Improving Trade and Technology Cooperation among Shanghai Cooperation Organization (SCO) Member Countries: Suggestions and Way Forward

Table of Contents

List of Tables 
List of Figures
Acronyms
Executive Summary

1.  Introduction
1.1.     SCO: An Overview
1.2.     Objectives of the Report
1.3.     Structure of the Report

2.  Summary of Macroeconomic Data
2.1.     Population of SCO Countries
2.2.     GDP Growth
2.3.     Per Capita GDP
2.4.     Saving Rates
2.5.     Overseas Remittances
2.6.     Foreign Direct Investment
2.7.     Trade Deficit
2.8.     Inflation
2.9.     Labor Force Participation

3.  A Review of SCO Trade Agreements
3.1.     SCO Trade Agreements
3.2.     Outlook for SCO Trade
4.  Integration of Financial Markets
4.1.     SCO Interbank Union (IBC) 
4.2.     Banking Services to Traders SCO
4.3.     Foreign Policy and Economic Financial Prosperity
4.4.     Emerging technologies in shaping future

5.  Logistic Infrastructure
5.1.     Logistical Infrastructure in SCO countries
5.2.     SCO Priorities – Declarations

6.  Transitioning into the Electric Vehicle (EV) World
7.  Policy Implications

References

Executive Summary

This report presents a detailed analysis of economic and technological cooperation between the Shanghai Cooperation Organization (SCO) member states to improve trade, financial integration, and technology adoption, particularly for electric vehicle technology, across all Member States. China, Russia, Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan formed the SCO in 2001, Pakistan and India joined in 2017; Iran in 2023, and Belarus in 2024. The main goal of the SCO is to help member governments with a range of economic, political, and technological issues. It focuses primarily on security, cooperation, economic development, and cultural transformation. This report presents policy recommendations to drive growth and discusses important areas of economic integration.

Key themes and findings

1. Trade cooperation and agreements

• Trade inside the SCO region has grown steadily, with intra-regional trade share rising from 5.4% in 2001 to 17.5% in 2020. Nonetheless, member states continue to face numerous difficulties concerning customs laws, transportation infrastructure, and trade policy.
• To fully realize the potential of intra-SCO trade, the recommendations simply streamline customs procedures.
• Certain outreach initiatives are crucial to sensitize business community for joint ventures and trade promotion.
• A coordinated strategy is needed, with the SCO secretariat playing a central role, in facilitating the development and implementation of solutions to various trade challenges, i.e., these include infrastructural bottlenecks, bureaucratic delays, funding constraints, and variations in trade regulations.
• Lastly, to unlock the full economic potential of FTAs, it is crucial to address geopolitical uncertainties and historical political tensions.

2. Financial market integration

• The report highlights the necessity of financial market integration in promoting and facilitating international trade and investment. Highlighted examples are China’s initiative, which includes currency swaps and digital finance solutions, and the role of the SCO Interbank Union (IBC).
• To address these issues, the report suggests stepping up collaboration on financial reforms, using digital payment methods, and gradually switching from US dollars to national currencies.
• SCO countries must focus on developing common standards and coordinating financial regulations to facilitate cross-border transactions and financial operations. This may include alignment of regulatory frameworks for digital currencies, and block-chain technologies to modernize cross-border payments and reduce reliance on traditional banking systems. Additionally, establishing policy-driven mechanisms for information sharing and regulatory cooperation among financial specialists in SCO countries is needed. The countries must effectively address financial complexity issues such as informal money transfer payment challenges, and lack of financial ease for businesses.

3. Transition to electric vehicles (EVs)

• The SCO member nations are implementing EV technology at varying rates. China is the world leader in production and exports. China’s advancements in electric vehicle production offer other members substantial opportunities to collaborate on joint research and investment in technology.
• While some nations, like Pakistan, Iran, and others, are still struggling with issues like high upfront costs and inadequate charging infrastructure, other nations, including India, Kazakhstan, Russia and many others have also developed measures to advance and encourage EV adoption, i.e., subsidies for creating ‘quick’ charging stations, tax benefits, free parking, developing charging infrastructure, etc.  
• The report suggests coordinating policy for collaborative ventures for manufacturing and infrastructure development, as well as technology transfer for EVs. This cooperation on EV production and charging infrastructure will help the area shift to more environmentally friendly modes of transportation.

4. Logistics and infrastructure development

• Economic integration requires an improved and efficient logistical infrastructure. China has initiated a number of projects under the Belt and Road Initiative (BRI) in a number of countries to promote sectoral infrastructure, i.e., road networking, energy, agricultural markets, etc. The Turkmenistan-Afghanistan-Pakistan- India (TAPI) pipeline, and the China-Europe Railway Express, North-South International Transport Corridor developing by Russia, Iran, India and other SCO economies are among the major transportation projects highlighted in the report. These projects are expected to reduce shipping times and increase trade.
• However, because they rely mostly on road transportation, landlocked nations like Kyrgyz Republic and Uzbekistan have serious logistical difficulties.
• Similarly, India has developed connectivity initiatives like INSTC and Sagar Mala Project.
• The report recommends to improve financing of infrastructure projects, such as modernization of existing facilities and development of new ones, and cooperation in this sphere to enhance commerce and upgrade transportation corridors to create multi-model logistic hubs. Increasing landlocked nations’ connection is a top priority.

5. Macroeconomic profile

• The macroeconomic profile of each member state exhibits notable variations, with China, India, and Russia functioning as prominent economic powers and Central Asian nations mostly depending on the export of natural resources. Numerous variables, including as labor force participation, population growth, and trade dynamics, vary throughout the member states. The analysis demonstrates how crucial it is for member states to diversify their economies.
• Macroeconomic data highlights chances for member states to work together to enhance trade while also highlighting differences in trade volume, banking systems, and technological improvements.

Increased regional cooperation, better trade facilitation, and improved financial and technological integration could unlock the potential of the SCO. With a little tweak and the removal of current obstacles, the SCO can evolve into a significant driver of regional economic development, technical innovation, and environmental sustainability. The report’s recommendations serve as SCO’s roadmap for improving capabilities and fostering innovation. The SCO can ensure the long-term progress and prosperity of the region by promoting sustainable development in all of its member nations through concerted action.