The successful holding of the 23rd Shanghai Cooperation Organisation’s (SCO) Council of Heads of Government meeting was a major diplomatic achievement for Pakistan. Established in 2001, the SCO is a regional grouping of eight countries comprising Belarus, China, India, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, and Uzbekistan, having immense potential to become a major player in the global economy, especially with respect to expanding trade and economic cooperation in the Eurasian region. The SCO countries have a combined population of 3.5 billion people (40 per GDP) and $2.5tr of trade worldwide.

Over the last few years the SCO has implemented various economic integration initiatives, such as the Regional Anti-Terrorism Structure (RATS) and the SCO Interbank Cooperation Association (SIBCA), to promote trade and investment. The SCO member states are geographically located in close proximity, facilitating trade and reducing transportation costs. The economies of SCO member states are complementary, with each country possessing unique resources and capabilities. This complementarity offers opportunities and potential for mutually beneficial trade but infrastructure development for regional trade remains a challenge, particularly in some of the more remote areas. High tariffs, quotas, and other non-tariff barriers also hinder the multilateral trade liberalisation process of goods and services. Member states’ economies vary significantly in terms of size, development levels, and economic structures, creating opportunities for mutual cooperation and development.

At the time of SCO’s establishment, member nations resolved to foster security, economic and political cooperation among themselves to take a unified stance against unilateral sanctions and protectionist trade practices of the US. The joint communique issued at the end of the Islamabad summit referred to the US-backed barriers to open trade and economic collaboration and emphasised that “sanctions not only undermine the sovereignty of countries but also disrupt global economic relations”. The joint statement advocated for multilateral cooperation under which countries can openly trade.To quote the communique, “the unilateral application of sanctions is incompatible with the principles of international law and has a negative impact on third countries and international economic relation”. It also opposed protectionist actions and trade restrictions that undermine the multilateral trading system and impede global sustainable development.

The Islamabad moot also took up the issue of adopting a local currency payment mechanism to allow the SCO member countries to settle mutual trade transactions in their respective local currencies rather than relying on international currencies like the dollar or the Euro. This would help reduce the cost of trade by eliminating currency exchange and transaction fees.

It may be added here that some SCO members, including Pakistan, have already entered into bilateral currency swap agreements, which allow them to trade goods and services directly in their local currencies. This is expected to enhance economic cooperation and increase financial stability in the region. In order to encourage the use of local currencies and boost economic cooperation among member states, the SCO leaders have further decided to expedite consultations on the establishment of financial institutions like SCO Interbank Union, SCO Development Bank, SCO Development Fund and SCO Investment Fund. These institutions will go a long way to pave the way for economic integration, trade facilitation, and regional connectivity by providing financing for infrastructure projects and focusing on investments in key sectors, such as energy, transportation and telecommunications.

By providing alternative financing options, the SCO aims to reduce dependence on external financial institutions and promote economic growth among its member states. Apart from supporting multilateral trade regime over unilateral Western actions undermining global competition and adoption of local currencies for mutual trade settlement among member countries, the SCO moot has sought to increase connectivity and cooperation in joint energy infrastructure, information technology, security and counterterrorism, logistics, transportation, environment and climate change, public health, industrialisation, green technologies, science and so on.

Development of railway systems, multimodal transportation, port and logistics infrastructure, and the digital transformation of the transport sector have also been highlighted as key priorities. “Flagship projects like the Belt and Road Initiative of President Xi Jinping should be expanded focusing on developing road, rail and digital infrastructure that enhances integration and cooperation across our region,” Prime Minister Shehbaz Sharif said in his speech as the chair of the meeting.

No doubt, all members of SCO are committed to making the organisation a force to reckon with in the region, but progress on the common goals outlined in previous moots has been extremely slow. There are many hurdles in the way, including bilateral disputes, visa restrictions, etc. The development of the SCO as a vibrant economic grouping can not only bolster regional trade and investment but also enhance security cooperation and facilitate access to energy and infrastructure projects for its members. To move towards the desired goal, it is essential that special committees should be formed which meet regularly to follow up on the policy decisions taken at the SCO summit. China, Russia and India are big economic powers. They must take the lead in the matter. This is not only in their own interest but the region as a whole which will help break the Western hold on the global economy.