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Hilal English

Regional Economic Integration,

Central Asian Energy Supply and
Afghanistan's Peace: Benefits for
Pakistan
 July 2023
This piece aims to shed light on the benefits of regional economic integration
with Central Asian Republics and Afghanistan for Pakistan's energy and
economy.

Pakistan has room to develop into a key economic center for the region, thanks to
its population of almost 240.5 million (United Nations Population Fund, Pakistan
estimates, 2023) and advantageous placement at the South, Central, and Middle
East intersection. Pakistan can boost commerce, investment, and regional
connectivity by using its strategic location and cooperating with its neighbors.
Economic integration also encourages the exchange of cutting-edge technologies
and best practices, creating new markets and employment opportunities.
Creating economic corridors with efficient transportation infrastructure can help
Pakistan become a regional economic hub. These corridors will foster economic
activity within the country and with its neighbors. Infrastructure, flourishing
industries, and urban development are all a product of developing economic
corridors. These can be a rich source of investments and projects that will boost
the economy, create jobs, speed up the movement of commodities and lessen
Pakistan's burgeoning energy crisis. This piece aims to shed light on the benefits
of regional economic integration with Central Asian Republics (CARs) and
Afghanistan for Pakistan's energy and economy.

Creating economic corridors with efficient transportation infrastructure can help

Pakistan become a regional economic hub. These corridors will foster economic
activity within the country and with its neighbors. Infrastructure, flourishing
industries, and urban development are all a product of developing economic
corridors.

Regional Economic Integration

It can be seen as akin to global embeddedness or how one interacts with the
world, much like globalization. Regional integration, however, is spatial and
occasionally political in contrast to globalization. Due to stricter regulations and
potentially higher peer pressure, it has stronger institutional foundations than
globalization. Multiple researchers have reported that the regional integration of
Europe resulted in a significant reduction in disparities in income between
integrating/integrated nations. Developing members of the region can prosper
more quickly, thanks to free trade agreements (FTAs) and labor and goods
mobility.
Fortunately, Pakistan has undertaken measures to foster economic integration
with its neighbors through initiatives and projects like the South Asian Association
for Regional Cooperation (SAARC) and China-Pakistan Economic Corridor (CPEC),
notwithstanding political unrest and security fears. Pakistan has also signed
Afghanistan Pakistan Transit Trade Agreement (APTA) and Pakistan-Kazakhstan
Preferential Trade Agreement; however, a need is felt for a greater, more resilient
regional integration from all quarters of the nation. Keeping in view Pakistan's
dwindling energy reserves and ensuing energy crisis, we need to look forward to
integration with energy-rich states such as CARs.
Central Asian Republics-Afghanistan-Pakistan Integration: Prospects
CARs and Pakistan have strong cultural and religious links. Pakistan has been
unable to benefit from CARs as opposed to the major actors in the region, such as
India, Iran, Russia, China, and Turkey, due to its regional diplomacy dilemma. The
upheaval in Afghanistan has also impacted Pakistan's relations with the CARs.
Security concerns along the Afghan border pose a significant obstacle to
Pakistan's attempts to pursue the proposed pipelines that would transport the
much-needed oil and gas from Central Asia to Pakistan and elsewhere.
Although there has been considerable progress in economic and trade relations
with the CARs, overall trade activity is still minimal compared to other forms of
foreign commerce, with Kazakhstan and Uzbekistan being Pakistan's two most
involved trading partners. Trade volume between Kazakhstan and Pakistan
increased to $219 million in fiscal year (FY) 2022. Meanwhile, the value of
Uzbekistan-Pakistan trade climbed to $250 million in the same year.
Pakistan has historically been drawn to Central Asian energy resources.
Nevertheless, the implementation of two critical projects in this field has been
taking place at a rate slower than needed. The significance of CARs' energy
markets for Pakistan must be understood in the light of Islamabad's desire to
consume and transit Central Asian energy supplies. Moreover, unlike Central Asia,
South Asia suffers from a persistent energy shortage.

Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline

The trans-Afghanistan pipeline, the Turkmenistan-Afghanistan-Pakistan-India
(TAPI) gas pipeline, was the first post-Cold War initiative to deliver gas from CARs
to energy-deficient South Asia. It is to carry gas from Turkmenistan to Afghanistan,
Pakistan, and later on India. By running through Pakistan and Afghanistan, this
pipeline would link the Turkmenistan gas field of Yolotan-Osman with the Indian
city of Fazilki. TAPI pipeline's anticipated cost is around USD 25 billion. The
building of this project began in 1995 as a consequence of a pact that Pakistan
and Turkmenistan signed; however, the precarious situation in Afghanistan has
raised all parties' concerns. Albeit, Pakistan has expressed its readiness to
continue the TAPI project regardless of all obstacles.
Central Asia-South Asia Transmission Project
Another initiative to transfer power from Central Asia to South Asia called Central
Asia-South Asia Transmission Project (CASA-1000) has also been a victim of
delays. The 1,227 km long cross-border transmission project for power was to
transmit 1,000 to 1,300 Mega Watt (MW) of energy produced in Kyrgyzstan
through Tajikistan each year to Afghanistan and Pakistan since 2015. The
estimated cost of the project is USD 1.2 billion. In terms of project execution,
similar to TAPI, there are challenges that render the possibility of completing these
massive projects unlikely. The key issues are security, diplomatic difficulties
between participating nations, and a lack of sufficient funding for implementation.
Overall, Afghanistan's ongoing instability continues to influence the level of
collaboration on the project. The recognition of the incumbent Afghan government
and its capacity to uphold stability and security and engage in negotiations
continues to be issued. Afghan pipelines and power lines appear to be particularly
difficult to protect.
Turkmenistan-Afghanistan-Pakistan Power Line (TAP-500)
The year 2018 saw the signing of a framework agreement for the proposed TAP
Power Interconnection Project between three states. From Turkmenistan, through
Afghanistan, to Pakistan, a 500 km line for transmission was to be built as a part
of the project. Once finished, the project would enable Turkmenistan to supply up
to 4,000 MW of electricity to Pakistan and Afghanistan. The project funding is
estimated to be around USD 1.2 billion. This project, too, has come to a halt
following Taliban’s takeover of Afghanistan.

Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan Power Project

Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan Power Project (TUTAP)
is another Central Asia Regional Economic Cooperation (CAREC) program
between Central Asian and South Asian states. The first phase, which cost USD 35
million and was completed in February 2009, has since allowed for a year-round
330 MW power connectivity between Afghanistan and Uzbekistan. Asian
Development Bank (ADB) approved the second phase costing USD 47 million,
which provided a 450 MW electricity connection between Afghanistan and
Tajikistan. It was put into service in 2011. A 300 MW power line between
Afghanistan and Turkmenistan was being implemented as a part of the third
phase, which cost USD 140 million and was approved by ADB in 2012. ADB
approved the fourth phase costing USD 200 million of the Afghanistan-
Turkmenistan link extension in December 2015, which too was under
implementation. Finally, ADB authorized the installation of a 500 MW high-voltage
transmission line in the fifth phase costing USD 240 million in December 2016 to
permit electricity exports from Afghanistan to Pakistan. Due to the situation in
Afghanistan, ADB has halted its funding beginning on August 15, 2021.
Central Asian Republics-Afghanistan-Pakistan Integration: Irritants
Stable Afghanistan is of utmost importance with regard to Pakistan's relations
with the CARs, given that Afghanistan provides the most convenient link for the
landlocked CARs to seaports and markets in South Asia. Because of the confined
Wakhan border, Pakistan's only route into Central Asia is via Afghanistan; however,
these advantages for Pakistan and Central Asia would only be attainable once the
scenario in Afghanistan has substantially stabilized and safe land access
becomes feasible.
Afghanistan had been left with a political void following the 1989 retreat of the
Soviet Union and the United States. The Afghan civil war turned the nation into a
center for the trafficking of consumer products to Pakistan and Central Asia and
the illicit trade of weapons and drugs. The situation worsened as foreign actors
and neighboring nations began supporting opposite sides. The establishment of
the Taliban in 1994 was arguably the most significant change in post-Soviet
Afghanistan. By enforcing Shariah in Afghanistan, the Taliban promised to
empower the opposing factions, impose the rule of law, and bring peace. That was
followed by 20 years long U.S. War on Terror in Afghanistan.
However, since the U.S.’ retreat from War on Terror in Afghanistan in 2021, the
Taliban have reemerged. This has halted the funding for the ongoing and proposed
energy projects. Thus, peace in Afghanistan is fundamental to Pakistan-Central
Asia regional integration.
Benefits for Pakistan: Combating Energy Crisis
An important determinant of a nation's economic growth is the energy sector. The
need for energy has grown significantly over the last few decades. The three main
factors increasing energy demand are the rise in population, industrial activity, and
technological advancement globally. According to Lahore Electric Supply
Company (LESCO), due to the increased demand for electricity, the city may
experience more power disruptions in the summer of 2023. The electrical supply
and demand imbalance significantly jeopardize Pakistan's growth prospects.
Energy shortages and blackouts have caused significant financial losses. The
severity of power blackouts can be comprehended by the fact that Pakistan
incurred a loss of USD 100 billion as a result of total power blackout in January
2023.
Despite having additional capacity, the nation is currently facing a 6000 gigawatts
(GW) shortfall. Due to Pakistan’s dwindling natural resources, such as oil and gas,
it has to rely on costly energy imports that have contributed to the growing circular
debt of Pakistan.
The pipelines mentioned above are thought to diversify Pakistan's sources of
energy and guarantee energy security. Due to the substantial economic activity
these projects would produce, they will also present a chance for connectivity
between various regions and bring stability and peace to Afghanistan. To lessen
dependence on gas imports via ships and spot markets and to negate the U.S.
influence in energy politics, Pakistan should employ the TAPI, TUTAP, CASA-1000,
and TAP-500 pipelines and transmission lines as alternative energy projects.
These initiatives must be developed because they will increase the country’s
energy security and help rid the state of dependence on the Gulf states.
Conforming to Regional Infrastructure Standards
By global standards, Pakistan's infrastructure is underdeveloped, adversely
impacting every Pakistani citizen. Power outages, lack of road access, and railway
networks affect business and commerce. For a nation to sustain and accelerate
economic growth and social development, its infrastructure must be improved and
expanded. For Pakistan's economy and to enhance the quality of life, it is essential
to elevate both service and quality in transportation and power. One way to do this
would be to become interconnected with the regional states. Joint projects will
attract sufficient investments to repair and build infrastructure in the country. It is
estimated that Pakistan loses between 4 and 6 percent of its gross domestic
product (GDP), or roughly USD 6 billion, as a result of its lack of infrastructure.
By connecting to and integrating economically with other CAREC participants,
Pakistan may make the most of its strategic location by conforming to the region's
infrastructure standards. This will indubitably enhance cross-border trade and
revenue generation.
Industrial and Urban Development
The development of key industries is a vital feature of energy corridors. Industry
requires more than just being close to highways or railroads to prosper; it
additionally requires an atmosphere that encourages investment and trained
workers. The government may use additional incentives to promote such growth,
but it is crucial that whatever commodities are developed inside such energy
corridors should not remain confined. Instead, it should help connect the nation's
exports to the global supply chain. Industrial development is, in turn, followed by
the growth of urban population centers in close proximity. In addition to generating
employment and income opportunities, this will significantly enhance people's
health and well-being by lowering energy costs and reducing income disparities.
In conclusion, utilizing its participation in the CAREC Program and its initiatives,
Pakistan can collaborate with regional nations and development partners to
secure the energy, infrastructure, and technical and financial assistance required
to enable the country to realize its enormous economic potential. It is imperative
for Pakistan to understand the immediate need for regional economic integration
via energy corridors if it wants to avoid both cold winters and unbearably hot
summers.

The author holds an MPhil degree in International Relations from National Defence
University, Islamabad. She writes for South Asian Voices, CISS Insight and CGSS.
E-mail: [email protected]
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Summaiya Malik

The writer holds an MPhil

degree in International
Relations from National
Defense University, Islamabad.
She writes for South Asian
Voices, CISS Insight and The
Diplomatic Insight. E-mail:
[email protected]

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