Pakistan’s Geo-economic Challenge

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Dr Qaisar Rashid

Gul was considered a reflection of Pakistan’s security mindset, which remained preoccupied with the country’s geostrategic position

Stemming from geostrategic placement, geopolitics kept on dictating its terms to Pakistan, which has finally realized that it is lagging behind in development based on the economy. Pakistan remained infatuated with geo-politics, which it now intends to forsake.
Pakistan’s cold war (1945-1991) engagement as a South Asian proxy to militate against the spread of communism bestowed upon Pakistan a limited role. From 1991 (the end of the Cold War) to 2001 (the beginning of the War on Terror), life remained quiescent as Pakistan got the provision of oil supplied either free or at subsidized rates from Saudi Arabia, especially whenever economic sanctions were slapped on Pakistan. Further, certain other Middle Eastern countries also extended to Pakistan’s financial bailout packages.
It was the Kargil war of 1999 that dented Pakistan’s image internationally, as the world got wary of a nuclear-capable country telling lies to them about the war it had launched. The War on Terror of 2001 worsened the impression further. Where things went wrong was the point where the United States alleged that Pakistan was double-dealing and that Pakistan was shy of delivering on the promises. Encompassing the past, the US was seeing its relations with Pakistan as a whole, whereas Pakistan was seeing its relations with the US as bound by time (post-9/11) or perhaps by investment (dole out dollars to serve the purpose). Eventually, on 1 January 2018, in his first tweet of the year, US President Donald Trump accused Pakistan of lying and deceiving the US while receiving billions of dollars in foreign aid, even though being a US ally Pakistan had been enjoying a special status as a non-NATO alliance partner. The US alleged that Pakistan was not cracking down effectively on terror groups, active in Afghanistan and Kashmir. Subsequently, the US withdrew financial (civil and military) support and left Pakistan in the lurch. The Trump administration also campaigned to add Pakistan to an intergovernmental watch list for terrorism financing. With that, the facility of Pakistan’s geostrategic position giving birth to its geopolitical utility was over. Further, the age of diplomacy sans economic maintenance was also over.
The post-2018 realities forced Pakistan into transforming itself and seeking refuge in geo-economics. That is, Pakistan had to utilize its geo-strategic position to espouse geo-economics. Pakistan’s choice to shift its direction has been excruciating since Pakistan has not been in a habit of thinking in geo-economics except that Pakistan permitted China to have a road link to Gwadar as a trade route in 2013. The consequent China Pakistan Economic Corridor (CPEC) remained the main realization of Pakistan’s preference for geo-economics.
It had been surprising for many Pakistanis to see President Xi Jinping visit India in 2014 and pledge to invest the US $20 billion in the next five years, besides agreeing to provide greater market access to Indian products to reduce the large trade gap with India. The post-2014 era opened a new vista in China-India bilateral trade relations. Until 2014, the net Chinese investment in India was the US $1.6 billion and this was mostly by the state-owned enterprises. After 2014, however, as per the Ministry of Commerce in Beijing, a noticeable shift from state-driven to market-driven private sector investment from China has taken place. The total Chinese investment in India is expected to cross US $26 billion. Further, as per the latest data issued by the Chinese customs, China-India bilateral trade, which was $87.6 billion in 2020 rose to US $125.66 billion in 2021. It was around a 43 per cent increase in trade in one year, despite the China-India border standoff called the Doklam standoff in 2017 and the China-India border clashes near the disputed Pangong Lake and in the Galwan River valley in Ladakh along the Line of Actual Control since May 2020. Most Pakistanis are not coming to terms with this duality: trading on the one hand and fighting on the other.
Before his death in August 2015, the late General Hamid Gul kept on peddling the idea of nuclear brinkmanship, whether Pakistan was dealing with India or the International Monetary Fund (IMF). If he were alive today, he would have seen the futility of his prescription. In fact, he misled Pakistanis through his emotional and naive rhetoric buoyed up by a few anchors in the electronic media. Airing the threat of nuclear escalation, Pakistan cannot blackmail the world to agree to its terms. Gul was considered a reflection of Pakistan’s security mindset, which remained preoccupied with the country’s geostrategic position to be translated quintessentially in terms of geopolitics. The strategy saw Pakistan scale down on the map of development. The economic constraints that Pakistan has been hobbled with have made the nuclear possession vulnerable. This is one of the reasons Pakistan has started thinking loud in terms of geo-economics.
To the world, Pakistan’s economic vulnerability is obvious: Pakistan tends to spend more and earn less every year. Pakistan’s habit to oversize its budget has refused to wean off although the foreign aid facility, which was the hallmark of the Cold War, is no more available. The bailout package of the IMF is meant for earning from Pakistan the original borrowed amount with interest. Of its own volition, the incumbent government has fallen into the trap of the interest-based international system, as Pakistan preferred not to cut off its expenditure and reduce imports of luxury items after 2018. Now, Pakistan is fast approaching the tipping point where it has to distinguish between developmental expenditures and non-developmental expenditures, and similarly between essential import items and luxury import items. The incumbent government is lucky that its predecessor government laid the infrastructure, which is sustaining the economy. The infrastructure development projects are still buttressing the economy through their both direct and indirect productive impacts.
Presently, barring the CPEC, Pakistan has no significant experience to meet the challenges of transformation into geo-economics. The path to the geo-economy is un-treaded and hence treacherous for Pakistan.