Time to Harness the Real Potential
Dr. Ikramul Haq
The progress in bilateral economic ties between Azerbaijan[1] and Pakistan[2] during the last few years, though praiseworthy, can now be accelerated and boosted to harness the real potential of economic cooperation for the mutual benefit of the people of two friendly Muslin countries. For achieving this goal, Pakistan must undertake some urgent measures and make concerted efforts. In this regards, the newly-established Special Investment & Facilitation Council (SIFC[3]) can play a pivotal role. The existence of large areas of cooperation and possibilities of joint ventures in some vital fields between Azerbaijan and Pakistan, representing low-hanging fruits, though known, have yet not been explored in a manner that can bring early and hefty dividends for both the countries.
In 2022, Azerbaijan marked the 30th anniversary of establishment of diplomatic relations with Pakistan. There exists a special political bond between the two nations, transcending their geographical distance. Since independence, the journey of Azerbaijan has been towards opening doors for collaboration with all in a number of sectors and with Pakistan in areas especially related to business and military. In the last 34 years, it held wide ranging discussions with Pakistan at various events exploring to boost multifaceted cooperation, included but not restricted to bilateral trade. The two fraternal nations for more than three decades now enjoy strategic partnership relations.
In a recent meeting[4] held on 7 February 2024 in Baku, between Azerbaijan’s Minister for Agriculture Majnun Mammadov and Ambassador of Pakistan to Azerbaijan Bilal Hayee, both sides emphasized the importance of enhancing agricultural product trade turnover and strengthening collaboration in areas such as animal husbandry, rice farming, and cotton cultivation.
The last high level meeting on economic cooperation between Azerbaijan and Pakistan took place during a two-day visit [15-16 June 2023] of Baku by then Pakistan’s Prime Minister of Pakistan Democratic Movement (PDM), Shehbaz Sharif. After long parleys on areas of mutual interests at a joint Press stakeout at Zugulba Palace, Azerbaijan President Ilham Aliyev and Premier Shehbaz Sharif, told the media of agreeing to introduce flights of Azerbaijan Airlines between Islamabad and Baku, and enhancing number of military exercises, besides exploring avenues of cooperation in the areas of energy, investment and education.
Prime Minister Shehbaz told the media that during the “wonderful” discussion, there was a “total unanimity” of views on various bilateral and multilateral issues as the relationship was built on mutual trust and sincerity of purpose. He thanked the Azerbaijan President for abolishing duties on Pakistani rice to facilitate export of the commodity to this friendly country. He said Pakistan welcomed Azerbaijan Airlines to start its operations to Islamabad and invited the country’s aviation minister to Pakistan to work out Baku-Karachi flights with a view to promoting bilateral tourism.
Shehbaz Sharif also thanked Azerbaijan for being a staunch supporter of Kashmiris’ rights and highlighted the Indian acts of terror and atrocities in the occupied Valley, including violations of United Nations resolutions. He reiterated that Pakistan was committed to the territorial integrity of Azerbaijan and appreciated the bravery of its forces for fighting for the country’s rights.
Highlighting the immense opportunities that Gwadar Port offered, Shehbaz Sharif said both countries could cooperate to enhance trade. He told the media that the Pakistan-Azerbaijan cooperation in defence was not a secret as it was not meant aggression but for peace within the region. Extending an invitation to President Ilham Aliyev to visit Pakistan, he also looked forward to the Azerbaijan delegations of economic, aviation and energy ministers to discuss at length cooperation in petroleum and solar energy sectors.
In his remarks, President Ilham Aliyev welcomed our prime minister and his delegation and said both countries had agreed to enhance cooperation in the fields of energy, defence and education. He said that Azerbaijan hoped to host more Pakistani students and with Azeri students studying in Pakistani universities, bilateral relations are bound to strengthen. He told the media that the two sides had agreed to increase the number of military exercises as military capability was of utmost importance considering the changing circumstances. He said strong military capacity guaranteed independence and territorial integrity as Azerbaijan also liberated its Karabakh region through its military might, not dialogue. He said Pakistan and Azerbaijan always stood shoulder to shoulder as both peoples shared the same views on a host of issues.
At the conclusion of his visit Shehbaz Sharif aptly observed, “Though our ties are so strong since ages, these do not reflect their intensity through trade and investment, exchange of visits and other important areas of cooperation”.
The above underscores the need to take some concrete steps on the part of SIFC to offer Azerbaijan investments in joint ventures, especially in defence industry related to arms production and its export from Pakistan, as well as all the priority areas it has earmarked for special facilitation. At this juncture, it looks imperative to highlight the role of SIFC so that Azerbaijan government as well as private investors can take advantage of new avenues of investment in key areas.
The SIFC, established in the wake of amendment in the Board of Investment Ordinance, 2001[5] through Board of Investment (Amendment) Act, 2023[6] provides “a central forum to the stakeholders for undertaking cross-sectoral reforms and developing an enabling policy environment, necessary to improve the investment ecosystem”. It elevates awareness of “Pakistan’s untapped potential:, empowering investors with “informed decision-making” to explore investment opportunities aligned with their objectives. The five key areas, SIFC has highlighted at its website are: Agriculture & Livestock; IT & Telecom: Mines & Minerals; Energy (Petroleum & Power) and Industry, Tourism & Privatisation.
Dr. Mehmood Ul Hassan Khan, Executive Director of the Center for South & International Studies (CSAIS), Islamabad, in his article [Azerbaijan-Pakistan emerging economic ties: an expert opinion[7], 26 September 2023] has discussed in details the recent initiatives taken by both the sides to boost bilateral trade and enhance investment and economic cooperation. On the basis of such studies, SIFC and other government departments can establish joint, country specific task force(s) to prepare short, medium and long term action plans. At the moment, Pakistan needs compatible and affordable energy to boost existing exports and induce now value–added innovative export-oriented manufacturing units as well as ICT goods and services[8], for which training of human capital is a prerequisite. Azerbaijan can be a very important partner in all these projects as it is already supplying us LNG at competitive price.
As highlighted in the above article, we need to export more goods under Preferential Trade Agreement with Azerbaijan, 103 items conveyed to Baku on June 14, 2023, seeking market access in Azerbaijan are insufficient. Azerbaijan has already shared a list of 84 items with us. The Ministry of Commerce, like all other government departments, is slow to respond and consult all stakeholders. The draft of Transit Trade Agreement is already shared with Azerbaijan on September 15, 2022 with the consensus of all stakeholders. According to Dr. Mehmood Ul Hassan Khan the agreement encompasses all modes of transportation, including road, railways, air, and sea. It suggests mutual tariff reduction modalities that need to be finalized as soon as possible, aiming at further facilitating trade between Azerbaijan and Pakistan.
It is a good omen that energy cooperation has become the main tool for further strengthening of bilateral relations between the two countries. Azerbaijan has agreed to provide liquefied natural gas (LNG) to Pakistan at discounted price. Baku is going to help Islamabad in the fields of oil and gas, aside from investing in Pakistan’s solar energy industry which would definitely reduce its energy woes, noted by Dr. Mehmood Ul Hassan Khan. It is heartening that Pakistan has expressed a desire to collaborate with Azerbaijan in the field of petrochemicals and solar energy. The LNG shipments from Azerbaijan to Pakistan are now on monthly basis, with concessional rates being applied to each cargo. To facilitate collaboration on energy resources, the Pakistan State Oil (PSO) and State Oil Company of Azerbaijan Republic (SOCAR) are engaged in government-level cooperation. We need to join hands with Azerbaijan to explore oil and gas reserves in Balochistan, Sindh and elsewhere to become self-sufficient.
According to Dr. Mehmood Ul Hassan Khan, “there is huge scope for Pakistan private sector and companies to make investments in Azerbaijan economy including, infrastructure development, smart living, smart cities, green energies, digitalization, e-commerce, artificial intelligence, quantum technologies, bog data, community development, SMEs, Micro-Financing, handicrafts, marble, cement, fertilizer, pharmaceutical, horticulture, fishing, public health, vaccines, disaster management, money markets and last but not least, aviation, tourism, banking, Islamic banking, education (with dual degrees), modern farming, dairy, renewable etc”[9]. It would be better if SIFC promotes joint ventures on reciprocal basis in these and other areas.
Businessmen and investors of both countries have established a joint chamber of commerce and industry—Pakistan Azerbaijan Commerce[10]. This chamber and all other chambers in Azerbaijan and Pakistan need to provide research-based viable feasibilities for mutually-beneficial projects that will facilitate investors to avail opportunities for joint ventures. The need of the hour is mutually-beneficial investments in both countries through joint ventures with the aim to export quality goods and services at competitive prices. It is now the era of cooperation in vital fields such as artificial intelligence, blockchain, cloud technology, and a number of areas of the ICT sector.
IT companies in Pakistan must explore opportunities in the liberated territories of Azerbaijan. Massive reconstruction projects and establishment of smart villages and smart cities are underway in these territories. It is best occasion for the SIFC to show its effectiveness by inviting and guiding big Pakistani IT companies to go for joint ventures with Azerbaijani enterprises to help in these projects. In the coming days, under the auspices of SIFC, Pakistan-Azerbaijan Digital Business Forum[11] must meet to arrange active and continuous interactions between the investors/personnel of IT sector and seek investments in both the countries through joint ventures.
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Dr. Ikramul Haq, Advocate Supreme Court, specialises in constitutional, corporate, media and cyber laws, ML/CFT related laws, IT, intellectual property, arbitration and international tax laws.
He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He served Civil Services of Pakistan from 1984 to 1996. He established Huzaima & Ikram in 1996 and is presently its chief partner. He studied journalism, English literature and law. He is Chief Editor of Taxation. He is country editor and correspondent of International Bureau of Fiscal Documentation (IBFD) and member of International Fiscal Association (IFA). He isVisiting Faculty at Lahore University of Management Sciences (LUMS) and member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE).
He has coauthored with Huzaima Bukhari many books that include Tax Reforms in Pakistan: Historic & Critical Review, Towards Flat, Low-rate, Broad and Predictable Taxes (revised & Expanded Edition, Pakistan: Enigma of Taxation, Towards Flat, Low-rate, Broad and Predictable Taxes (revised/enlarged edition of December 2020), Law & Practice of Income Tax, Law , Practice of Sales Tax, Law and Practice of Corporate Law, Law & Practice of Federal Excise, Law & Practice of Sales Tax on Services, Federal Tax Laws of Pakistan, Provincial Tax Laws, Practical Handbook of Income Tax, Tax Laws of Pakistan, Principles of Income Tax with Glossary andMaster Tax Guide, Income Tax Digest 1886-2011 (with judicial analysis).
The recent publication, coauthored with Abdul Rauf Shakoori and Huzaima Bukhari is Pakistan Tackling FATF: Challenges & Solutions
available at:
https://www.amazon.com/dp/B08RXH8W46 and
He is author of Commentary on Avoidance of Double Taxation Agreements,Pakistan: From Hash to Heroin, its sequelPakistan: Drug-trap to Debt-trapand Practical Handbook of Income Tax. Two books of poetry are Phull Kikkaran De (Punjabi 2023) and Nai Ufaq (Urdu 1979 with Siraj Munir and Shahid Jamal).
He regularly writes columns/article/papers for many Pakistani newspapers and international journals and has contributed over 2500 articles on a variety of issues of public interest, printed in various journals, magazines and newspapers at home and abroad.
[1] In 2022, Azerbaijan celebrated the 30th anniversary of establishing diplomatic relations with the subjects of international relations, both individual states and international organizations.
[2] Pakistan was one of the first countries to recognize the independence of the Republic of Azerbaijan on December 12, 1991. Diplomatic relations between the two countries were established on June 9, 1992. The Pakistani embassy in Baku was established on March 12, 1993, and the Azerbaijani Embassy in Islamabad on August 24, 1997.
[3] “To avoid complex business processes and inordinate delays, SIFC operates as a dynamic ‘Single Window’ for ensuring seamless facilitation of worthy investors”—see further details at its website: https://www.sifc.gov.pk/about (accessed at 12;22 pm on 18 February 2024)
[4] For details, visit official website of Ministry of Foreign Affairs and Ministry of Information & Broadcasting, recent links:
https://mofa.gov.pk/press-releases/3rd-round-of-pakistan-azerbaijan-bilateral-political-consultations-held-in-baku-azerbaijan (accessed at 1:38 pm on 18 February 2024)
[5] https://invest.gov.pk/boi-ordinance
[6] https://na.gov.pk/uploads/documents/64d4dabf64a0c_139.pdf
[7] https://azertag.az/en/xeber/azerbaijan_pakistan_emerging_economic_ties_an_expert_opinion-2763337
[8] Open trade and investment regimes offer new avenues to rapidly upgrade technologies and increase specialisation as frontier technologies, applications and processes diffuse through open markets. This indicator measures information and communications technology (ICT) goods and services as a share of total international trade. It provides an indication of the importance of ICT trade across countries— https://goingdigital.oecd.org/en/indicator/75
[9] https://azertag.az/en/xeber/azerbaijan_pakistan_emerging_economic_ties_an_expert_opinion-2763337
[10] https://www.facebook.com/pakazcham/
[11] https://mofa.gov.pk/pakistan-azerbaijan-joint-digital-business-forum