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A fresh look at Russia, Central Asian states

In the ranking of foreign direct investment (FDI) in Pakistan, Russia and Central Asian States (CAS) do not figure out at all. The first three positions continue to be held by the US, UK and EU. But, the status is changing fast. Fresh investments from these front-ranking countries are nearly stagnant and in fact show a downward trend as some of them are de-investing in Pakistan. Considering that the FDI in Pakistan has shrunk to its lowest level of a pathetic figure of around US $750 million there is a need for Pakistan to look at other emerging and mature markets.

A fresh look for business and political affiliations with Russia and CAS appears to be a worthy option for Pakistan to work on. The only significant footprint of Russia in Pakistan is the Pakistan Steel Mills which Russia helped set it up in 1970s when the West was reluctant to do so. It was a great project which supported the growing industry of Pakistan and worked well at times when its management was competent and good governance prevailed. Subsequent poor governance and vested interests, abetted by the many governments in power, have failed this once great national asset. The government is now out to privatise it.

The year 2015 witness a significant series of initiatives by Pakistan to take a fresh look at Russia and CAS – which is being well reciprocated by theses countries. In July 2015 PM Nawaz Sharif participated in the 7th BRICS summit in the Russian city of Ufa where he was warmly received by President Putin.

Last week, PM Nawaz Sharif paid a three-day state visit to Belarus as a follow-up to Belarus President Lukashenko’s visit to Pakistan in May 2015. Among other routine talks and understandings on business in energy-defence production-trade and political matters, the high point of the visit of the PM is Belarus’ interest to participate in the infrastructure projects along the China-Pakistan Economic Corridor (CPEC). The present trade volume between the two countries is a mere $60 million.

Then there are other significant developments in this part of the world. The Russian government is reported to have approved a draft agreement with Pakistan on cooperation in the North-South gas pipeline construction. Whereas, Deputy Prime Minister of Turkmenistan is reported to have informed the Prime Minister of Pakistan that the ground-breaking ceremony of TAPI (Turkmenistan, Afghanistan, Pakistan and India) gas pipeline project would be held in December 2015.

Also the Central and South Asian energy project CASA-1000, funded by leading world donors, is shaping up fast into reality. All of these energy projects, emerging out of Russia and CAS, are of significant value to Pakistan to meet its energy needs. Further, after recovering from the trauma of shifting from the state controlled regime of business and political governance to more of a free economy regime, many of the Central Asian States are now coming up as being listed on the global scale as emerging markets.

Mongolia, a country rich in minerals, is growing at a remarkable GDP rate of around 8% with FDI flowing in, as the investors have started to consider this country as a potential market. Many of the Central Asian states and also Azerbaijan have a strong presence, each year, at the World Economic Forum (WEF) at Davos where they project their countries soft image and business potential.

The emergence of BRICS and its affiliated New Development Bank (NDB) starting with a capital of $100 million, the strengthening of Shanghai Cooperation Organisation (SCO) with Pakistan and India joining in the fraternity of Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan and the successful launch of Asian Infrastructure Investment Bank (AIIB) all leads to changing business and political dynamics in our region.

The prime movers of this change are China and Russia who are gelling the countries under their influence as an emerging fraternity of Central and South Asia to pool in their synergies for economic prosperity and political independence. All of this seems to be working well. It is in the best interest of Pakistan to align itself well with this emerging fraternity. Pakistan strategically is best located to position itself in a leading role. The establishment of road and rail link from Gwadar into China and strengthening of Gwadar Port under Economic Corridor has further elevated Pakistan’s value addition in the region.

The important note for Pakistan is that it is about time it moves out of the influence of proxies who up to now have well managed to exert their economic and political influence to dictate Pakistan’s external business and foreign policies. Russia is now eager and appears sincere to improve its relations with Pakistan after decades of cold relations. Under the influence of Russia are most of Central Asian States. Pakistan must now capitalise on this given opportunity well in its best national interest.

Farhat Ali, "A fresh look at Russia, Central Asian states," Business recorder. 2015-08-19.
Keywords: Economics , Economics issues , Political affiliations , Infrastructure projects , Economic Corridor , Energy project , Energy needs , Economy regime , Political independence , Energy defence , National interest , Management , Trade , Pakistan , China , Russia , India , Kazakhstan , Kyrgyzstan , Tajikistan , Uzbekistan , FDI , CAS , CPEC , GDP , WEF