Geo-economics is the new buzzword these days, thrown around rather loosely without quantifying its benefits, especially in a country like Pakistan which relies on a heavy diet of geopolitics and alliance tactics.
What has prompted this paradigm shift in national thinking? The answer lies in an altered international environment and its impact on the regional security calculus. For far too long, South Asia has borne the brunt of ‘bloc politics’ of competitive alliances and attendant conflicts. The focus on client-protege relations and regional conflicts have deprived South Asia of realising its true economic potential, rueful development for a region whose economic output comprised 25 percent of the global GDP in the 18th century.
Many African countries witnessed what is called ‘the resource curse’ in the last century. According to an analysis of 47 African economies by the International Food Security Institute (IFRI), the countries that were rich in natural resources became dependent on foreign profiteers to earn cheap rents without diversifying their economies.
Pakistan has similarly become a victim of its geostrategic curse because its leadership prefers short-term geopolitical rents at the cost of long-term economic development. The $264 billion Pakistani economy could have easily become a $1trillion economy had the true potential of its trade, commerce and industrial productivity been realised through economic partnerships and connectivity. Pakistan’s frontline status as an American ally in the cold war, anti-Soviet jihad, and US-supported war on terror in Afghanistan had kept its eye off the ball of economic connectivity.
America’s diminishing interest in Pakistan’s role as a strategic partner in its South and Central Asian policies and alliance with India to guard its residual strategic interests in the region forced Pakistan to look elsewhere for safeguarding its security interests. The strategic retreat of the US from South Asia leaving its allies like India to counter the influence of its strategic competitor, China, apparently forced policymakers in Pakistan to seriously rethink their national security and foreign policies.
The international environment witnessed the rise of China as the biggest national security threat. The hateful sentiments once reserved for the Soviet Union were directed towards China and, by implication, its hapless allies. America’s new national security focus is towards East Asia and the Indo-Pacific region to assuage the security paranoia of its strategic allies suchlike Taiwan, Australia, Japan, South Korea and Singapore and a host of others being corralled into military-centric security alliances like the Quad and AUKUS. A war-weary world community confronted with threats like climate change and food insecurity is naturally gravitating towards the development and connectivity model of China, instead of the confrontation template peddled by the US.
It was no surprise to see that Pakistan’s policy planners unveiled a new national security model based on geo-economics. It seems that Pakistani civil-military leadership realised the ephemeral nature of geo-strategic rents to embrace an economic-centered policy, finally breaking away from the resource curse of geo-strategic rents. The next step in this transition is quite challenging. Years of regional connectivity neglect and a tough Indian stance vis a vis Pakistan and Kashmiris puts the South Asian economic renaissance in serious jeopardy.
Regional economic integration leads towards better capability development and diversification of industrial output, leading ultimately towards enhanced industrial and trade volumes through the desired economies of scale (Hausmann and Hidalgo, 2010). India’s continued suppression of minorities and annexation of illegally occupied portion of the disputed Jammu and Kashmir state is depriving South Asia of enjoying the fruit of trade, connectivity and economic integration.
At present, India has bilateral free trade agreements with Sri Lanka (1999), Thailand (2004) and Singapore (2005). It is also negotiating such agreements with the Association of Southeast Asian Nations (ASEAN), the Bay of Bengal Initiative for Multi-Sectoral and Technical Cooperation Free Trade Area (BIMSTEC). Despite these initiatives, its record in regional integration is abysmally poor with deliberate attempts at weakening Saarc and the slow burner treatment to the South Asian Free Trade Agreement (SAFTA). If India had let go of its stubbornness, the East-West Economic Corridor (EWEC) could have been created, linking India with Pakistan, Afghanistan and Central Asia, and Iran through land corridors, featuring railways, roads and special industrial and trade zones.
Dr Ishrat Husain argues that India comprises 75 percent of the South Asian population and 77 percent of its GDP, but its trade with South Asian nations is less than five percent of its trade with the rest of the world. At present, Pakistan accounts for less than one percent of the total Indian exports to the rest of the world. South Asia can reap optimal connectivity dividends if trade goods are transported in a cost-effective and time-efficient manner, leveraging geographical advantages just as East Asian countries are garnering maximum commercial dividends through better value chain integration with the Chinese economy. A sincere attempt was made by Pakistan by revising the non-discriminatory market share in the South Asian Free Trade Area (Safta) in 2014 by lowering tariffs to as low as five percent. Indians had promised that the new government would notify the proposed changes in Safta, but nothing happened.
Post the US withdrawal, Afghanistan offers both challenges and opportunities. One big opportunity is the operationalisation of the East-West economic corridors comprising TAPI, CASA 1000, IPI and Trans Afghan Rail Corridor. Interestingly, Afghanistan, China and the US are on board for the 573-km-long railway project. The $5billion project is being actively pursued by Uzbekistan, Pakistan and Afghanistan, and promises to usher in a connectivity renaissance linking landlocked Uzbekistan with Pakistan’s seaports, reducing by half the transportation cost and the time of freight while enhancing the trade volume between Pakistan and Central Asia by 60 percent.
Pakistan sits atop a goldmine of trade, industry and natural resources, provided it fully leverages its geographical location. CPEC can ideally complement the EWEC, making Pakistan a true connectivity hub and strategic trade bridge between South and Central Asia. It is time to pull all stops to realise that geo-economic dream.
Email: firstname.lastname@example.orgRaashid Wali Janjua, "Our geo-economic dream," The News. 2022-03-01.
Keywords: Economics , Economic integration , Economic corridors , Economic output , Trade , Exports , China , India , Pakistan , CPEC , IFRI , EWEC