Speech Delivered at a Seminar on Justice Delayed Justice Denied
February 21, 2024
The Diplomatic Coup by China
February 23, 2024Speech Delivered at a Seminar on Justice Delayed Justice Denied
February 21, 2024The Diplomatic Coup by China
February 23, 2024Ambassador Aizaz Ahmad Chaudhry
Pakistan’s Geoeconomics
Geoeconomics is a term that was used in the early 1990s to signify the fact that in the post-Cold War period, competition between states would essentially be in the economic domain, rather than military. Accordingly, during the brief but intense phase of globalization and inter-dependence, the world witnessed growing emphasis on economic resources and modern technologies and how these were utilized to elevate a state’s stature and potential. China emerged during this period not only as a leading economy but also as a major regional and global power.
Another, perhaps simpler, way to define geoeconomics is the use of a country’s geography to maximize its strategic, political and economic advantages. Singapore, Hong Kong, and Dubai are good examples of geoeconomics-in-play, leveraging their geographic location to serve as a transit hub.
Geoeconomics is important, but it is not a substitute of geopolitics, which is a much broader and complex phenomenon. Inter-state competition in the military, information and technological domains has become intense and is influencing the fast-evolving global geopolitics. Multiple non-kinetic warfare tools have also emerged as the preferred mode for states to achieve their strategic goals and dominance. Of that, certainly economic policies and measures are an essential part. In that sense, geoeconomics may be regarded as a subset of geopolitics.
Notably, geoeconomics works both ways. It enables countries to take advantage of their geography and resources to maximize the welfare of their masses, but it also becomes a coercive tool in the hands of the powerful and wealthy to subdue the opponents. The US economic sanctions against Iran and North Korea are a case in point. Of late, the US is increasingly applying protectionism against Chinese exports to the US and also placing restrictions on several Chinese technology firms and apps. Pakistan too suffered when it was placed on grey list by the Financial Action Task Force, a platform that was used by the US and India to coerce Pakistan into taking action against certain non-state actors.
What does geoeconomics mean for Pakistan? The term assumed limelight in Pakistan’s public policy discourse when the first ever National Security Policy (NSP) of the country was announced in January 2022, calling for a comprehensive definition of national security. The NSP stipulated a tripod of traditional (military) security, economic security and human security to be pursued in tandem to make Pakistan and its people secure against internal and external threats. Within the context of economic security, geoeconomics emerged as one tangible, doable and realistic option for Pakistan to achieve its national security.
While there is growing recognition that Pakistan should place greater emphasis on geoeconomics, it is the traditional security issues which continue to be regarded as critical for the country’s national security. The security needs of the country began to dominate policy discourse right after the independence because of the circumstances in which Pakistan was born in 1947. The bigger state from which Pakistan was separated – India - was hostile and reluctant to give Pakistan its share of finances and military stores. The nascent state of Pakistan had no infrastructure and every element of statecraft had to be created from scratch. Three major issues that erupted at that time came to test the nerves of the policy makers: Settling the stream of refugees flowing into the country; Kashmir dispute and war with India in 1948; and stoppage of waters coming into Pakistani canals from the headworks that were located in India. The survival of the State and its security thus assumed paramount consideration and ever since has been central to Pakistan’s internal and external policies. Consequently, Pakistan came to be seen in the West and elsewhere as a country which was over-burdened by its immense security problems, dominated by security establishment, and pursing a foreign policy that is largely India-centric, a country which came to define threat spectrum for Pakistan.
Accordingly, Pakistan spent considerable time, energy and resources to develop formidable conventional forces and nuclear deterrence against any possible aggression from the east. However, the country has lagged behind in economic and social development. There is now a growing realization that if Pakistan wishes to modulate its security-centric approach, a greater emphasis on geoeconomics is the answer.
How should Pakistan bring the much-needed focus on geo-economics and how would this benefit the people of the country?
First, the policy makers need to review the way they look at Pakistan’s geographic location, which has often been described as a troubled or tough neighborhood. Due to wars with India and instability in Afghanistan spilling into Pakistan, many in the country understandably regard the geographic location as a source of instability. The counter-view is provided by geoeconomics, whereby Pakistan’s geography is viewed as a source of strength, and not a liability. The economic geography of the region where Pakistan is located makes it a hub of three sub-regions of Asia: South Asia, Central Asia, and Middle East. The combined population is over 2 billion people generating trillions of dollars of wealth and economic activity. The region is energy rich, boasts skilled and young human resource, and has reasonably high levels of industry. Adjacent to this region is China, Pakistan’s northern neighbor, with its own large population and an economy second only to the US.
No other country enjoys such a pivotal position that Pakistan does in this enormously resource-rich neighborhood. Once the country changes its lens, and begins to look at its neighborhood as a potential bastion of prosperity and not as a source of instability, Pakistan would be well-poised to benefit from this amazingly rich economic geography. The country can become, for instance, a hub of economic connectivity between the three subregions and China. If Pakistan chooses to move in that direction, it would look at the east-west and north-south connectivity in a new light. The wealth so generated and employment so created would benefit Pakistan and bring prosperity to the people of the country.
On north-south connectivity, there exists a consensus in the country, and a large number of projects have been completed under the ambit of China Pakistan Economic Corridor (CPEC). Gwadar port is being developed as an ideal trans-shipment hub. Ideal, because it is a deep seawater port, with two small bays protected by a landmass called Hammerhead. East Bay highway is connected to Karachi and an international airport is about to be inaugurated. Gwadar’s location in the Arabian Sea opens up to the Indian Ocean without the encumbrances of the Strait of Hormuz. Up in the north, the Karakorum Highway links China’s Xinjiang province with Pakistan through Gilgit-Baltistan. The road is now being opened for year-round traffic. After entering China, there are roads going to Tajikistan and Kyrgyzstan and onward to Eurasian mainland. This north-south connectivity thus has the potential to open up new opportunities for Pakistani ports in the Arabian Sea.
After CPEC’s first phase projects in the energy and infrastructure sectors neared completion, the second phase has now begun inviting investments into industry by expediting special economic zones, agriculture to make Pakistan self-sufficient in food, and information technology, where young minds of Pakistanis are currently engaged. Fortunately, there is a broad consensus in Pakistan that a vigorous implementation of CPEC can usher in a whole new phase for the economy of Pakistan.
As for east-west connectivity, India would be keen to trade with Afghanistan and Central Asia. The latter would like to supply their surplus energy to South Asia. If Pakistan were to become a transit country for this two-way mutually beneficial trade, this can usher an era of unprecedented economic activity for the region with Pakistan right at its center. There would, of course, be some security and other concerns, which must be addressed through safeguards built into the treaty arrangements. Pakistan itself is an energy-deficient country, and is spending precious foreign exchange to import oil and gas. From Turkmenistan, gas can flow to Pakistan and India through TAPI (Turkmenistan Afghanistan Pakistan India) project. From Tajikistan and Kyrgyzstan, highly economical hydel energy can come to Pakistan through CASA-1000 (Central Asia South Asia) and many other projects that can easily be conceived. All these vistas of cooperation can open up if Pakistan begins to view east-west connectivity from the point of view of geoeconomics.
The second geoeconomics imperative for Pakistan is to have peaceful environment in the region to make it conducive for economic development. There is no doubt that South Asia is facing profound challenges. The US is intensifying its competition with China in multiple domains, and even looking to wean Pakistan away from the CPEC. The US is also deepening its partnership with India, emboldening the latter’s hegemonic tendencies and encouraging it to bolster its war fighting capabilities against China. The Kashmir dispute continues to fester, with India embarked on the project of changing its demography. The situation in Afghanistan remains grim ever since the US withdrew its troops in August 2021. The country is at a high risk of destabilization and even civil war. The challenges of a humanitarian crisis, economic hardship, and resurgence of terrorism in Afghanistan are a matter of concern for the whole region.
These are monumental challenges. However, there are also opportunities if Pakistan uses its unique position to become a force of peace and positivity in the region. Pakistan has strong ties of friendship with China and Central Asian Republics, who all wish to link up to Pakistani ports to reach Indian Ocean. Pakistan maintains strong economic and commercial ties with the US and EU, which are Pakistan’s large trading partners. Pakistan is also open to policy dialogue with India while maintaining its principled support to the Kashmir cause and opposition to Hindutva-driven Indian hegemony in South Asia. Pakistan should consider opening its trade with India through land borders. Instead of buying expensive goods from far-away lands, Pakistan’s consumers can benefit from cheaper goods from across the border. Likewise, large Indian market can be accessed by Pakistan’s traders and investors.
For its part India, too, would benefit enormously if it normalizes relations with Pakistan. Around 2007, when both countries were engaged in a peace process, bilateral trade had gone up over $3 billion. Studies indicated a much higher potential for Pakistan-India bilateral trade. Likewise, Pakistan should take steps to bolster its trade with Afghanistan. Some years back, the bilateral trade had reached a $3 billion mark. Pakistan is a preferred market for Afghan traders and conduit for its goods in transit. The Taliban government can benefit significantly if it is persuaded to make the country a transit hub for the region. Trade helps build peace constituencies. These days, every country attaches highest of importance to its economic interests. India, for instance, is purchasing oil from Russia and is trading with China despite its partnership with the US.
The third most promising area of geoeconomics that can work well for Pakistan is the recent rapprochement between Iran and Saudi Arabia, which has been facilitated by China. Saudi Arabia has been taking steps to diversify its economy and investments across the world. Its Vision 2030 envisages a reduced reliance on oil exports by boosting other sectors. Pakistan could certainly benefit from the opportunities that would become available by Saudi potential investments in Asian countries, including Pakistan. Iran is a neighbor of Pakistan and its border with Pakistan provides ample opportunities to deepen economic ties between the two, especially through expanded border markets, barter trade, and other ways that are not subject to the US economic sanctions against Iran. With economic interactions between China and Iran and Saudi Arabia likely to pick up pace, Pakistan can benefit enormously being right in the middle. The Gwadar port, in particular, can play a pivotal role.
So, if Pakistan were to view its neighborhood through the lens of geoeconomics, become a hub of connectivity between various subregions of Asia, contribute to creating a peaceful regional environment, and benefit from new opportunities generated by the evolving global and regional geopolitics, Pakistan’s policy makers would need to gear up and take a number of actions. One, Pakistan should make its trade and investment regime more attractive. The information should also be propagated widely and through multiple instruments. Two, the government should engage thinktanks and academic institutions to study trade and investment regimes of the regional countries and identify opportunities for the common good of South Asian countries. Free Trade Areas (FTAs) are useful but only if safeguards are instituted to minimize injury to own industry. Three, Pakistan should expedite actions on the projects under CPEC as well as TAPI and CASA-1000. Four, Pakistan must pay urgent attention to non-traditional security threats to the economy, such as climate change, cyber-attacks, water, food, and energy insecurities, and lawfare. Pakistan may also consider establishing task forces to propose result-oriented solutions for countering these non-traditional threats to our economy. The success stories of economic integration in Europe and South East Asia should be studied with a view to evolving practical suggestions for regional integration in South Asia.
Of all the pre-requisites of geoeconomics, nothing is more important than how Pakistan is governed internally. The manifestations of geoeconomics may involve external actors but its dynamics are internal. The first area to focus on is political stability of the country. Experience has shown that those of the developing countries that registered rapid economic growth could do so only when they had a stable polity. In a multi-party parliamentary form of democracy, differences on public policy and methods to implement those policies are natural. It is a kind of check and balance for the executive. However, when differences are viewed as intractable disputes, and competition becomes hatred, and violent responses to opponents are tolerated by the society, then much of society’s energy is consumed by internal squabbles rather than focusing on how it could benefit from its economic geography.
The second imperative is law and order and rule of law. No foreign government or multinational company would want to invest in Pakistan if there is lawlessness and the institutions of the country are too weak to implement a rule-based order. No one should be above the law, including the elite of the country, any vested interests, or any non-state actor engaged in threat or use of force or other illegal activities.
The third imperative is the continuity of economic policies. Each succeeding government must respect the key economic policies of its predecessor so that the investors and traders can have certainty and predictability of their investments.
Fourthly, all loss-making state-owned institutions should be gradually phased out. It is not the business of the State to set up industry. The State should encourage and facilitate the private sector to establish and run industries. An economic domain where subsidies are provided to some is against the spirit of a level playing field.
The fifth suggestion is to avoid an over-emphasis on state-charity and hand-outs, which create a dependency syndrome and is counter-productive in the long term. The objective should be to find ways of empowering each citizen to earn his or her own living. The schemes such as micro-finance are more important than dishing out free money or goods. The Chinese experience in poverty eradication needs to be studied and emulated. It is remarkable that a country can lift 800 million people out of poverty in such a short span of time. A good starting point for Pakistan is to overhaul the education system, which should provide not only academic degrees but also produce creative, skilled, and responsible citizens.
Sixthly, Pakistan must work on changing its international perception away from extremism and terrorism to our points of strength. Pakistan is endowed with highest of the mountain peaks. A focus on mountain tourism can become a new positive identity of Pakistan. Likewise, the country’s archaeological heritage is rich. No land can boast the likes of Gandhara, Mohenjodaro or Mehargarh. Pakistan has also been a bastion of several religions of the world: Buddhism, Sikhism, Hinduism, Sufi Islam, and Christianity. There is a modest religious tourism in the country. That can be radically bolstered to generate economic activity. Domestic and foreign tourists would flock to see the treasures that Pakistan has.
Finally, Pakistan needs to mobilize the academics, think tanks, and civil society to create a narrative of peace. The government should galvanize society’s debate about the economic dividends of peaceful coexistence with neighbors. The intelligentia, academia, civil society, and print and electronic media can all play an important role in building a positive brand of Pakistan – a brand that is associated with regional peace, economic security, and human development.
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