottom line of conceiving a genuinely unified FTA that tears down non-tariff barriers and encourages cross border commerce.
Diversification is equally critical. Textiles are the lynchpin of Pakistan’s export basket, however markets such as IT services, pharmaceuticals and agro processed goods are not yet being explored. Growing e-commerce market in Turkey: The $53 billion e-commerce market by 2025 offers Pakistani tech startups and SMEs to scale digitally. Alongside, woven into BRI and Europe Asia trade flows, both nations have the potential to cut logistics costs to their neck of the woods by respectfully enhancing physical connectivity through Gwadar Port and Turkey’s Trans Caspian middle corridor.
Pakistan’s infrastructure landscape has already been in the clutches of Turkish conglomerates. Public private partnerships are successful as seen with the firm Limak Holding constructing Islamabad Airport and Albayrak Group managing Karachi’s solid waste. Pakistan has earmarked $20 billion in funding for renewable energy to achieve its 2030 Vision, and Turkish knowledge of hydropower (e.g., Nurol Holding), as well as solar technology, could help Pakistan on its way to a sustainable energy future. This is the case of joint ventures in tourism involving restoration of Mughal-era landmarks or Sufi pilgrimage circuits that leverage cultural affinities for economic purposes.
Conversely, Pakistan’s textile sector, contributing 60% of exports, holds untapped potential for backward integration with Turkish apparel giants like LC Waikiki and Mavi. The role Pakistan could play is by supplying high quality cotton and denim, keeping Turkey’s supply chain resilient. Meanwhile, Pakistan has jumped ahead to export 2.6 billion in IT versus plans of Turkey’s digital economy to reach 10 billion. AI, fintech and cybersecurity are some of the collaborative ventures that would make both nations innovation hubs.
Bilateral relations have been cemented around a defense collaboration. The purchase of T-129 ATAK helicopters and MILGEM-class corvettes by Pakistan points toes to rising Turkey as a defense exporter. The development of Akıncı drones through joint ventures represents a move away from buyer and seller to co production. Turkey’s TÜBİTAK Space Agency and Pakistan’s SUPARCO could assist with satellite technology in aerospace to improve regional communication and surveillance.
Another frontier of this problem is in the automotive sector. Turkey is an important vehicle producer in Europe, hence partnerships in electric vehicle (EV) manufacturing can assist Pakistan in seeking experience to manufacture EVs locally so that Pakistan avoids its massive $3 billion annual car import bill. Pakistan can help Turkish firms, like TOGG, to take advantage of Pakistan’s low-cost labor and growing middle class in establishing EV assembly plants, in parallel of global de-carbonization trends.
There is a natural synergy between Islamic finance and collaboration. Lastly, the two can explore partnership opportunities in Sharia-compliant fintech solutions where Turkey’s Kuveyt Türk and Pakistan’s Meezan bank could deliver their services to 1.8 billion Muslims worldwide. SME participation would be bolstered through streamlining of cross border payments through blockchain and direct banking channels which mitigate forex risks and delays in transactions. Turkish backed Special Export Zones are established in Gwadar and Karachi as a favorable destination with tax holidays and eased norms to attract high value industries like pharmaceuticals and automobile engineering that currently employ significant workforce.
In terms of geographical proximity, Pakistan is situated between Turkey and its huge two Asian neighbors: China and India, and is Turkey’s passage to South Asia, while Turkey’s Customs Union with EU provides for Pakistani exporters, duty free access to home for 450 millions of consumers. Harmonizing of trade policies and countering Western economic hegemony can be achieved through collaborative advocacy in the Economic Cooperation Organization (ECO).
Pakistan and Turkey are working on the formation of Pakistan Turkey economic corridor based on mutual trust and strategic foresight for redefining regional trade architectures. However, achievement of this vision necessitates proactivity in terms of deregulation of cross border ventures, incentivization for joint R&D and B2B links. In this context, the partnership between the UK and Australia precisely demonstrates how the old and deep strings continue to shape a new day, as both countries forge ahead as the engines of shared prosperity, as both countries encounter global economic headwinds.
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