Last month, Turkish President Recep Tayyip Erdogan visited Pakistan to strengthen bilateral cooperation. During the 7th session of the Pakistan-Turkiye High-Level Strategic Cooperation Council, both countries signed 24 agreements and memoranda of understanding (MOUs). Overall, the visit continued existing trends of strengthening cooperation between the two countries, especially in the areas of trade, investment, and defense.
Boosting Trade: Mission Possible?
One major takeaway from Erdogan’s visit was a new goal to boost annual trade to $5 billion – an ambitious leap from the $1.4 billion recorded in 2024.
Trade between Pakistan and Turkiye has been growing, but not at such a dramatic pace. Back in 2018, Pakistan’s exports to Turkiye were around $349 million. By 2023, that number had climbed to $457 million, with Turkiye’s exports adding another $466 million. That sounds like progress – but at an annual growth rate of about 5.5 percent, it’s nowhere near the level needed to hit $5 billion anytime soon.
Pakistan and Turkiye signed a Preferential Trade Agreement (PTA) in 2022. Under this, Turkiye eased tariffs on 261 Pakistani products, including agricultural and industrial goods, while Pakistan did the same for 130 Turkish products. The idea is to make trade smoother and more beneficial for both sides.
Another big piece of the puzzle is Special Economic Zones (SEZs) – designated areas where businesses get incentives like tax breaks and simplified regulations. Turkiye has a strong track record in construction, mining, and industrial development, so there’s hope that Turkish companies will invest in these SEZs and help expand Pakistan’s industrial and infrastructure capacity.
But reaching the $5 billion goal won’t be easy. Pakistan’s exports to Turkiye have always been on the lower side, and concentrated in a few key sectors. In 2023, Pakistan sold about $457 million worth of goods to Turkiye, with textiles accounting for over half that total ($254 million). To grow trade significantly, Pakistan will need to expand into new areas. Turkiye’s exports to Pakistan are generally both larger in value and more diversified, spanning combustion engines and other machine parts, textile raw materials, chemical products like rubber and plastic, and agricultural goods.
Pakistani exporters face hurdles like high tariffs (8 percent on average on raw materials and 12 percent on high-value textile products in 2022, escalating to 166.7 percent for textile goods in 2023) and strict regulations in Turkiye. For example, Pakistani denim products have faced anti-dumping duties in the past, which made them less competitive in the Turkish market.
Since the 1950s, Pakistan and Türkiye have entered into numerous agreements, including a 1965 Trade Agreement, the 1976 Economic and Technical Cooperation Agreement (which led to the establishment of the Turkiye-Pakistan Joint Economic Commission), the 1988 Double Taxation Prevention Agreement, and the 1997 Mutual Investment Promotion and Protection Agreement. However, while these agreements showcased strong political will to improve economic ties, their implementation lagged due to factors like bureaucratic inertia, lack of follow-through, and shifting economic priorities.
The recent signing of 24 agreements between Pakistan and Türkiye marks a renewed commitment to deepening ties. The activation of the High-Level Strategic Cooperation Council (HLSCC) to oversee the agreements, along with new collaborations in defense, energy, and technology, could strengthen both economies over time.
The Potential for Turkish Investment: Defense Is Key
Turkish investment could benefit several sectors in Pakistan, including key sectors such as construction and infrastructure, energy, manufacturing, and the automotive industry. Turkiye is a powerhouse in these areas and its companies could help build up Pakistan’s SEZs, improving industrial capacity and connectivity.
With Turkiye’s expertise in renewable energy and power generation, joint projects could help Pakistan tackle its long-standing energy crisis. Similarly, Turkiye and Pakistan can set up assembly plants and joint ventures in this sector could bring tech advancements and job opportunities.
The two countries have also been strengthening their defense and military collaboration, aiming to enhance strategic ties and bolster Pakistan’s defense capabilities. According to Trading Economics, in 2023, Turkiye exported approximately $20.95 million worth of arms and ammunition to Pakistan. This figure reflects a broader trend, with Turkiye’s arms exports increasing by 69 percent between 2018 and 2022, raising its share of global arms exports from 0.5 percent to 1.1 percent, as per a report by Stockholm International Peace Research Institute (SIPRI).
This partnership also encompasses joint military production, which could make significant contributions to Pakistan’s military modernization, particularly in the naval and aerospace sectors. One notable example is the establishment of a joint factory to produce the KAAN fighter jet, formerly known as the TF-X. The two countries have also discussed potential acquisitions of platforms like the T129 ATAK helicopters, though some deals have faced challenges due to external factors.
Turkiye has also played a pivotal role in modernizing Pakistan’s naval forces. A significant project involves the construction of four Babur-class corvettes for the Pakistan Navy, based on Turkiye’s MILGEM design. These advanced warships are being built collaboratively, with two under construction in Turkiye and two in Pakistan, enhancing Pakistan’s maritime defense capabilities.
Additionally, Turkiye has assisted in upgrading Pakistan’s submarine fleet. The Turkish defense company STM undertook the modernization of Pakistan’s Agosta 90B-class submarines, integrating modern systems to extend their operational life and effectiveness.
Pakistan’s defense strategy involves maintaining diverse partnerships to meet its security needs. While China remains a primary defense partner, supplying a significant portion of Pakistan’s military equipment, collaborations with Turkiye offer an avenue for diversification.
The Future Impact
The recent agreements between Pakistan and Turkiye have the potential to reshape Pakistan’s geopolitical landscape, influencing its relationships with Gulf nations, China, the West, and neighboring India.
This collaboration is not only bilateral but also extends to regional dynamics. Turkiye’s efforts to mend and enhance relations with Gulf countries, particularly through initiatives like the proposed Free Trade Agreement with the Gulf Cooperation Council (GCC), create potential for Pakistan to benefit from a trilateral relationship.
Turkiye also has active engagement in infrastructure projects through its Middle Corridor Initiative, which complements China’s Belt and Road Initiative (BRI). This synergy offers Pakistan an opportunity to serve as a pivotal junction connecting East and West.
Additionally, Turkiye’s strategic position as a bridge between Asia and Europe, coupled with its NATO membership, provides Pakistan with a conduit to engage more effectively with Western nations.
However, Turkiye’s strong support for Pakistan on issues like Kashmir has often strained its ties with India. Erdogan’s criticism of India’s Kashmir policies has led to diplomatic tensions. So as Pakistan and Turkiye deepen their defense and strategic ties, India may see this as a challenge to its regional influence, which could potentially lead to more friction and shifts in its foreign policy.