The economic relationship between Pakistan and Bangladesh holds significant potential, rooted in historical ties and shared cultural heritage. Despite occasional challenges, both nations have made concerted efforts to enhance trade cooperation. The historical backdrop of Pakistan-Bangladesh relations shapes their trade dynamics. Both countries were part of undivided British India until 1947, when the Indian subcontinent was partitioned, leading to the creation of Pakistan. In 1971 Bangladesh emerged as an independent nation following a bitter war of liberation. Despite the tumultuous separation, the cultural affinities between the two nations endure.

Trade between Pakistan and Bangladesh has grown steadily, albeit with room for expansion. According to the latest available data, bilateral trade between the two countries stood at approximately $1.5 billion in 2023. While this figure represents a substantial increase compared to previous years, it falls short of the true potential, given both nations’ size and economic prowess.

Several commodities dominate the Pakistan-Bangladesh trade. Textiles, including garments, yarn, and fabrics, constitute a significant portion of bilateral trade. Pakistan is a major cotton yarn and fabric exporter to Bangladesh, supporting its robust textile industry.

On the other hand, Bangladesh exports ready-made garments, ceramics, and pharmaceuticals to Pakistan.

Despite the mutual desire to deepen economic ties, several challenges impede the full realization of Pakistan-Bangladesh trade potential. High tariffs and non-tariff barriers hinder the flow of goods between the two countries, increasing transaction costs and reducing competitiveness. Inadequate transport infrastructure and logistics facilities limit trade efficiency and increase transit times, particularly for landlocked regions. Cumbersome bureaucratic procedures and regulatory complexities pose challenges for businesses seeking to engage in cross-border trade. Historical and geopolitical factors occasionally strain diplomatic relations between Pakistan and Bangladesh, impacting trade cooperation. Limited awareness about market opportunities and trade regulations in each other’s countries restricts business engagement.

Despite the challenges, numerous opportunities exist to foster stronger trade ties between Pakistan and Bangladesh. Simplifying customs procedures, reducing tariffs, and harmonizing regulations can streamline cross-border trade and enhance market access. Investments in transport infrastructure, including road, rail, and port facilities, can improve connectivity and reduce trade costs. Supporting small and medium enterprises (SMEs) through capacity building and market linkages can catalyze trade diversification and inclusive growth. Identifying complementary sectors such as agriculture, pharmaceuticals, and information technology for collaboration can create mutually beneficial trade opportunities.

Promoting cultural exchanges, business delegations, and educational collaborations can foster trust and understanding between the business communities of both countries.

Negotiating comprehensive trade agreements, such as a Preferential Trade Agreement (PTA) or a Free Trade Agreement (FTA), can provide a framework for reducing tariffs and promoting trade facilitation between Pakistan and Bangladesh. Enhancing customs cooperation and information sharing can help combat trade-related illicit activities and expedite customs clearance processes, fostering smoother cross-border trade flows. Pakistan and Bangladesh are members of regional economic blocs such as SAARC and BIMSTEC. Strengthening these regional platforms can create opportunities for deeper economic integration, including harmonizing trade policies and promoting intra-regional trade. Supporting cross-border connectivity projects, such as constructing roads, railways, and energy corridors, can enhance physical connectivity between Pakistan and Bangladesh, facilitating trade and investment. Developing dedicated trade corridors or economic zones along the border regions can attract investment, promote cross-border trade, and spur economic development in marginalized areas.

Recognizing the growing importance of services trade, both countries can explore opportunities for collaboration in sectors such as IT services, healthcare, tourism, and education. Simplifying visa procedures for business travelers, professionals, and tourists can encourage greater people-to-people exchanges and facilitate providing services across borders. Investing in skills development and capacity building in service-oriented industries can enhance competitiveness and create employment opportunities, driving economic growth in both nations.

Harmonizing regulatory frameworks and standards in key service sectors can promote cross-border service delivery and enhance consumer confidence in service quality.

To unlock the full potential of Pakistan-Bangladesh trade, policymakers can consider the following recommendations. Facilitate mutual recognition agreements to streamline quality standards and certification processes, reducing trade barriers. Encourage bilateral investments through investor-friendly policies and incentives, fostering joint ventures and technology transfer. Launch targeted trade promotion campaigns and exhibitions to showcase products and explore new market opportunities. Explore avenues for greater regional economic integration, leveraging platforms such as SAARC (South Asian Association for Regional Cooperation) and BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation).

The potential for enhancing trade cooperation between Pakistan and Bangladesh is vast, encompassing various sectors, from traditional goods trade to services and digital commerce. By adopting a comprehensive approach that addresses trade barriers, fosters regional integration, promotes services trade, and harnesses the digital economy’s opportunities, both nations can unlock new avenues for economic growth and prosperity. Through sustained dialogue, collaboration, and policy reforms, Pakistan and Bangladesh can forge a resilient partnership that benefits their economies and contributes to regional peace and development objectives.