Rice exporters and traders in Pakistan have proposed the government establish a strong banking system with the Islamic Republic of Iran or implement a Special Purpose Vehicle (SPV) system to boost trade, especially the rice exports.
Pakistani businessmen and economic institutions, especially the private sector have always stressed the need to use banking capacity between Tehran and Islamabad to facilitate trade and make better use of the two neighbors’ trade and economic ties.
The chambers of commerce in Pakistan have repeatedly raised the idea of using national currencies between Iran and Pakistan, saying that the lack of a banking system is the main obstacle to increase bilateral trade and increasing the difficulties of traders between the two countries in achieving mutual trade.
Pakistan is the fourth largest exporter of rice in the world. Rice is cultivated on 2.89 million hectares of land, which accounts for 10 percent of Pakistan’s total arable land, and in 1997 alone was worth more than $ 2 billion.
According to daily Business Recorder, the Rice Research and Development Board (RR&DB) of Pakistan’s Punjab province has proposed the federal government for planning a strong banking system, such as Special Purpose Vehicle (SPV), for barter trade of goods to increase rice export to Iran.
The proposal was moved by the exporters at the 19th meeting of the Board held recently in Lahore.
They observed that Iran is a big market of Basmati rice but the absence of a banking channel between Pakistan and Iran is the only hurdle to export Pakistani commodities.
Iran imports 50 percent of the total domestic rice requirement and Pakistan can give a big push to its exports by entering into this market.
A 16-member delegation from the Pakistan Rice Exporters Association (REAP) traveled to Tehran in April 2018 to explore trade and investment opportunities in Iran and increase rice exports.
Pakistani exporters met with members of the Tehran Chamber of Commerce, Industries and Mines and the Mashhad Chamber of Commerce and Industries during their visit to Tehran.
According to Pakistani economic activists, Iran imported more than 800,000 tonnes of basmati rice from Pakistan before the 2010 sanctions.
Pakistani rice exporters say the lack of a communication channel between the two countries is one of the main reasons for the decline in bilateral trade.
Kenya and China are also among Pakistan’s largest buyers of basmati rice. Twenty-five percent of these exports go to Africa.
Pakistan produces more than 7 million to 7.5 million kilograms of rice every year, of which more than 4 million kilograms are exported. This is about 70% of Pakistan’s total rice production.