Peace and economic prosperity by land route connectivity

The strategic location of Pakistan at the junction of South Asia, the Middle East, and Central Asia provides a unique advantage, and this type of advantage is rarely available to a few countries in the world.

Most international organizations and global think tanks classify Pakistan as part of the South Asian group. However, in the recent past, the World Bank has officially reclassified Pakistan from its South Asia regional grouping to the Middle East and North Africa (MENA) region for financial and analytical reporting.

Pakistan is also a member of the Central Asia Regional Economic Cooperation (CAREC) and the Economic Cooperation Organization (ECO), indicating its active participation in multilateral collaboration with Central Asian countries.

The economic history of Central and South Asia is largely associated with the connectivity of trade and natural and human resources among the peoples of Central and South Asian countries. The “Silk Route” and the “Grand Trunk Road” (famously known as the “GT Road” in Pakistan and India) have been providing the major source of this connectivity. The direction of trade and the mobility of human resources in the Central Asian Republics were changed from South Asia to Eastern Europe during the Soviet regime. Now, visible signs of the revival of historical routes are strongly observed in the region.

This background justifies the supremacy and importance of Pakistan in connecting the three regional groups. This supremacy provides access to the Pakistani producers to the world’s largest markets, opportunities to attract foreign investment, and the development of a major hub of global connectivity and transit trade.

To achieve economic prosperity and social well-being through fast-track economic growth and development is a relatively easy task in this country, subject to economic governance and management. This strategic location, large domestic market, large markets in the neighboring regions, fertile land, and rich mineral resources support the planning and development strategies.

Despite these advantages, the country is facing severe economic challenges, including stagnant economic activities, lower GDP growth, a severe debt crisis, devaluation of currency, high interest rates, growing poverty and unemployment, and unpredictable high inflation rates.

To establish attractive and efficient connectivity among the regions is not only important from an economic point of view, but it is also influential for reducing political tension and regional disparities. Two prerequisites to establish efficient connectivity are:

• The construction of compatible infrastructure
• Easing the procedures and regulations for the cross-border movement of goods and services.

So far as construction of the compatible infrastructure is concerned, there are several projects in progress or under active consideration to connect the various countries in Central Asia, the Middle East, and Europe. One of those big projects is the ‘Trans-Asian Railway (TAR)’ project, which was initiated by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP). The China-Pakistan Economic Corridor (CPEC), which is an integral part of the ‘Belt and Road Initiative (BRI)’ of China, is also an important component of regional integration between South Asia, Central Asia, and the Middle East.

The Central Asia Regional Economic Cooperation (CAREC) and the Economic Cooperation Organization (ECO) are also working on several mega projects to connect Central Asia and the Middle East. The Quadrilateral Agreement on Traffic in Transit (QATT), Islamabad-Tehran-Istanbul (ITI) Train Network, Trilateral Transit Trade Agreement (TTTA), Pakistan-Uzbekistan Transit Trade Agreement, Pakistan–Iran–Turkmenistan Commerce Cooperation (PITCC), Central Asia & South Asia (CASA) – 1000 energy corridor, Indus River Trade Corridor, North–South Transnational Corridor (Kazakhstan-Turkmenistan-Iran railway link),

Iran-Pakistan Pipeline, Turkmenistan, Afghanistan, Pakistan and India (TAPI) Pipeline, Trans-Iranian Canal, Europe-East Asia Economic Corridor, Europe-Mediterranean-East Asia Economic Corridor, Russian Federation-Middle East and South Asia Economic Corridor, Russian Federation-East Asia Economic Corridor, East Asia-Middle East and South Asia Economic Corridor, and Europe-Middle East and South Asia Economic Corridor are included in the major projects to connect the economic hubs in these regions.

Some of those are in active progress, and some have been inactive, amended, or closed because of geopolitical reasons. The construction of these corridors and logistic infrastructure is largely financed by international development finance institutions, including the World Bank, Asian Development Bank, and Asian Infrastructure Development Bank.

Several projects for the smoothness of goods and services, and people-to-people easy interaction have been considered or ratified by the participating countries. The ratification of the customs convention on the international transport of goods under cover of TIR Carnets (TIR Convention), the white card scheme to facilitate the drivers to travel across the boarders in the region, simplification of visa process in the participating countries, ECO free trade agreement to enhance the trade among the member countries (ECOTA), visa sticker scheme for the leading businessmen to allow them visa-free access in the participating countries, and the formation of ‘ECO Trade and Development Bank’ and the ‘ECO Insurance Company’ are the steps that are considered important for the enhancement in the relations of participating countries on the pattern of European Union.

However, careful strategies are required in Pakistan to regulate the procedures for adopting these powerful and game-changing policies. These strategies have dual objectives: (1) To facilitate the smoother cross-border movement of goods for the enhancement of trade (including transit trade), tax revenue, inflow of foreign exchange, and foreign investment, and (2) To prevent the illegal trade and ensure the security of domestic assets, resources, land, and people. To streamline the movement of goods, vehicles, and passenger traffic across borders with neighboring countries, the parliament legislated the Pakistan Land Port Authority (PLPA) Act 2025. One of the major purposes of this initiative is to modernize Pakistan’s external border, fostering legitimate trade and improving bilateral and transit trade with Afghanistan and the Central Asian Republics (CARs). Now, the Pakistan Land Port Authority (PLPA) is responsible for developing policies and acts as a coordinating entity for different government agencies involved in the cross-border trade facilitation.

An important aspect of the success and effectiveness of regional connectivity, free trade agreements, and bilateral treaties belongs to political relations, peace, and security conditions in the participating countries. Certainly, the finance and commerce ministries are very concerned with trade enhancement, tax revenue, and foreign exchange earnings. However, the role of the interior and foreign affairs ministries becomes much more important for the success and effectiveness of such bilateral and multilateral relations, while the transportation and communication departments play an important role. For this reason, the establishment of an autonomous authority was a fundamental requirement. This is a normal international practice. Notably, various agreements on regional integration have failed in various parts of the world because of the lack of coordination in the absence of an autonomous authority.

Despite a declining trend in the aggregate exports from Pakistan, it is a notable point that Pakistani firms are more export-oriented than the firms in other countries of the region. According to the latest available statistics, there are more than 8 percent Pakistani firms that export more than 10 percent of their product to the international markets. This ratio is 1 percent in the case of India, and 4 percent in the case of China. This is a strong indicator to believe that Pakistani firms are more export-oriented, and they have the capacity to earn more foreign exchange in the case of the availability of a big market and transit facilities. Certainly, the growth in their exports will be transformed into stock market growth, enhanced investment, the creation of employment opportunities, and other economic indicators.

Financial Indicators of Corporate Sector (2025)

(Percent of GDP, unless mentioned)

At present, Pakistan’s position is not bad in financial competitiveness. The lowest market capitalization as a percentage of GDP reflects that the market is still undervalued and there are bright chances of growth in the capital market, subject to growth in trade and production. This is an obvious indicator of the effect of growth in trade on the capital market. The higher market capitalization as a percentage of GDP in the Indian capital market than the world average may be an indicator of its saturation or bubble element. The weak area of Pakistan’s financial market is the much lower magnitude of the domestic credit, which is a reflection of fiscal imbalances due to inflation and mounting debts.

How much of the benefits of the connectivity and availability of a big market are transferred to the domestic private sector and business entrepreneurs? It largely depends on the size and competitiveness of the business sector. Simultaneous efforts and strategies are required to improve the competitiveness of the private sector. Certainly, fiscal and monetary reforms will be required in synchronization with smooth and liberal connectivity in trade.