KARACHI, Pakistan – Turkey and Pakistan agreed this week to undertake a US$20 billion project to upgrade a railway link from Islamabad to Istanbul, basically to transport cargo more efficiently between the two countries and ultimately on to Europe.

During a meeting in Istanbul, visiting President Asif Ali Zardari of Pakistan and his Turkish counterpart, Abdullah Gul, discussed the upgrade of the rail route. Three Turkish companies have shown interest in the five-year project that envisages cutting travel time between Islamabad and Istanbul, via Tehran, from the current 11 days or more to three to four days.

The move follows an agreement in November to increase the level of bilateral trade between the two countries to $2 billion from the existing $741 million in a couple of years. Analysts believe that the 6,566 kilometer rail project from Islamabad to Istanbul, with 1,990km of track in Pakistan, 2,570km in Iran and 2,006km in Turkey, will open new avenues of bilateral cooperation as well as strengthening trade and economic ties.
Zardari was on a four-day visit of Turkey, ending on Wednesday, to attend a trilateral summit with Afghan President Hamid Karzai and the Istanbul summit on Afghanistan, involving Afghanistan and its six immediate neighbors. He also held discussions on bilateral matters with Turkish leaders. Zardari floated the Islamabad-Istanbul cargo train idea last year when an experimental train was run on the route on his initiative on August 14.

“The cargo rail link could provide a speedier option to expand economic ties between the two countries as well as with Iran,” Associated Press of Pakistan reported Zardari as saying. “This rail link will strengthen Pakistan’s economy as well as people-to-people ties not only with brotherly Muslim countries but also onwards to Europe.”

The existing track between the two countries requires considerable improvement if it is to be used for timely cargo services. The August trial trip of a container train service from Islamabad reached Istanbul in two weeks, traveling from Islamabad through the southwestern Pakistani province of Balochistan then on to Iran. Islamabad is also looking to start a passenger train service on the route.

The two sides have worked to negotiate a preferential trading agreement, aimed to increase trade and investments, especially in transport, telecommunications, manufacturing, tourism and other industries. While Pakistan exports rice, leather, textiles and fabric sports goods, and medical equipment, Turkey exports wheat, diesel, lentils, chemicals, transport vehicles, machinery and energy products to Pakistan.

Many Turkish private firms have invested significantly in industrial and construction projects, developing highways, pipelines and canals in Pakistan.

During a two-day visit to Pakistan in October, Turkish Prime Minister Recep Tayyip Erdogan vowed to upgrade his country’s strategic partnership with Pakistan and strengthen economic cooperation. The two nations signed a joint declaration to strengthen relations in trade, investment, agriculture, industry, culture, education and defense and agreed to increase their trade from $741 million a year to $2 billion in a couple of years.

Erdogan, who was accompanied by an 80-member delegation of business executives, termed the present trade volume insignificant and committed the Turkish Cooperation and Development Agency to boost bilateral trade.

In November, the countries agreed to move forward the timeline for signing a preferential trade agreement and abolish the requirement for visas for businessmen traveling between the two countries.

Zardari reportedly impressed on the business community of Turkey not only the importance of enhancing trade relations with Pakistan but also the lucrative investment opportunities in his country.

Islamabad needs foreign investment to bolster its strife-torn economy. Foreign direct investment (FDI) into the country dropped 57%, to US$1.01 billion, in the six months to June compared with a year earlier, according to the central bank. That continued a decline in FDI to $3.72 billion in the fiscal year that ended in June from $5.4 billion 12 months earlier.

Turkey and Pakistan are founding members of the Economic Cooperation Organization (ECO), the only forum with representation of all the countries bordering Afghanistan. Analysts stress the need to make efforts to establish inter-regional oil and gas pipelines as well as power grids from energy-rich to energy-deficient states. Free trade is central to regional economic integration as it can unlock latent energies and transform socio-economic landscapes.

Pakistan has served as a route for international trade for ECO countries. During the Cold War period and after the collapse of the Soviet Union in the early 1990s, this route was disrupted by political instability and the security crises in Afghanistan. The prevailing situation in Afghanistan hinders any revival of economic, trade and cultural relations between the newly independent states in Central Asia and other Asian countries.

The ECO can only become a coherent organization if it creates inter-dependencies and synergies, especially in areas of energy, transportation and trade. Completion of the Gwadar port in Balochistan province in Pakistan will help to revive transit facilities and trade links among the member countries and it offers tremendous prospects for regional trade, as it lies outside traditional areas of conflict. Pakistan has repeatedly offered ECO member countries port and transit facilities at Gwadar to establish trade links with the world that would benefit the entire region. (The members of the ECO are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan.)