By S.M. Inam
Pakistan and Indonesia’s decision to accelerate efforts to upgrade their preferential trade agreement into a comprehensive economic partnership by 2027 is more than a procedural adjustment. It signals a deliberate reordering of priorities in Islamabad, where economic statecraft is increasingly being positioned at the center of foreign policy. The meeting between Prime Minister Shehbaz Sharif and Indonesia’s investment minister, Rosan Roeslani, accompanied by a senior delegation, was framed in the familiar language of brotherhood and shared history. Yet beneath the rhetoric lay a sharper emphasis: political affinity must now translate into measurable economic outcomes. For decades, Pakistan’s engagement with fellow Muslim-majority nations has leaned heavily on symbolism and solidarity.
Joint communiqués have often highlighted cultural ties, shared values and historical goodwill. What appears to be changing is the clarity with which those affinities are being repurposed as instruments of growth. The shift from a preferential trade agreement to a comprehensive economic partnership implies a structural transformation. Tariff reductions alone will no longer suffice; the ambition now encompasses joint ventures, technology transfer, cooperation between sovereign wealth funds and deeper industrial integration. Such a recalibration is not merely aspirational. Indonesia, Southeast Asia’s largest economy, and Pakistan, South Asia’s second most populous country, both preside over expanding consumer markets and youthful demographics. Their complementarities are evident. Indonesia’s strength in palm oil production, for example, aligns with Pakistan’s import needs.
Pakistan’s textile base, pharmaceutical capacity and halal food industry offer areas where cross-border investment and supply chain integration could generate long-term dividends. A comprehensive framework would, in theory, reduce non-tariff barriers, streamline customs procedures and create institutional mechanisms to resolve disputes — the less visible but more decisive elements of trade architecture. The emphasis on investment is equally significant. For Pakistan, which has struggled to maintain consistent foreign direct investment inflows, partnerships that extend beyond trade balances into capital formation are critical. Sovereign wealth fund cooperation, if structured transparently, could help finance infrastructure, renewable energy projects and industrial zones. For Indonesia, access to a large and strategically located market provides both commercial opportunity and geopolitical diversification.
A similar logic is visible in Pakistan’s outreach to Kuwait. The prime minister’s call to convert strong political ties into investment and trade partnerships reflects a broader strategic pivot. Diplomacy is being recast as an instrument for attracting capital, diversifying financing sources and modernizing economic institutions. The licensing of a Kuwaiti-linked digital bank was presented as more than a regulatory formality; it was framed as evidence that political goodwill can be channeled into concrete financial infrastructure. If governed prudently, such ventures could deepen Pakistan’s financial sector, expand digital inclusion and offer Gulf investors structured entry into a sizeable emerging market. Engagement with Cambodia and the expansion of defence-industrial cooperation with Saudi Arabia further illustrate this diversification strategy.
Southeast Asia’s rising economies present Pakistan with an opportunity to widen export destinations and reduce overreliance on traditional Western markets. Defence collaboration, particularly in advanced technologies and co-production, serves both strategic and commercial ends. It positions Pakistan not merely as a security partner but as a participant in high-value industrial ecosystems. In an era when supply chains are being recalibrated and geopolitical alignments reassessed, middle powers that can offer both market access and technical capability may find themselves with enhanced bargaining power. Yet ambition, however well articulated, must contend with structural realities. Investors are guided less by declarations of intent than by assessments of risk. Predictability in taxation, clarity in regulation and efficiency in dispute resolution remain decisive factors.
Pakistan’s record in these areas has been uneven. Tax regimes have shifted frequently; bureaucratic procedures can be opaque; judicial processes are often protracted. Without sustained reform, the promise of comprehensive partnerships risks being diluted by operational friction. Economic diplomacy must therefore be anchored in domestic coherence. Political consensus on core economic objectives would reassure partners that agreements are durable rather than contingent on electoral cycles. Regulatory reform, rationalization of tariffs, digitization of customs systems and credible enforcement of contracts are not peripheral issues; they are foundational to any meaningful upgrade in economic engagement. The credibility of international commitments ultimately rests on internal governance. The broader geopolitical environment adds complexity.
Trade blocs are evolving, energy routes are being reconfigured and strategic competition among major powers is reshaping investment flows. For countries such as Pakistan, agility is essential. Diversifying partnerships across Southeast Asia and the Gulf reduces vulnerability to shocks emanating from any single corridor. It also aligns with the logic of economic resilience: multiple channels of trade and finance provide insulation against volatility. Pakistan’s strategic geography, bridging South Asia, Central Asia and the Middle East, has long been invoked as an asset.
(The writer is a former government officer and a senior analyst on national and international affairs, can be reached at inam@metro-morning.com)
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