Daily Times

Emerging from geostrategic location, geopolitics kept on determining Pakistan’s trajectory, both regional and international. Now, Pakistan feels trammelled and trapped and yearns for a switchover to the path of geo-economics.

On the external front, Pakistan failed to notice that international dynamics had changed after the end of the Cold War in 1991. For instance, in 1995, Russia took an initiative to mollify China on border disputes on Islands and, in April 1996, Russia cajoled China (and three Central Asian States) into signing a friendship agreement, which was termed as the Shanghai five. Whereas China was seeking its economic prosperity agenda, Russia changed its geo-strategy from geo-politics to geo-economics. Since its foundation on June 15, 2001, the Shanghai Cooperation Organization – an upgraded version of the Shanghai Five – has been an example of cooperation based on economic shared-ness primarily, casting off political differences.

Tolerating the presence of non-state actors on its land was another major blunder Pakistan committed in the post-Cold War era. On February 26, 1999, in his speech on foreign policy, President of the United States (US) Bill Clinton prophesied that the next danger would not be from any country launching a nuclear strike but from the accident in which deadly weapons – such as the weapons of mass destruction – would fall into the hands of a terrorist group, which could have the potential and resolve to use them. Fighting this kind of threat became a lynchpin of US foreign policy. Further, Clinton announced that the US would use all the means at its disposal to deny terrorists safe heavens, weapons and funds relentlessly. Pakistan discounted the veiled warning.

Pakistan’s economy now runs preferably on indirect taxes and enjoys the ride of a free-market economy, which allows for the formation of cartels.

In 1989, in Paris, G-7 countries had already founded an inter-governmental body called the Financial Action Task Force (FATF) to meet the challenge of money laundering. Motivated and emboldened by Clinton’s speech, besides other factors, G-7 countries expanded the FATF’s mandate to include terrorism financing in 2001. Proving the suspicions correct, a Pakistan-based militant organization, Lashkar-e Taiba, launched a series of attacks on the city of Mumbai (India) on November 26, 2008. With that, Pakistan’s efforts to engage with India in talks over Kashmir were doomed. Pakistan remained incapable of forestalling the terrorist act. This was the turning point in Pak-India relations. On Kashmir, India suspended the composite dialogue, which had been resumed in July 2004. Afterwards, in November 2015, though a bilateral peace dialogue was restored, it was titled the comprehensive dialogue, the agenda of which was crowned with the theme of terrorism and not with the issue of Kashmir. India kept on insisting that the issue of terrorism should be solved before the talks proceeded to the issue of Kashmir. Eventually, the comprehensive dialogue ended in nought.

The Mumbai attacks also brought Pakistan into sight of the FATF, which dispatched Pakistan to the grey list of surveillance and scrutiny, from 2012 to 2015. Because of legislating on anti-money laundering and passing counter-terrorist financing regulations, Pakistan enjoyed a respite in 2016; however, Pakistan remained short of implementing the legislation. Pakistan failed to grasp that post-2014 China-India bilateral trade relations offered sufficient leeway to the US to dictate Pakistan, as the US viewed in China-India relations the exclusion and demotion of Pakistan. In May 2017, the Chinese Ambassador to India Luo Zhaohui invited India to join the One Belt One Road project and assured New Delhi that the China-Pakistan Economic Corridor would not impinge upon anyone’s sovereign rights. By sovereign rights, the ambassador referred to the route passing through Pakistan-administered Azad Kashmir. In February 2018, backed by France, Germany and the UK, the US tabled a proposal to put Pakistan again on the grey list. On June 29, 2018, the FATF complied with the request. Pakistan’s credibility dwindled. Since then, Pakistan has been facing financial hardships and clamouring for geo-economics.

The FATF offers no escape to Pakistan. In February 2020, China made Pakistan abide by the conditions of the FATF while asking the FATF to provide some more time to Pakistan. In August 2020, China also asked Pakistan to comply with the Pakistan-Afghanistan Transit Trade Agreement of 1965 to allow the transit of Afghan exports to India through Pakistan’s Wagah border. China made Pakistan realize that the world had gone economic sensitive and that Pakistan could not stand in isolation – revelling in its touted geo-politics proclivity.

On the internal front, Pakistan has been paying the price of botched policies of the past. From 2000 to 2007, the martial law era of President General Parvez Musharraf was known for privatization, permitting the expansion of the private sector, but the era remained shorn of installing energy plants and constructing dams. The subsequent civilian elected governments had to opt for imported oil- and gas-based energy production plants to meet the country’s energy need immediately. Now, with the rise in the import price of gas and oil in US Dollars, the cost of living has also ascended. Pakistan’s economy is reeling under the encumbrance of both deficiencies in energy and the high cost of available energy. Though the private sector expanded exponentially, it is struggling to survive owing to the high cost of energy provided.

The economic team employed by General Musharraf remained oblivious of the future. The team solved the immediate problem of the circulation of money by privatizing business sectors, but it could not predict implications. Pakistan’s economy now runs preferably on indirect taxes and enjoys the ride of a free-market economy, which allows for the formation of cartels and is under little administrative control. Price control for uniformity is difficult to achieve and the export of agricultural products is hard to halt, restraining the economy each year.

Pakistan has failed to protect its local industry, which is susceptible to pressure. In the markets, stationery products such as pencil, pen, rubber, sharpener, and electronic products such as bulb, wire, fuse and switches are available made in China. Similarly, clothes, crockery, socks, sleepers, boats, softies and whatnot is being imported from China. The reason is simple: Chinese products are cheaper and better in quality than the products manufactured locally.

Whenever Pakistan opens trade with India, a replica of the same will take place. Cheap Indian products would flush Pakistan’s markets; jeopardising the economic health further.

In a way, Pakistan’s growing realisation to lean on geo-economics is quite belated and problematic. Pakistan’s shift in its focus from geo-politics to geo-economics may be both sluggish and agonising.

The writer can be reached at qaisarrashid@yahoo.com