There has been a significant revival of regionalism in the world. Regional blocs of different kinds have been established. As a result of such agreements, the regional cooperation has increased rapidly. The success of the European Union and ASEAN in promoting regional trade and stimulating economic development has also encouraged other countries to form economic groups. The countries that do not form a regional group would experience a reduction in their trade shares.

Seen in this perspective, in 1964 Turkey, Iran and Pakistan put foundation of “Regional Cooperation for Development (RCD)”. In May 1992, not only the Central Asian States got the membership of ECO, but also Afghanistan was included in ECO. In this way, the members of ECO increased from three to ten as Pakistan, Iran, Turkey, Afghanistan, Azerbaijan, Kazakhstan, Kyrghyzstan, Tajikistan, Turkmenistan and Uzbekistan.

Similarly, Pakistan is a member of SAARC which was established in 1985. The member countries include Pakistan, India, Afghanistan, Sri Lanka, Bhutan Maldives and Nepal.

The countries of the region and the areas, which are now known as Pakistan, used to have trade relations in the past and the caravans carrying goods from Indus to Persia, Central Asia and then, bringing in return consumable goods to this area. So these countries had been trading with each other since centuries.

The available information presents a dismal picture of the current state of intra-regional trade in the region. The member countries of the blocs still rely rather heavily on industrial economies for their exports and imports. The mutual trade in the region has been stagnant over time. The share of intra-regional trade in the world trade of countries of the region remained more or less stagnant around 5.0 percent. The intra-regional trade continues to retain a marginal character in the region. The intraregional trade in percentage terms in ASEAN, East Asia and European Union now stands respectively at, 22, 40 and 65 percent.

Keeping in view the above background of the countries of the region in terms of status of their interrelated low share of trade, there is a need to strike the core issue in their mutual trade. The important and alarming question coming up is that why trade amongst the countries is so low and it could not rise up? It is essential to respond to this key question as it forms the basis of the article. The rest of the article has been developed to respond to this question and the methodology presented has been directed towards this issue and a well devised model has been placed to identify the magnitude of the mutual trade. Simplistically it can be said that there exists untapped/unexplored potentialities in the region, which requires to be harnessed through collaborative plan and action to achieve the target of higher intra-regional trade within the region.

In the Vision 2025 document unveiled by the Government of Pakistan, regional connectivity for trade and transit with the member states of South Asian Association for Regional Cooperation (SAARC), Association of South-East Asian Nations (ASEAN), Economic Cooperation Organization (ECO) and Central Asia Regional Economic Cooperation (CAREC) has been stressed as development priorities.

In this connection the China Pakistan Economic Corridor (CPEC) through investing in infrastructure, energy, trade and communications projects, provides an opportunity to the countries of the region to enhance regional economic integration. The economic corridor will enhance the volume of Pakistan’s trade by addressing the energy shortfall and improving the transport infrastructure. Similarly, the intra-regional trade would increase through its infrastructure connectivity projects linking China, South Asia, Central Asia, West Asia, North Africa and Gulf states.

The gravity model of trade was used to assess the trade potential of SAARC and ECO countries. The gravity equation basically states that trade between two countries increases with their size and decreases with their distance. The result of the model shows that Pakistan’s actual exports to ECO member countries were below the levels predicted by the model in all but one of the cases examined. The exception is found for Pakistan’s exports to Turkey, where the actual level is 12 percent higher than the predicted value. While on the other extreme, in case of Tajikistan the exports are only 3 percent of the predicted value. Among the Central Asian countries, Azerbaijan is the major market for Pakistan’s exports which meets 20 percent of the predicted exports. Iran, being a close neighbor of Pakistan, hardly matches ten percent of the potential exports predicted by the gravity model of trade. In the case of Afghanistan, the country being the second biggest market for Pakistan’s exports after Turkey and having common border with Pakistan broadly matches the predicted value. The country received 97 percent of the exports which the model predicts for.

While in case of SAARC, Pakistan’s actual exports to the member countries were below the levels predicted by the model in case of three countries namely; Bhutan, Nepal and India. Regarding the remaining four member countries; Afghanistan, Bangladesh, Maldives and Siri Lanka the actual exports were much higher than the predicted value. According to the estimated value of the model, in the case of Siri Lanka the actual value of trade was 491 percent higher than the predicted vale. In the case of Maldives, Bangladesh and Afghanistan the country’s exports were 169, 121 and 31 percent higher than the predicted value respectively. While on the other extreme, in case of Bhutan and Nepal the exports were only 15 and 17 percent of the predicted value respectively. In the case of India, the country having common border with Pakistan only matches less than 1% the predicted value. The country received 0.006 percent of the exports which the model predicts for.

The success of CPEC is linked with the peace in Afghanistan. In this connection the role of Afghanistan envisioned by Allama Mohammad Iqbal is still very much relevant in the present circumstances. As Iqbal has stated that:

“Asia is a body built of clay and water and Afghanistan is a heart in that body, if there will be peace in Afghanistan there will be peace in Asia if there will be turmoil in Afghanistan then there will be turmoil in Asia”.

The writer is Professor at the department of Economics at the University of Balochistan Quetta.

The result of the model shows that Pakistan’s actual exports to ECO member countries were below the levels predicted by the model in all but one of the cases examined.