Pakistan became a full member of the Shanghai Cooperation Organisation (SCO) on June 9, 2017. Since joining, Pakistan has reaped significant benefits, particularly in trade and economic cooperation.
Trade data indicates that Pakistan has seen substantial gains from the SCO. The membership has boosted regional trade and investment, enhanced security cooperation, facilitated access to energy and infrastructure projects, and increased Pakistan’s diplomatic influence in Central Asia and beyond. The SCO has provided Pakistan with opportunities for economic diversification and a central role in promoting regional connectivity through initiatives like the China-Pakistan Economic Corridor (CPEC) and the broader Silk Road economic corridors.
Pakistan’s geopolitical standing has also improved, positioning it as a key player in regional cooperation efforts. The SCO platform has enabled Pakistan to shape regional policies and foster closer ties with Central Asia, China, and Russia.
The SCO meeting in Islamabad offered a positive opportunity for Pakistan and India to increase interaction, potentially easing tensions. Trade with SCO member states has grown since 2017, with China being the dominant partner, having a trade volume exceeding $27 billion annually. Pakistan’s trade with Central Asian countries has been on the rise, aiming to enhance its role as a trade and transit hub.
The China-Pakistan Free Trade Agreement (CPFTA) has facilitated trade by reducing tariffs and increasing economic activity. Pakistan’s trade with Russia has also been growing, especially in energy, defense, and trade, with bilateral trade around $1.5 billion in 2022.
However, trade with India remains limited due to geopolitical tensions, significantly dropping since 2019. Political normalization could boost trade, but this is contingent on broader political developments.
Trade with Central Asian countries like Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan has been gradually increasing. Pakistan’s exports mainly include textiles, rice, and agricultural products, while imports focus on oil, gas, and minerals.
The SCO has also initiated the use of local currencies for trade to reduce dependence on global currencies like the US dollar. The Local Currency Payment Mechanism (LCPM) allows member countries to settle transactions in their respective currencies, reducing transaction costs and exposure to exchange rate fluctuations. Some SCO countries have entered into currency swap agreements, and a significant portion of bilateral trade, especially between China and Pakistan, is now conducted in local currencies.
Pakistan’s membership in the SCO has fostered economic growth, enhanced regional connectivity, and strengthened geopolitical ties within the region.
