Defending against hybrid warfare requires certainty of financial resources. Unfortunately, Pakistan’s weak economic position and lack of fiscal space to expand security-related budget has constrained the country’s ability to give a more proactive response to hybrid warfare.
Pakistan faces various forms of economic threats from its neighbours which need to be carefully studied. For example, informal trade and illegal merchandise goods that come inside the country from Afghanistan, Iran and India, have hurt the competitiveness of our local enterprises. Such form of trade and even smuggling also leads to reduction in the government’s tax revenues.
Pakistan’s already signed Free Trade Agreements (FTAs) also need to be evaluated to how these are benefitting the local industry. Many have complained that in the past China-Pakistan free trade agreement may have posed problems for local micro, small and medium enterprises.
Pakistan has also seen diminishing presence at the economic forums which are convened under the auspices of the United Nations. The difficulties in convincing the Financial Action Task Force (FATF) team regarding Pakistan’s efforts to curb terror financing and money laundering provides several lessons. At a time when Pakistan’s narrative regarding the ‘war on terror’ should have been appreciated, our financial and banking system is being blamed for being easy on cross-border transactions. It should be evaluated that once Pakistan had come out of the FATF greylist in 2012, why after a gap of almost five years, the country’s economic management is again under investigation. This is bound to over regulate our banking sector and stifle competition.
Pakistan also faces cyber security-related threats in the banking and financial sector. The recent example of cyber-attacks on two commercial banks in Pakistan should be a wake up call. These Pakistani bank accounts were accessed from five different countries and the money was siphoned out, whereas at the national level, cyber security action plan to counter such threats was missing. This should, in fact, be part of the National Action Plan (NAP). Pakistan needs to expand e-commerce and IT-enabled services, nonetheless, with this expansion comes the higher risk of cyber threat for customers. Some websites of reputed Pakistani enterprises were also hacked by foreign hands which then demanded payment for restoration of their websites.
To strengthen Pakistan’s economic image abroad, it is critical to open branches of local think tanks abroad. A pro-Pakistan economic discourse is much needed to highlight the potential in agriculture, manufacturing and services sectors across the country
While development partners have helped Pakistan in difficult times, our Economic Affairs Division must take into consideration the role of foreign consultants. rather than hiring foreign consultants for support to the government, local capacity must be utilized. In all contracts with multilateral, bilateral and intergovernmental bodies, there should be a clause for minimum local consultancy requirement. Advice by local think tanks and consultants will also improve (local) institutional memory. Another challenge is finalizing large commercial transactions in Pakistan. Most countries wishing to invest here complain of a lack of one-window facilitation. The solutions to the predicaments lie in seven key areas.
First, Pakistan needs to put in place an efficient economic management group in the civil service. There is a need to induct credible macroeconomists in the Ministry of Finance, Ministry of Commerce and the Planning Commission.
Second, socioeconomic disparities must be addressed with good governance and sustained public investments in regions such as Balochistan and erstwhile FATA. This will also help in strengthening the overall state of federation.
Third, for sustained increase in foreign exchange reserves, Pakistan needs to pay attention to boosting its export competitiveness. There is a strong case to focus on services sector exports given the large, urbanized, educated and connected youth segment in the country. Over half of our national income comes from the services sector which is usually not competitive.
Fourth, continuous effort is required to improve Pakistan’s business image. The country’s economic managers need to make the systems more hospitable for foreign investors. FDI in export-oriented industries can help scale up, diversify product range and also steer existing products towards greater sophistication.
Fifth, dispute resolution mechanisms and business courts need to deliver expedient, cost effective and certain decisions. In this regard, capacity building of judiciary dealing with commercial cases and tax bar officials could be a good starting point.
Sixth, to strengthen Pakistan’s economic image abroad, it is critical to open branches of local think tanks abroad. A pro-Pakistan economic discourse is much needed to highlight the potential in agriculture, manufacturing and services sectors across the country. Finally, the incentives provided to Special Economic Zones (SEZs) and investments in less developed areas of Pakistan need to be highlighted.
* Disclaimer: This article is part of the proceedings of a media workshop on “Hybrid Warfare and Pakistan’s Readiness: Time for National Narrative Construct and Strategic Foresight” organized by the Islamabad Policy Research Institute.
The writer is Deputy Executive Director of the Sustainable Policy Research Institute