Geoeconomics is the new buzzword these days, thrown around quite loosely without quantifying its benefits, especially in a country like Pakistan that relies on a heavy regime of geopolitics and alliance tactics.
What caused this paradigm shift in national thinking? The answer lies in a changed international environment and its impact on the regional security calculus. For too long, South Asia has borne the brunt of the ‘block politics’ of competitive alliances and the conflicts that flow from it. The emphasis on client-protege relationships and regional conflicts robbed South Asia of realizing its true economic potential, a dismal development for a region whose economic output accounted for 25% of global GDP in the 18th century.
Many African countries have witnessed what is known as the “resource curse” over the past century. According to an analysis of 47 African economies by the International Food Security Institute (IFRI), resource-rich countries have become dependent on foreign profiteers to earn cheap rents without diversifying their economies.
Pakistan has also become a victim of its geostrategic curse because its rulers prefer short-term geopolitical rents to the detriment of long-term economic development. Pakistan’s $264 billion economy could easily have become a $1 trillion economy if the true potential of its business, trade and industrial productivity had been realized through economic partnerships and connectivity. Pakistan’s frontline status as a US ally in the Cold War, the anti-Soviet jihad and the US-backed war on terror in Afghanistan had kept its eye on the economic connectivity ball.
America’s waning interest in Pakistan’s role as a strategic partner in its South and Central Asian policies and its alliance with India to protect its residual strategic interests in the region have forced Pakistan to seek elsewhere to safeguard its security interests. The strategic withdrawal of the United States from South Asia, leaving its allies like India to counter the influence of its strategic competitor, China, has apparently forced Pakistani policymakers to seriously rethink their national security and foreign policy.
The international environment has seen the rise of China as the greatest threat to national security. The hateful sentiments once reserved for the Soviet Union were directed at China and, by implication, its hapless allies. America’s new national security focus is on East Asia and the Indo-Pacific region to assuage the security paranoia of strategic allies such as Taiwan, Australia, Japan, Korea South and Singapore and a host of others being rolled into military-centric security alliances like the Quad and AUKUS. A war-weary global community facing threats like climate change and food insecurity naturally gravitates toward China’s model of development and connectivity, instead of the confrontational model peddled by the United States.
It was not surprising to see that political planners in Pakistan unveiled a new national security model based on geoeconomics. It seems that Pakistani civil-military leaders have realized the ephemeral nature of geostrategic rents to adopt an economy-centric policy, finally breaking the resource curse of geostrategic rents. The next step in this transition is quite difficult. Years of neglect of regional connectivity and India’s tough stance on Pakistan and Kashmir are seriously jeopardizing South Asia’s economic renaissance.
Regional economic integration leads to better capacity development and diversification of industrial production, ultimately leading to increased industrial and trade volumes through the desired economies of scale (Hausmann and Hidalgo, 2010). India’s continued suppression of minorities and annexation of the illegally occupied part of the disputed state of Jammu and Kashmir is depriving South Asia of the fruits of trade, connectivity and economic integration.
Currently, 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 on regional integration is abysmal with deliberate attempts to weaken Saarland and slow processing of 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 , including railways, roads and special industrial and commercial zones.
Dr Ishrat Husain says India accounts for 75% of South Asia’s population and 77% of its GDP, but its trade with South Asian countries is less than 5% of its trade with the rest of the world. At present, Pakistan accounts for less than one percent of India’s total exports to the rest of the world. South Asia can reap maximum connectivity dividends if trade goods are transported cost-effectively and quickly, leveraging geographic advantages just as East Asian countries reap maximum trade dividends through better value chain integration with the Chinese economy. A sincere attempt was made by Pakistan in revising the non-discriminatory market share in the South Asian Free Trade Area (SAFTA) in 2014 by lowering tariffs by up to 5%. The Indians had promised that the new government would notify the proposed changes to Safta, but nothing happened.
After the US withdrawal, Afghanistan offers both challenges and opportunities. A big opportunity is the operationalization of the East-West Economic Corridors comprising TAPI, CASA 1000, IPI and Trans Afghan Rail Corridor. Interestingly, Afghanistan, China and the United States are on board for the 573 km long railway project. The $5 billion project is being actively pursued by Uzbekistan, Pakistan and Afghanistan, and promises to usher in a renaissance of connectivity linking landlocked Uzbekistan to Pakistan’s seaports, cutting transport costs in half and freight time while improving trade volume between Pakistan and Central Asia by 60%.
Pakistan sits atop a goldmine of trade, industry and natural resources, provided it takes full advantage of its geographical location. CPEC can ideally complement EWEC, making Pakistan a real connectivity hub and a strategic trade bridge between South Asia and Central Asia. It is time to do everything possible to achieve this geo-economic dream.
The author is a security analyst and a PhD student. He can be reached at: [email protected]