Economy, Business And Markets

Iran, Pakistan Urged to Remove Trade Barriers

Finance Desk
The biggest problem between Iran and Pakistan today is the banking issue and they need to open the banking channel
S.M. Muneer (2nd R), the chief executive of Trade Authority of Pakistan, and Mehdi Jahangiri (C), deputy head of ICCIMA at a meeting on Aug. 23. (Photo: Saeed Ameri)
S.M. Muneer (2nd R), the chief executive of Trade Authority of Pakistan, and Mehdi Jahangiri (C), deputy head of ICCIMA at a meeting on Aug. 23. (Photo: Saeed Ameri)

Pakistan is intent on increasing its trade volume and business cooperation with Iran and to do this, the two countries should work together to remove trade barriers, said the chief executive of Trade Authority of Pakistan on Tuesday.

Speaking on the sidelines of a business meeting at Tehran Chamber of Commerce, Industries, Mines and Agriculture–the country's biggest private-sector assembly–S.M. Muneer told Financial Tribune that Pakistan wants to work in a "big manner" with its "important neighbor".  

"We have brought a high-powered delegation to Iran to increase trade with the country," he said. "We are here for trade …. We are not here for aid."

According to Muneer, the 30-strong delegation representing 25 Pakistani businesses aims to boost trade in the fields of textile, spices, fruit and vegetable, dental products and jewelry.

"This will give a big impetus for increasing trade between the two countries," he said.

The official also emphasized the need for the two countries to strengthen banking relations and ramp up cross-border cooperation to enhance trade.

"Our biggest problem today is the banking issue … There are no more sanctions and we have to open the banking channel between Iran and Pakistan," he said.

"The central banks of the two countries should meet and open the banking channel so the opening of letters of credit can start."

Muneer noted that using third countries like Dubai for conducting transactions is costly and should end.

Last month, Pakistan’s Ministry of Commerce asked its central bank and private banks to come up with a mechanism to resume banking transactions between Pakistan and Iran. Representatives of Pakistani private banks also visited Iran a couple of months ago.

Despite the lifting of sanctions on Iran in January, trade between the two countries is still hampered by a lack of mechanism that would allow normal banking transactions.

The two countries are also studying a proposal to sign a free trade agreement.

Addressing concerns about smuggling damaging Iran-Pakistan trade, Muneer said, "We want formal trade, not smuggling. We want more and more train service ... more and more air transport and more transport by road."

Muneer is scheduled to meet Iran's deputy trade minister and Central Bank of Iran Governor Valiollah Seif on Wednesday.

Iran is working to normalize its banking relations with the world since the removal of sanctions but concerns about remaining US sanctions and the ban on dollar-denominated transactions have prevented many major banks from doing business with the Middle Eastern country.

In his address to the TCCIMA gathering, Muneer called for easing visa issuance rules, suggesting that the two countries sign an agreement extending visa durations for businesspeople to three years from the current 15 days. He also called for scheduling more flights between the two neighbors and reducing import tariffs to ease trade.   

Mehdi Jahangiri, the deputy head of TCCIMA, told Financial Tribune that given the correspondent relations established by Iranian banks with their Pakistani counterparts, banking relations between the two neighbors would soon take off.

"Some of the biggest challenges facing Iran and Pakistan concern trade transit and money transactions, which are now being conducted through UAE. It is one of our serious concerns," he said.

Addressing the same gathering, Jahangiri said the current annual trade between Iran and Pakistan–which stands at $830 million–was meager, considering the proximity of the two nations and their politico-cultural commonalities.   

Referring to the target set during President Hassan Rouhani's visit to Pakistan, Jahangiri said bilateral trade should increase to $5 billion.

The official noted that the governments of both countries are working on plans to develop special economic zones, stressing that TCCIMA "as the strong arm of the private sector" is ready to take steps to facilitate this.

Jahangiri also welcomed Pakistan's move to hold an exclusive exhibition on Iran in February 2017, which will serve as an important avenue for facilitating business-to-business interactions between Iranian and Pakistani merchants.